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Federal R eserve Bank
OF DALLAS
ROBERT
D. M c T E E R , J R .
DALLAS, TEXAS
752 6 5 -5 9 0 6
P R E S ID E N T
January 7, 1994
A N D C H IE F E X E C U T I V E O F F I C E R
Notice 94-04
TO:
The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Request for Public Comment on
Proposed Changes to Regulation BB
(Community Reinvestment)
DETAILS
In conjunction with the other Federal Financial Institution
Supervisory agencies, the Federal Reserve Board has requested comment on
proposed changes to its Regulation BB, which carries out provisions of the
Community Reinvestment Act (CRA). The proposed changes to the regulation
would provide more direct guidance to banks on the nature and extent of their
CRA responsibilities and the means by which their obligations will be assessed
and enforced.
The revised regulation would emphasize performance, rather than
process; is intended to provide greater predictability and promote consistency
in examinations; and would reduce the compliance burden on some institutions.
The Board must receive comments by February 22, 1994. Comments
should be addressed to William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington,
D.C. 20551.
All comments should refer to Docket No. R-0822.
ATTACHMENT AND ENCLOSURE
A copy of the
Vol. 58, No. 243, of the
attached. Also enclosed
addresses issues related
agenc i e s ’ notices as they appear on pages 67466-508,
Federal Register dated December 21, 1993, is
is a staff memo to the Board of Governors that
to the proposed revisions.
MORE INFORMATION
For more information, please contact Gloria Vasquez Brown at (214)
922-5266.
For additional copies of this B a n k ’s notice, please contact the
Public Affairs Department at (214) 922-5254.
Sincerely yours,
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)
67466
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 25
pocket No. 93-19]
RIN 1 5 5 7 -A B 3 2
FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Docket No. R-0822]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 345
RIN 3064— 0 2 7
A
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563e
[Docket No. 93-234]
RIN 1 5 5 0 -A A 6 9
Community Reinvestm ent Act
Regulations
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.
AGENCIES:
The Office of the Comptroller
of the Currency, Board of Governors of
the Federal Reserve System, the Federal
Deposit Insurance Corporation, and the
Office of Thrift Supervision (the Federal
financial supervisory agencies) are
proposing to /evise their regulations
concerning the Community
Reinvestment Act (CRA). The purpose
of the CRA regulations is to implement
the continuing and affirmative
obligation of regulated financial
institutions to help meet the credit
needs of their com m unities, including
low- and moderate-income areas,
consistent w ith safe and sound
operations and to provide guidance on
how the agencies assess the
performance of institutions in meeting
that obligation.
The proposed new regulations are
designed to provide clearer guidance to
financial institutions on the nature and
extent of their CRA obligation and the
methods by which the obligation w ill be
assessed and enforced. The proposed
procedures are designed to emphasize
SUMMARY:
performance rather than process, to
promote consistency in assessments, to
permit more effective enforcement
against institutions with poor
performance, and to reduce unnecessary
com pliance burden while stimulating
improved performance.
/
DATES: Comments must be received by
February 22, 1994.
ADDRESSES: OCC: Comments should be
directed to: Communications Division,
Office of the Comptroller of the
Currency, 250 E Street, SW.,
W ashington, DC 20219, Attention:
Docket No. 93-19. Comments will be
available for public inspection and
photocopying at the same location.
BOARD: Comments should be
directed to: William W. Wiles,
Secretary, Board of Governors of the
Federal Reserve System, Docket No. R 0822, 20th Street and Constitution
Avenue, NW., Washington, DC 20551.
Comments addressed to Mr. Wiles may
also be delivered to room B-2222 of the
Eccles Building between 8:45 a.m. and
5:15 p.m. weekdays, or to the guard
station in the Eccles Building courtyard
on 20th Street, NW. (between
Constitution Avenue and C Street) at
any time. Comments may be inspected
in room M P-500 of the Martin Building
between 9 a.m. and 5 p.m. weekdays,
except as provided in 12 CFR 261.8 of
the Board’s rules regarding the
availability of information.
FDIC: Comments should be directed
to: Hoyle L. Robinson, Executive
Secretary, FDIC, 550 17th Street, NW.,
Washington, DC 20429. They may be
hand delivered to room 402,1176 F
Street, NW., Washington, DC between
8:30 a.m. and 4:30 p.m. on business
days. They may be sent by facsimile
transmission to 202-898-3838.
Comments will be available for public
inspection at the FDIC Reading Room
#7118 at 550 17th Street, NW.,
Washington, DC between 9 a.m. and
4:30 p.m. on business days.
OTS: Comments should be directed
to: Director, Information Services
Division, Public Affairs, Office of Thrift
Supervision, 1700 G Street, NW.,
Washington, DC 20552, Attention:
Docket No. 93-234. These submissions
may be hand delivered to 1700 G Street,
NW. from 9 a.m. to 5 p.m. on business
days; they may be sent by facsimile
transmission to FAX num ber (202) 9067755. Submissions must be received by
5 p.m. on the day they are due in order
to be considered by the OTS. Late-filed,
misaddressed, or m isidentified
subm issions will not be considered in
this rulemaking. Comments will be
available for public inspection at 1700
G Street, NW., from 1 p.m. until 4 p.m.
on business days. Visitors will be
escorted to and from the Public Reading
Room at established intervals.
FOR FURTHER INFORMATION CONTACT:
OCC: Stephen M. Cross, Deputy
Comptroller for Compliance, (202) 8745216; and Matthew Roberts, Special
Counsel, Chief Counsel’s Office, (202)
874-5200.
BOARD: Glenn E. Loney, Associate
Director, Division of Consumer and
Community Affairs, (202) 452-3585, or
Scott G. Alvarez, Associate General
Counsel, Legal Division, (202) 4523583.
FDIC: Bobbie Jean Norris, Deputy
Director, Office of Consumer Affairs,
(202) 898-6760; Valerie Thomas,
Review Examiner (Compliance),
Division of Supervision, (202) 8987155; Ann Loikow, Counsel, (202) 8983796; and Sandy Comenetz, Counsel,
(202) 898-3582, Regulation and
Legislation Section, Legal Division.
OTS: Timothy R. Bum iston, Deputy
Assistant Director for Policy, (202) 9065629; Theresa A. Stark, Program
Analyst, Specialized Programs, (202)
906-7054; Lewis A. Segall, Senior
Attorney, Legal Policy Division, Chief
Counsel’s Office, (202) 906-6648.
SUPPLEMENTARY INFORMATION:
Introduction
The Federal financial supervisory
agencies are jointly proposing new
regulations to implement the CRA. The
proposed regulations would replace the
existing regulations in their entirety.
The CRA is designed to promote
affirmative and ongoing efforts by
regulated financial institutions to help
meet the credit needs of their entire
communities, including low- and
moderate-income areas, consistent with
safe and sound operations. Despite the
CRA’s notable successes, bank and thrift
industry, community, consum er and
other groups m aintain that its full
potential has not been realized, in large
part, because com pliance efforts have
focused on process at the expense of
performance.
In accordance with a request by the
President, the Federal financial
supervisory agencies have undertaken a
com prehensive effort to reform their
evaluation standards and examination
procedures. The proposed regulations
implement one part of this reform effort
by substituting for the current processbased assessment factors a new
evaluation system that would rate
institutions based on their actual
performance in meeting community
credit needs. In particular, the new
system would evaluate the degree to
which an institution is providing (1)
Federal Register / Vol. 5B. No. 243 / Tuesday, December 21, 1993 / Proposed Rules
loans, (2) branches and other services,
have also com plained that the CRA
and (3) investm ents to low- and
examination process encourages them to
moderate-income areas. The proposed
generate excessive paperwork at the
regulations also clarify how an
expense of providing loans, services,
institution’s CRA performance w ould be and investments. In surveys of
considered in the corporate application
com pliance costs, the institutions have
process and seek to make the
often identified the CRA as the most
lations more enforceable,
burdensom e of consum er protection and
addition to this rulemaking, the
com m unity reinvestment statutes.
agencies will work together to improve Community, consumer, and other
examiner training and to increase
groups have agreed with the industry
interagency coordination regarding
that there are inconsistencies in CRA
application of standards, performance of evaluations and that current
exam inations, assignment of ratings,
exam inations overemphasize process
and use of enforcement tools. The
and underem phasize performance.
agencies will also work together to
Community and consum er groups have
improve public access to data collected
also criticized the regulatory agencies
pursuant to the Home Mortgage
for failing to penalize banks and thrifts
Disclosure Act (HMDA) and the
aggressively for poor performance.
proposed regulations. These efforts
Believing that the CRA examination
should produce a CRA assessment
and enforcement process can be
process that is less burdensom e for
improved, the President requested in
many institutions and yields more
July that the Federal financial
results for the local com m unities the
supervisory agencies reform the CRA
law is intended to benefit.
exam ination and enforcement system.
Background
The President asked the agencies to
consult with the banking and thrift
In 1977, the Congress enacted the
industries. Congressional leaders, and
CRA to encourage banks and thrifts to
leaders of community-based
help meet the credit needs of low- and
organizations across the country to
moderate-income com m unities. In the
develop new CRA regulations and
CRA, the Congress found that regulated
examination procedures that “replace
financial institutions are required to
paperwork and uncertainty with greater
dem onstrate that their deposit facilities
performance, clarity, and objectivity.”
serve the convenience and needs of the
Specifically, the President asked that
comm unities in w hich they are
the agencies refocus the CRA
chartered to do business, and that the
exam ination'system on more objective,
convenience and needs of com m unities
performance-based assessment
include the need for credit as well as
standards that m inimize compliance
deposit services.
The CRA requires each of the four
burden w hile stim ulating improved
Federal financial supervisory agencies
performance. He also asked that the
to use its authority w hen examining
agencies develop a well-trained corps of
regulated banks and thrifts to encourage examiners who specialize in CRA
institutions to help meet the credit
examinations. The President asked that
needs of the com m unities in w hich they in undertaking this effort, the regulators
do business, consistent w ith safe and
seek to promote consistency and evensound banking practices. Recently, the
handedness, to improve public CRA
CRA has come to play an increasingly
performance evaluations, and to
important role in im proving access to
institute more effective sanctions
credit among under-served
against institutions w ith consistently
com m unities—both rural and urban—
poor performance.
across this country. Under the im petus
Public Hearings
of the CRA, many banks and thrifts have
opened new branches, provided
To implement the President’s
expanded services, and made
initiative, the four agencies held a series
of seven public hearings across the
substantial com m itm ents to increase
country. At those hearings, the agencies
lending to all segments of society. It is
heard from over 250 witnesses. Nearly
estim ated that tens of billions of dollars
50 others subm itted w ritten statements.
have flowed to low- and moderateIndividuals, small business men and
income areas as a result of the CRA.
Despite these successes, the CRA
women, representatives of banks and
examination and enforcement system
thrifts and their trade associations, state
has been criticized. Financial
and local government officials, members
institutions have com plained that policy of local community-based organizations,
guidance from the supervisory agencies
and leaders of national com m unity and
on the CRA is unclear and that
consum er advocacy groups presented
examination standards are applied
their views. While the oral and w ritten
inconsistently. Financial institutions
statem ents subm itted by the over 300
T
67467
w itnesses encompassed a variety of
views, some common themes emerged.
Most commenters—bankers, state and
local government officials, and leaders
of community-based organizations—
endorsed a more performance-based
CRA evaluation system. Most witnesses,
however, also rejected a formulaic
approach that would be applied on a
national basis. They emphasized that
exam inations should focus on lending,
particularly to low- and moderateincome individuals, minorities, small
farms, small businesses, and affordable
housing and economic development
organizations. However, they stressed
that the facts and data about an
institution’s lending record should be
evaluated in light of its business
strategy, its financial condition, and the
credit needs of the community in which
it operates. A need to make the
evaluations more geographically
specific for those institutions that
operate in m ultiple locations was also
noted.
A num ber of respondents, both from
the financial service industry and
community-based organizations,
expressed interest in the idea of
financial institutions developing
strategic plans for CRA performance in
conjunction with the representatives of
the communities within which they
operate. Some wanted the regulatory
agencies to make enforceable
agreements between financial
institutions and community groups a
central focus of the CRA process. Others
suggested that the agreements should be
between the institutions and the
supervisory agencies.
Many of those same respondents
criticized the agencies for a lack of
consistency in examinations and urged
the agencies to develop cooperative
training programs for their examiners.
All groups stressed the need to improve
the training of examiners responsible for
CRA evaluations. While most witnesses
focused on training for examiners who
conduct CRA examinations, a number of
the respondents also urged CRA training
for commercial examiners so that they
can develop a better understanding of
com m unity development lending.
Many community-based organizations
and local government officials
commented on the need for data to be
collected on small business and
consum er loans similar to that collected
for housing loans under the Home
Mortgage Disclosure Act. Those
witnesses urged that the geographic
distribution of those loans be
monitored, and many also suggested
that data on the race or ethnicity of the
borrower be collected as well. They
contended that the lack of this data was
6 7468
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1S93 / Proposed Rales
a serious im pedim ent to th e pu b lic’
s
and the regulatory agencies’ability to
evaluate an institution's performance in
these significant areas. However, eth er
witnesses, particularly those
representing sm aller lenders,
com plained ab o u t current reporting
burdens—citing the Home Mortgage
Disclosure Act reporting requirements—
and urged that n o additional reporting
of loans be m andated.
Many sm aller financial institutions
and some com m unity groups also stated
that th e present system was too focused
on punishing institutions that fail to
perform, an d th e em phasis instead
should be on rew ards for institutions
truly meeting a w ide range of
com m unity lending and service needs.
W itnesses identified a need to recognize
that investm ents in interm ediary
com m unity development organizations
are beneficial for society and should be
considered a s strengths in evaluating an
institution’s CRA performance, even
though the benefits of the investment
may not flow back to the specific service
com m unity delineated by the
institution. W hile there was an
em phasis on rewards, respondents
outside the banking comm unity were
overwhelmingly against the adoption of
a “safe harbor” for financial institutions
from CRA protests on the basis of
ratings assigned by the regulatory
agencies.
Many small institution respondents
also noted the burden im posed by the
present regulations. They felt that a
different level o f docum entation and
different approaches to reviewing their
performance were appropriate. Small
bankers stressed the high costs in terms
of both tim e and money required to
meet the perceived docum entation
requirem ents of the present approach. In
many cases they stated that these
burdens were actually im peding their
institutions’ ability to meet credit and
service needs.
Finally, a num ber o f respondents from
the financial services industry and
com m unity-based organizations
proposed that non-chartered financial
service providers, such as insurance
com panies, finance com panies, and
oth er sim ilar types of credit providers
be subject to com m unity reinvestm ent
requirem ents sim ilar to th e CRA.
We have attem pted to ad dress many
of these concerns w ithin the proposed
regulations. W ithout resorting to fixed
formulas, the proposed regulations set
forth a different, more objecti ve and
more enforceable approach to evaluating
performance under the Act. The new
regulations w ould m aintaia the present
regulations’ em phasis on evaluating
each institu tio n ’s record in light o f its
tests, institutions w ould have to report
to the agencies an d make available to
the public data on the geographic
distribution of their loan applications,
denials, originations and purchases.
Small banks and thrifts could elect to be
evaluated un d er a stream lined method
that would not require them to report
this data. Every institution would have
the option to choose assessm ent based
on a pre-approved strategic plan that
had been subjected to review and
comment by community-based
organizations and the rest of the public.
However, the plan option w ould not
relieve an institution of its data
reporting obligations.
The lending test applicable to large
institutions would consider the extent
to which the institution is m aking loans
in low- and moderate-income portions
The Proposed Regulations
of its service areas. The test w ould also
give an institution credit for other
In General
community developm ent loans and
In order to promote consistency, to
partnerships with com m unity groups to
reduce com pliance burden and to
promote credit availability. The service
improve performance, the proposed
test w ould consider the extent to w hich
regulations elim inate the current
the institution is making branches
regulations’ tw elve assessment factors
accessible to low- and moderate-income
and substitute a performance-based
areas in its service areas an d is
evaluation system. Under th e proposed
providing other services that promote
system, financial institutions w ould not credit availability. The investment tesl
be assessed on their efforts to meet
would consider investm ents in
com m unity credit needs. Such
com m unity and economic development
assessments have given rise to
activities and would also take into
unnecessary docum entation that has
account grants to support community
reduced the effectiveness and
and economic development activities,
underm ined the credibility of current
donations or sales on favorable term s of
evaluations. Similarly, the agencies
branches to w om en-or minority-owned
w ould not evaluate the m ethods used by institutions, and investment
an institution to assess credit needs.
partnerships w ith com m unity
However, to perform under the
organizations.
proposed performance-based standards,
The three tests would not apply
institutions would have to provide
uniform ly to all institutions. As a
loans, investm ents, and services for
general rule, institutions would be
w hich there is a market. Therefore, they evaluated on the basis o f the product
would have an incentive to perform
lines offered to their custom ers in the
normal course o f business. The lending
needs assessments in th eir
test w ould apply to retail institutions,
communities.
In assessing a n institution’s CRA
and the investm ent test would apply to
performance, the agencies would
wholesale and limited-purpose
recognize that the institution is
institutions. A retail institution would
expected to help meet the credit needs
be evaluated under the investment test
but its performance would only count to
of its entire community. In
examinations, however, particular
boost its lending test rating. All
institutions would be evaluated under
attention would be paid to the
institution's record of helping to meet
the service test, but wholesale and
lim ited-purpose institutions would be
the credit needs in low- and moderateincome areas.
evaluated under a different standard
Institutions would be evaluated based than retail institutions.
An institution evaluated under a
on their lending, service, and
given test would receive one of five
investment performance. Generally,
ratings of its performance under that
independent institutions with at least
test: Outstanding, High Satisfactory,
$250 m illion in assets and m em bers of
Low Satisfactory, Needs to Improve, or
holding com panies with that level of
Substantial Noncompliance. The
banking and thrift assets would be
evaluated based on some com bination of agencies have proposed five ratings
rather than four ratings for each test to
lending, service, and investment tests.
measure as accurately as possible
As a predicate for evaluation under the
business strategy and community. The
new regulations would require
additional data reporting for consum er,
small business, and hom e mortgage
loans, with provisions for disclosing
that inform ation to the public in a
tim ely manner. To provide incentives
for strong performance, the new
regulations would clarify how CRA
performance would be considered in the
application process. However, the
regulations would not ccnnlain a “safe
harbor” provision. Under the new
assessment system, further incentives
would be provided to institutions that
show strong performance by reducing
the frequency o f exam inations. F inally,.
the regulations would provide a
different evaluation framework for small
institutions.
Federal Register / Vol. 58, No. 243 / Tuesday, December 21,' 1993 / Proposed Rules
variations in performance among
institutions. The agencies propose to
have only four com posite ratings,
however, because the four ratings are
required by the statute.
Small institutions that choose not to
report loan data w ould be evaluated
under a stream lined m easure of lending
performance that would focus on their
loan-to-deposit ratio, the degree to
which they make their loans in their
service area, their loan mix (across
product lines and income levels of
borrowers), their fair lending record,
and their record of Community
complaints. Institutions that are
currently subject to reporting under the
Home Mortgage Disclosure Act (HMDA)
would also be evaluated on the
reasonableness of the distribution of the
loans they have reported. The
investm ent and service records of small
institutions w ould be considered to
boost their ratings based on the lending
measure.
The regulations w ould not require
institutions to offer specific loan
products, to make specific loans or
investm ents or to make loans or
investm ents that are expected to result
in losses or are otherw ise inconsistent
with safe and sound banking practices.
However, the regulations w ould require
dem onstrated performance by
institutions in lending, service, and
investm ents that benefit low- and
moderate-income areas and individuals.
Institutions w ould be perm itted and
encouraged to develop and apply
flexible underw riting standards that are
consistent with safe and sound
operations for loans that benefit lowand m oderate-income individuals and
areas.
Under the proposal, wholesale and
lim ited purpose institutions are defined
as insured depository institutions that
are in the business of extending credit
to the public but that do not make a
significant am ount of reportable loans.
This w ould include banks that make
primarily large commercial loans, as
well as credit card banks, and sim ilar
institutions.
The proposed regulations would not
apply to institutions that engage solely
in the correspondent banking business,
trust company business, or the business
of acting as a clearing agent. The
agencies have previously indicated that
these institutions are not governed by
the CRA because these institutions
generally do not perform com m ercial or
retail banking services and do not
generally extend credit to the public for
their own account.
C om m unity R einvestm ent Obligation
and Enforcem ent
The agencies propose to state in the
regulations that financial institutions
have a continuing and affirmative
obligation to help meet the credit needs
of their comm unities, including lowand moderate-income areas, consistent
w ith safe and sound operations, and
that a purpose of the regulations is to
implem ent this obligation. An
institution that received a composite
rating of Substantial Noncompliance
would be subject to enforcement actions
under 12 U.S.C. 1818.
The agencies propose these provisions
as a method of improving the
effectiveness and fairness of CRA. If the
consequences for inadequate
performance are restricted to the
application process, then institutions
not contem plating applications may
have little incentive to comply.
Community reinvestm ent is an
obligation of all institutions, w hether or
not they are contem plating an
application. In the absence of agency
enforcement actions, com m unities in
w hich institutions that do not anticipate
filing applications are chartered may not
receive the com m unity reinvestment
that the statute intends. The proposed
provisions on the com m unity
reinvestm ent obligation and the
consequent availability of formal
enforcement actions w ould strengthen
the agencies’ ability to encourage
institutions to meet their com m unity
reinvestment obligation.
67469
institution's performance relative to
other CRA lenders by comparing the
institution’s share {market share) of
reported housing, small business, and
consumer loans in low- and moderateincome areas in its service area with its
share of such loans in the other parts of
its service area. The agencies would
evaluate the institution’s performance
independent of other CRA lenders’
performances by examining the ratio of
such loans made by the institution in
low- and moderate-income areas in its
service area to such loans made
throughout its service area or by
examining the geographic distribution
of such loans across the low- and
moderate-income areas in the
institution’s service area. By doing so,
the agencies would assure that, in order
to achieve a good rating under this test,
either the institution has a good
distribution of loans in the low- and
moderate-income areas in its service
areas or has a significant am ount of
loans to such areas.
The agencies believe that this
formulation would allow an institution
to target its com m unity developm ent
lending to particular areas if doing so is
critical to serving as a catalyst to
community developm ent lending
throughout its service area. The agencies
are aware that, in some cases, a
concentrated lending effort is more
useful and effective than a dispersed
effort across a broader geographic area.
However, the agencies have attem pted
to make clear that this standard would
not permit institutions unreasonably to
exclude low- and moderate-income
The Lending Test
areas from their lending.
The lending test w ould evaluate
The proposal indicates that the
prim arily w hether a retail institution is
agencies w ill make all lending test
making loans in low- and moderatecalculations using both volume of loans
income areas as well as in other areas.
made and num ber of loans made. In
The test would exam ine both direct
addition, in evaluating an institution's
lending by the institution and, if the
performance relative to other CRA
institution elected, its proportionate
lenders, the agencies w ill calculate
share of indirect lending made through
market shares separately for small
lending consortia in w hich the
business, home mortgage, and consumer
institution participates, subsidiaries of
lending and weigh the calculations for
the institution, funded non-chartered
those categories in reaching an overall
affiliates of the institution, and womenjudgment of an institution’s market
or minority-owned institutions, lowshare performance. These decisions
income credit unions, and other lenders reflect the belief that, in different
in w hich the institution has m ade
communities, one loan type may be
lawful investments. The test w ould also more critical than others, and that, for
different loan types, one form of
take into account loans m ade by an
measurement (either the num ber of
institution to com m unity developm ent
loans or dollar volume) may be more
organizations and interm ediaries.
useful and instructive than another.
U nder the lending test, an institution
This proposal w ould give the agencies
would be evaluated on the basis of its
performance in making reportable loans the flexibility to make the relevant
calculations, weigh the results in
in com parison to other lenders subject
to CRA in its service area. An institution reaching an assessment of an
institution’s performance, and discuss
w ould also be evaluated independently
them in the public evaluation in the
of how others are performing. The
m anner deem ed most informative.
agencies would evaluate the
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Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
At the election o f an institution, th e
agencies w ould consider indirect loans
attributable to the institution under the
lending te s t Indirect loans would be
defined a s loans m ade by third parties,
such as lending consortia, subsidiaries
of the institution or non-chartered
affiliates that it assists in funding, and
women- or m inority-ow ned institutions,
low-income credit unions, and other
lenders that lend to low- and moderateincom e individuals or areas and in
w hich th e institution has made lawful
investm ents. If an institution reported
its attributable indirect loans an d chose
to have them attributed to it, the
agencies w ould attribute the indirect
loans in proportion to the institution’s
investm ent taking into account both the
total lending by the th ird party and the
lending done by the third party in the
institution’s service area. The proposal
intends that the institution receive
credit for a proportionate share of the
total loans m ade by the third party
based on the institution’s investm ent,
funding o r participation. However, in
claim ing this credit, the loans should
not be counted twice an d th e institution
m ust take a representative geographic
distribution of th e loans in k s service
area or areas.
The proposal m akes a distinction
betw een the ahility of an institution to
claim credit un d er the lending test for
indirect loans by its suhsidim ies and
funded non-chartered affiliates an d its
ability to claim cred it for indirect loans
made by oth er lenders. T h e institution
could -claim -credit for th e lending o f
subsidiaries ar nan-chartered affiliates,
under the same rules regarding
proportionate shares, w hether it invests
in the entity o r makes a loan to it. For
o th e r third party lenders, the institution
w ould be required to have m ade an
investm ent in the en tity in order to
claim credit under the lending test for
its loans. The purpose o f this distinction
is to recognize the unique relationship
betw een the institution an d its
subsidiaries and affiliates, and to
enhance the ability o f institutions an d
their parent corporations to structure
their com m unity developm ent lending
flexibly.
The agencies could adjust an
institution’s rating based on the
described factors upw ard, an d , in
exceptional cases, dow nw ard. Upward
adjustm ent might be w arranted if an
institution m ade a substantial am ount of
loans requiring innovative underw riting
or loans for w hich there is special need,
such as loans for m uitifam ily housing
construction and rehabilitation, loans to
start-up or very sm all businesses, loans
to community developm ent
organizations or facilities an d loans to
encouraged to engage in investm ent
activities.
The focus o f the investm ent test
w ould be the ultim ate im pact of the
institution’s investment rather than the
investm ent p erse. Therefore, qualified
investm ents w ould not be credited
under the test unless they had a
dem onstrable im pact, e.g. in providing
loans o r community development
projects that benefit low- and moderateincome individuals and areas.
Institutions would be evaluated under
the investm ent test based on the am ount
of assets compared to th eir risk-based
capital that they have devoted to
qualified investm ents for which they
have not already received credit under
the lending test. If an institution made
a qualified investment that generated
some attributable indirect loans but also
created non-loan benefits for low- and
moderate-income areas o r individuals,
the institution could receive credit
under th e lending test for the indirect
loans and credit under the investment
test for that part of the investm ent that
was not considered as indirect lending.
Qualified investm ents w ould include
lawful investm ents th at benefit low- and
moderate-income geographies or
individuals in an in stitu tio n ’s service
area: in support of local affordable
housing an d com m unity, econom ic, o r
sm all business development-, in
com m unity developm ent financial
institutions, com m unity developm ent
corporations, com m unity development
projects, sm all business investm ent
corporations tin e hiding m inority small
business in vestment corporations), and
m inority- a n d women -owned financial
institutions an d other com m unity
developm ent financial intermediaries;
in consortia or o th e r structures serving
low- and moderate-income individuals
and areas; and in state and local
governm ent agency housing bonds or
State and local governm ent revenue
bonds specifically aim ed at helping lowand moderate-income areas and
individuals. T he CRA does not grant
institutions any investm ent authority, so
investm ents must comply w ith other
statutory and regulatory lim itations and
requirements.
Eligible grants would be considered
qualifying investments. Donation or sale
on favorable term s of brandies to
Investm ents a n d O ther Factors
m inority- or women-owned institutions
would also count as qualifying
W holesale and lim ited-purpose
investments. Loans by wholesale and
institutions would norm ally be
limited purpose banks th at would
evaluated under the investm ent test
constitute qualified investm ents w ere
instead of the lending test. Retail
they in the form o f investm ents would
institutions would be evaluated under
be treated as qualified investm ents for
the investm ent test, but investment
perform ance would not be used to lower the purposes of the Investment T e st For
purposes of the investm ent test,
the overall rating of a retail institution.
wholesale and limited-purpose
However, all institutions would he
very low-income individuals and areas.
W hile the agencies w ould expect such
lending to be made w ithin the confines
of safety and soundness, it is
understood that lending in low- and
moderate-income areas can sometimes
require a unique approach to
establishing that the loan can be safely
underw ritten. It is the agencies’ purpose
to recognize the unique quality of these
loans and the special expertise and
effort they require on the part of the
lender by making clear that such loans
w ill be given particular consideration by
th e agencies in arriving at a rating under
the lending test. Particular
consideration will also be given to loans
m ade to com m unity developm ent
lending institutions.
An institution could also receive an
upw ard adjustm ent to its lending rating
based on the operation o f a program
under which the institution would
reevaluate applications that, based on
An initial evaluation, the institution
planned to deny. To the extent that an
institution operates such a “second
look” program in w hich applications are
review ed by com m unity organizations,
the institution m ust request applicants
to w aive any privacy rights under state
or federal law in order to share their
applications with those organizations.
The institutions should also make sure
that the participating organizations take
appropriate steps to protect applicants’
confidentiality.
In exceptional cases, a n in stitution’
s
rating might b e adjusted dow nward. For
example, an adjustm ent might be
w arranted if the quantitative measures
inaccurately portrayed the institution’s
actual lending to low- or moderateincome geographies or individuals.
Based on these measures, an
in stitution’s lending effort would be
assigned a prelim inary rating of
outstanding, high satisfactory, low
satisfactory, needs to improve, or
substantial noncom pliance. Preliminary
ratings would be presum ptive and could
be rebutted by the institution if, for
exam ple, it believed the presum ptive
rating d id not accurately or adequately
reflect its lending record because of
particular econom ic o r dem ographic
characteristics.
Federal Register / Vol. 58, Ntx 243 / Tuesday, December 21, 1993 t Proposed Rules
institutions w ould be deem ed to have
nationw ide service areas.
The agencies could adjust an
institution's rating under the investm ent
test to take into account whether the
institution's investm ents are
particularly Innovative or meet a special
need and w hether the institution’s
activities in connection w ith the
investm ents ore particularly com plex or
intensive o r involve innovative
partnerships w ith community-based
organizations. Examples of such
activities include helping to establish a
new entity to conduct com m unity
developm ent activities or providing
significant service or assistance in
support of a qualified investment. The
agencies could also adjust an
institution’s rating if th e institution has
made a large am ount of investm ents tin t
would be qualified investments except
that they fail to benefit th e bank’s
service area. Downward adjustm ents
would only be justified in exceptional
cases.
Based on these measures, an
institution’s investm ent effort w ould be
assigned a prelim inary rating of
outstanding, high satisfactory, low
satisfactory, needs to improve, or
substantial noncom pliance. Prelim inary
ratings w ould be presum ptive and could
be rebutted by the institution.
The Service Test
In the CRA, Congress found that
regulated financial institutions are
required by law to dem onstrate tin t they
serve the convenience an d needs of
their com m unities and that “th e
convenience and needs of com m unities
include th e need for credit services as
well as deposit services.’’ See 32 U.S jC.
2901. The CRA focuses, however, on an
institution’s effort to help meet the
credit needs of its community or
com m unities.
Branch availability in a com m unity is
critical to the availability of credit, as
well as deposit, services. The loan
origination process (including initial
contacts, pre-application counseling,
application com pletion and application
filing) often occurs at branches.
Moreover, accessible branches are
critical to the development of the fullservice banking relationships that
facilitate participation in the credit
system.
Therefore, the service test w ould
evaluate a retail institution prim arily on
the basis of the percentage of its
branches that are located in o r that are
readily accessible to lew - an d m oderateincom e areas. Generally, in a densely
populated area, a branch w ould be
considered readily accessible if it was in
easy walking distance. In a less
populated area, a branch would
generally be considered readily
accessible if it w as in easy or normal
driving distance. T he percentage of
branches that an institution would be
expected to have in or readily accessible
to law- and moderate-income areas in
each service area would depend, in part,
on the num ber of such areas in the
service area.
The agencies could adjust a retail
institution’s service record upw ard or
dow nw ard to reflect more accurately Us
branch service to tow- or moderateincom e geographies or individuals, but
dow nw ard adjustm ents would be made
only in exceptional cases.
In determ ining the appropriateness
and degree of any adjustm ent, the
agencies might consider the institution’s
record of opening and closing branches,
w hether branches wherever located are
act nelly serving low- and moderateincom e individuals, any significant
differences in the quality, quantity or
types of services offered to low- or
moderate-income individuals or
geographies, and sim ilar factors.
The agencies could also adjust a retail
institution’s rating upw ard to reflect a
strong record erf providing or supporting
other services th at prom ote credit
availability for lew- and moderateincom e individuals and areas. Particular
weight in this consideration w ould be
given to credit and home-ownership
counseling, email and minority-owned
business counseling, low-cost checkcashing, and low-cost deposit services.
A ppropriate consideration w ould be
given to the lim itations faced by
institutions w ith a small num ber of
branches^ No institution would be
required to expand the size of it*
branching netw ork o r to operate
branches at a loss. Because they
generally do not have branch systems,
wholesale a n d limited-purpose
institutions w ould be evaluated based
on their support for services than
prom ote credit availability rather than
their provision of branches.
Based on these measures, an
institution’s service performance w ould
be assigned a prelim inary rating of
outstanding, high satisfactory, low
satisfactory, needs to improve, or
substantial noncom pliance. Prelim inary
ratings w ould be presum ptive and could
be rebutted by the institution.
Com posite Eatings
As required by the statute, there
w ould be four possible composite
ratings; outstanding, satisfactory, needs
to im prove, and substantial
noncom pliance. For retail institutions,
the institution’s rating un d er the
lending test w ould form the basis for Its
87471
com posite rating. For wholesale or
lim ited-purpose institutions, the
institution’s rating under the investm ent
test would serve as the basis for the
com posite rating. For retail institutions,
the rating w ould then be increased by
tw o levels in the case of outstanding
investm ent performance or by one level
in the case of high satisfactory
investm ent performance. For all
institutions, the rating w ould be
increased by one level in the case of
outstanding service and decreased by
one level in the case of substantial noncom pliance in service.
The rating w ould be converted to the
statutorily-required four level rating
system , w ith high satisfactory and low
satisfactory both scored as satisfactory.
An institution that w ould otherwise
receive a needs to improve rating w ould
be rated in substantial noncom pliance if
the institution received no better than a
needs to im prove rating on both of its
last tw o exam inations. Finally, the
rating w ould be adjusted, if necessary,
to take into account illegal lending
discrim ination by the institution to
arrive at a final composite rating.
Lending D iscrim ination
A financial Institution is not serving
its entire com m unity adequately if it is
discrim inating illegally. Therefore, there
w ould be a rebuttable presumption th at
an institution w ould receive a
composite rating o f less than satisfactory
if th e institution com m itted an Isolated
act of illegal discrim ination o f which it
has knowledge that it has not corrected
fully or is not in the process of
correcting fully or engaged in a pattern
or practice of illegal discrimination that
it has not corrected fully. The
presum ption could be rebutted in the
case of technical or de m inim is
violations, for example, if an institution
violates the Equal Credit O pportunity
Act by offering a preferential credit
program for individuals over age 55
(rather than lim iting the program to
individuals over age 62 as the law
requires).
M ultiple Service Areas
An institution’s CRA rating should
reflect its performance in all the local
com m unities in w hich it does business.
If an institution operates in more than
one service area, the agencies w ould
evaluate all the institution’s loan data
and would conduct full lending and
service tests in a sam ple of the service
areas in w hich th e institution operates.
T he agencies w ould then assign separate
com posite ratings for each area. The
institution’s overall rating would reflect
the performance of the institution fai all
service areas studied.
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Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
Sm all Institution A ssessm ent Option
The CRA requires the agencies to
assess an institution’s record of meeting
the credit needs of its entire com m unity,
but does not specify the m ethods by
which the assessm ents are to be made.
The agencies believe that the Congress
gave the agencies broad discretion to
determ ine the appropriate methods for
CRA assessments. The Congress
recognized that assessment m ethods
m ust be appropriate for comm unities
and institutions of different sizes,
conditions, needs and attributes.
Many sm all institutions and their
representatives have urged that the
agencies exercise their discretion to
exempt small institutions from CRA
assessments. However, the agencies do
not believe that an exemption is
perm itted by the statute. Moreover, the
agencies believe that an exem ption
would be unw ise because it could result
in neglect of the credit needs of
com m unities that are served by
exempted institutions.
The agencies believe, however, that
they may exercise their discretion to
create different assessment m ethods to
take into account differences among
classes of financial institutions. The
agencies further believe that a different
assessment m ethod may be w arranted to
provide appropriate treatm ent of small
banks and thrifts. The proposed
regulations therefore generally offer
small banks and thrifts the option of
choosing evaluation under a
stream lined assessment method.
Concomitantly, the regulations would
not impose upon small institutions the
data collection requirem ents that are
necessary for the general assessment
method applied to other institutions.
This difference in method may be
appropriate because the
disproportionate burden that w ould be
otherwise im posed on small institutions
does not appear to be necessary to
achieve the purposes of the regulations.
Collection and reporting by small banks
and thrifts of data on the geographic
distribution of their loans may impose
a burden on those institutions
disproportionate to larger institutions.
In addition, small banks and thrifts
often serve geographically compact
comm unities, so the benefits of
geographic coding and reporting of
loans by such institutions are generally
minimal.
Finally, the stream lined examination
process proposed by the agencies is
designed to m easure accurately w hether
small banks and thrifts are, in fact,
serving the needs of their entire
com m unities. In this regard, the
agencies stress that the exam inations tor
small banks and thrifts will not be
implem ented as de facto exemptions.
Examinations will not be formalities or
sim ple reviews in w hich examiners
quickly determ ine w hether institutions
have met the items on a “check list.”
Meaningful examinations, including
reviews of the loan files of small
institutions, will be conducted, but the
burden of the examinations will be
shifted largely from the banks being
examined to the examiners.
Small banks and thrifts would be
defined as independent institutions
w ith assets of less than $250 million or
institutions with less than $250 m illion
in assets that are members of holding
companies the total banking and thrift '
assets of which are less than $250
million. Approximately 9% of the
combined assets of U.S. commercial
banks (including development,
industrial and cooperative banks, and
State and federally-chartered savings
banks) are in banks or in bank holding
com panies w ith assets less than $250
m illion and w ith a loan-to-deposit ratio
of 60% or higher.
The primary basis for a small
institution’s rating would be an
evaluation of its lending record. An
institution would be presum ed to
receive a satisfactory rating if it has a
reasonable loan-to-deposit ratio, makes
the majority of its loans locally, has a
good loan mix (makes a variety of loans
to the extent perm itted by law and
regulation and lends across income
levels), has no legitimate, bona-fide
com plaints from community members,
has not com m itted an isolated act of
illegal discrim ination of w hich it has
knowledge that it has not corrected fully
or is not in the process of correcting
fully, and has not engaged in a pattern
or practice of illegal discrim ination that
it has not corrected fully. In addition, if
an institution is required to report loans
under the HMDA, the institution would
also be required to have a reasonable
geographic distribution of reported
loans.
A small institution that meets each of
the standards for a satisfactory rating
and exceeds some or all of those
standards could receive an overall rating
of outstanding. In assessing w hether a
small institution’s CRA record is
outstanding, the relevant agency would
consider the extent to which the
institution's loan-to-deposit ratio, its
lending to its service area, and its loan
mix exceed the standards for a
satisfactory rating. In addition, at the
option of the institution, the agency
would evaluate the institution’s record
of making qualified investm ents and its
record of providing branches, remote
service facilities (RSFs), automated
teller m achines (ATMs), and other
services that enhance credit availability
or in other ways meet the convenience
and needs of low- and moderate-income
persons in its service area.
If a small institution failed to meet or
exceed all of the standards for a
satisfactory rating, the relevant agency
would conduct a more extensive
examination of the institution’s loan-todeposit record, its record of lending to
its local community, and its loan mix.
The agency w ould also contact members
of the com m unity, particularly in
response to com plaints about the
institution, and review the findings of
its most recent fair lending examination
In addition, at the option of the
institution, the agency would assess the
institution’s record of making qualified
investm ents and its record of providing
branches, RSFs, ATMs, and other
services that enhance credit availability
or in other ways meet the convenience
and needs of low- and moderate-income
persons in its service area.
If a small institution operates in more
than one service area, the relevant
agency w ould evaluate the institution's
performance in all of those service
areas.
Plan A ssessm ent Option
Any institution, as an alternative to
being rated under the lending, service,
and investm ent tests or the assessment
method for sm all institutions, could
elect to subm it for agency approval a
CRA plan w ith measurable goals against
which its subsequent performance
would be assessed. This plan would be
required to be publicly disclosed and
subject to public comment before
approval. If the agency approved the
plan, it w ould assess the institution’s
performance to determ ine if the
institution met or exceeded the plan
goals. If the institution failed to meet or
exceed the preponderance of the
measurable goals set forth in the plan,
the institution’s performance would be
evaluated under the applicable tests or
standards described above. Assessment
under a plan would not relieve an
institution from its obligation to report
data on the geographic distribution of its
loans.
D efinition o f Service Area
The geographic areas surrounding
each office or group of offices in which
a retail institution (including a small
institution) makes most of its direct
loans would be used to define its service
areas. A rebuttable presum ption would
exist that an institution's service area is
acceptable if it is broad enough to
include low- and moderate-income
areas, and does not arbitrarily exclude
Federal Register / VoL 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
low- and moderate-income areas. For
example, service areas defined by the
institution to include the areas around
branches in which it makes a substantial
portion of its loans and all other areas
equidistant from the branches would
normally be acceptable. Institutions
would not be evaluated on the method
they use to delineate their service areas.
Wholesale and lim ited-purpose
institutions would not have to define
service areas.
A retail institution w ould generally
have m ultiple service areas if it serves
significant areas across state or
metropolitan boundaries. An institution
could have m ultiple service areas
w ithin one m etropolitan area, and
service areas need not necessarily be
coterminous with metropolitan
statistical area or state boundaries.
However, a service area generally
should not include more than one
m etropolitan statistical area and should
not include both a metropolitan
statistical area and a rural area.
refinancings) for single family, 1—
4
family, and multifamily housing.
Institutions already covered by HMDA
would not be required to collect any
additional information on their home
mortgage loans but w ould be required to
submit home mortgage data in summary
form by the January 31 deadline.
Institutions not now covered by HMDA
w ould have to collect and report the
summary home mortgage data required
by the proposed CRA regulations but
w ould not have to report home mortgage
data in the detail required by HMDA
Reporting of open-end home equity
lines of credit is not required under
HMDA and would not be required
under the proposed regulations, because
the burdens of collection and reporting
appear to outweigh the associated
benefits.
Consumer loans are defined to
include all closed-end loans, secured
and unsecured, extended to a natural
person primarily for personal, family, or
household purposes, except for credit
card loans and m otorized vehicle loans
Data Collection and Reporting
and those loans included in the
In addition to data already collected
definition o f home mortgage loans.
under the HMDA and the agencies’ fair
Consum er loans also w ould not include
housing data collection requirements,
open-end credit lines.
institutions that d o not elect or are not
The agencies have not proposed to
eligible for the small institution
require collection and reporting of data
streamlined assessment m ethod would
on open-end credit lines, credit card
be required to collect and report to the
loans, and m otorized vehicle loans
agencies data on the geographic
because the burdens associated with
distribution of t h e iT hom e mortgage,
collection and reporting of the data
consumer, small business (including
appear to outweigh th e associated
small farm) loan w ritten applications,
benefits. The legislative history of the
application denials, originations and
Community Reinvestment Act reveals
purchases. In the case of a retail
that Congress was prim arily concerned
institution that elected to count its
w ith the availability of home mortgage
attributable indirect loans for its lending loans and small business loans. In
test, data w ould have to include reports
addition, collection of data on revolving
on attributable indirect loans (including credit (including credit card loans) and
loans made outside low- or moderateautomobile loans is particularly
income areas). Data on small business
burdensome given the nature of those
loans would be reported in four
loans.
categories based on the sales volume of
D ocumentation and Disclosure
the business. Data on the race and
Every institution w ould have to make
gender of borrowers w ould not be
available for public inspection a file
required to be collected an d reported,
with all signed, w ritten com m ents from
except to the extent such data are
the public that it has received for the
required by current law. Data would
past 2 years, its performance data for
have to be reported in sum mary form
that period, m aps of its service areas
(see appendix A) and would have to be
and lists of the census tracts or block
subm itted to the agencies by January 31
numbering areas that make up each
of the calendar year following the
service area, and a copy of the public
calendar year for w hich the data were
section of its most recent CRA
collected. These data would be used by
Performance Evaluation. If an
the agencies to make the calculations
institution elected assessment under the
under the lending test and would be
plan option, it would be required to
made available to th* public.
Home mortgage loans w ould be
include in the public file a copy of its
defined to include all mortgage loans
plan. Copies of information in the
reportable under HMDA and its
public file would be required to be
implementing regulations. These
m ade available at cost to members of the
include closed-end purchase and
public on request The public file w ould
improvement loans (including
be required to be m aintained at the
§7473
institution’s main office. Materials
relating to a given service area would
also be required to be m aintained at
each branch in that service area. Every
institution w ould have to post in the
public lobby of every branch a notice of
its CRA obligation and the public’s
ability to comment on and review data
concerning that performance.
Publication o f E xam ination Schedule
a n d Public Com m ent
The proposed regulation provides that
the agencies will publish a list of the
institutions which are scheduled to
undergo CRA exam inations in the next
calendar quarter. The list would be
published at least 30 days in advance of
the quarter and would contain the
names of the institutions that have been
scheduled for a CRA examination in
that quarter. Members of the public
would be invited to subm it comments to
the appropriate agency regarding the
CRA performance of any institution
whose name appears on the list. If
received prior to the start of an
exam ination, those comments w ould be
taken into consideration during the
examination in addition to any
comments already in the institution’s
public CRA file. As the precise timing
of any particular examination, including
the length of time any particular
examination takes to complete, cannot
always be accurately judged, members
of the public would be urged to submit
their comments as soon as possible after
the list of institutions is published.
Additionally, the agencies would urge
all interested members of the public to
file comments with institutions
regarding their CRA performance on an
ongoing basis and not to wait until any
particular institution has been
scheduled for a CRA examination to file
comments either with the institution
itself or the appropriate agency. This is
especially important as from time to
tim e it might be necessary or advisable
for the agencies to conduct a CRA
examination of an institution which had
not been previously scheduled to
receive an examination that quarter. In
short, the fact that an institution’s name
does not appear on the published list
would in no way preclude the agencies
from conducting a CRA examination.
Applications
The CRA requires the agencies to
consider the CRA performance record of
an insured depository institution in
considering applications by the
institution for a deposit facility.
A pplications for a deposit facility
include applications to charter a bank or
Federal savings association, to obtain
Federal deposit insurance, to establish
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Federal Register / Vol. 58, No. 243 / Tuesday, December 21,-1993 / Proposed Rules
or relocate a branch office or ATM, an d
to acquire another insured depository
institution or its assets. The agencies
propose in the regulation to explain
how CRA ratings achieved through
performance-based exam inations will be
considered in these applications.
U nder the proposal, the CRA
exam ination rating would continue to
be an im portant and often controlling
factor in assessing the CRA aspect of an
application, including where
appropriate the convenience and needs
factor. The CRA exam ination rating is
not conclusive, however, and the
proposal recognizes that other
information related to CRA performance
and the convenience and needs of
com m unities, including information
collected through public comment and
through periodic and special reports, is
also relevant and m ust be considered.
As proposed, an “outstanding” rating
generally w ould result in a finding that
the CRA aspect of the application is
consistent w ith approval of the
application and w ould receive extra
weight in reviewing the application. A
“satisfactory” rating generally would
result in a finding that the CRA aspect
of the application is consistent with
approval of the application. A “needs to
im prove” rating generally w ould be an
adverse factor in the CRA aspect of the
application, and absent dem onstrated
improvem ent in the bank’s CRA
performance or other countervailing
factors, generally w ould result in denial
or conditional approval of the
application. A “substantial
noncom pliance” rating generally would
be so adverse a finding on the CRA
aspect of the application as to result in
denial of the application.
In addition to consideration of CRA
performance in the application process
and use of their general enforcement
powers (which could include issuing
cease and desist orders or imposing civil
money penalties), the agencies plan to
use the frequency of CRA exam inations
to provide incentives for strong
performance. Institutions with
outstanding ratings will generally be
exam ined less frequently than the
average institution, and institutions
w ith less than satisfactory ratings will
generally be exam ined more frequently.
Of course, other factors, such as an
institution’s financial condition, will
also affect the frequency of
exam inations. The agencies believe that
linking exam ination frequency to
performance makes sense not only
because it provides an incentive for
strong performance but also because it
reflects a sensible allocation of the
agencies’ limited exam ination resources.
T ransition
U nder the proposed regulations, the
data collection and reporting
requirem ents will go into effect July 1,
1994 for all institutions that are required
under the regulations to collect and
report data. Data collected from July 1,
1994 through December 31.1994 would
be required to be reported to the
agencies no later than January 31,1995.
Thereafter, institutions w ould be
required to collect the data on an annual
basis and to report the data no later than
January 31 of the following year.
Evaluations based upon the new
assessment standards could begin by
April 1,1995, by which tim e sufficient
data will have been collected and
analyzed to accommodate the
quantitative analyses contem plated by
the regulations. However, the agencies
anticipate that financial institutions
may need time to adjust to the new
approach. Therefore, from April 1,1995
to July 1,1995, an institution could
elect to be evaluated under the
standards that were in place under the
old system rather than the new
standards. After July 1,1995, the hew
standards would be mandatory except
that, until April 1,1996, an institution
showing good cause could request
evaluation under the old standards. An
institution could also elect to be
evaluated under a strategic plan during
the transition period. However, as
w ould be the case w henever an
institution elects evaluation under the
plan option, the institution would have
to submit the strategic plan at least 3
m onths prior to the plan’s proposed
effective date. The purpose of this
requirem ent is to allow the agencies
sufficient lead time to review, assess,
and determ ine w hether to approve the
plan.
Finally, the agencies are concerned
that some institutions may have
difficulty adapting to the new
assessment standards and that such
institutions may, despite clear efforts to
the contrary, find that their first CRA
rating under the new standards is
substantially below their most recent
rating under the old system. The
proposed regulations provide a
reasonable accommodation for
institutions that find themselves in that
situation. If an institution’s first rating
u nder the new standards is more than
one category below the institution’s last
rating under the old standards, the
agencies would not disapprove any
corporate application nor take any other
enforcement action against the
institution based on that lower rating if
the agencies determ ined that the drop in
the institution’s rating occurred despite
the institution’s good faith efforts to
perform at least satisfactorily under the
new standards.
Review
The agencies recognize that the
proposed regulations represent a
dram atic change in existing practices
and that cautious adm inistration is
therefore required. Consultation by
financial institutions with the agencies
on com pliance with the new standards
and procedures will be encouraged, as
will liberal use of agency appeals
processes. The supervisory agencies will
engage in an internal review of the
effectiveness of the new regulations.
The agencies contemplate
reconsideration of the regulations to
improve their effectiveness w ithin the
next several years. The agencies intend
for the proposed regulations to require
dem onstrated performance but to
impose as little unnecessary compliance
burden as possible, and the agencies
will review the regulations to determine
w hether they are advancing these goals.
O ther Efforts
In addition to this rulemaking, the
agencies will work together to improve
examiner training and to increase
interagency coordination regarding
application of standards, performance of
examinations, assignment of ratings,
and use of enforcement tools. The
agencies will work together to make
exam inations as short in duration as
possible, to m inimize unnecessary
com pliance burden, and to ensure
consistency and reliability in the rating
process.
The agencies will also work together
to improve public access to data
collected pursuant to HMDA and the
proposed regulations. To that end, the
agencies will strive to make the
summary data reported under the
proposed CRA regulations available to
the public as soon as possible. The
Federal Reserve Board will also strive to
make HMDA data available by May 30
of the year following the year for which
the data are submitted.
CRA Loan Data Format
The agencies are proposing a common
CRA Loan Data Format, included in
each regulation as appendix A. That
common format appears at the end of
this preamble, but would be published
with each agency’s regulation if this
proposal is adopted as a final rule.
Specific Areas tor Public Comment
Comment is invited on all aspects of
the proposal. In addition to general
comments, the agencies request
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
comments on the following particular
issues:
(1) Are the lending, service, and
investment tests meaningful and
workable? Is the appropriate weight
given to each of the three tests in
determining the composite rating?
Should num bers or ratios be substituted
for the descriptive quantitative terms
used in the various rating levels under
the three tests? If so, w hat should they
be?
(2) Should “indirect loans”, or loans
made by entities in w hich a bank or
thrift has made an investm ent, be
included in the lending test as
proposed? Is the treatm ent of "indirect
loans” meaningful, workable, and
effective?
(3) Should the quantitative measures
used in the lending, service, and
investment tests be expanded to include
a broader array of performance
measures? If so, w hat w ould those
additional measures include?
(4) Should banks and thrifts be
perm itted to elect to be evaluated on the
basis of their performance relative to an
approved CRA plan? Is the regulation
sufficiently clear about the bases upon
w hich agencies w ould approve a
proposed plan?
(5) Are the provisions of the
regulations on the circum stances under
which the agencies w ould use their
enforcement authority to promote
67475
If you operate a financial institution,
how much time do you now devote to
com pliance and how m uch tim e do you
anticipate the proposed regulations
would require that you devote? (Please
indicate the size of your institution
w hen answering.) How might
com pliance costs be reduced consistent
w ith the regulatory and statutory
objectives?
(10) What analytical or computational
problems, if any, result from the fact
that this proposal requires calculation of
relevant ratios under the lending test
using only the loans made by
institutions that would be required by
the proposal to report their lending,
rather than loans made by all lenders in
the relevant markets? How should the
regulation be adjusted to deal with any
such problems?
(11) Are there other approaches to
changing the CRA regulations that
w ould be more beneficial and cost
effective, and that w ould achieve the
goals of this reform effort? If so, what
alternative approach should be
considered and w hat w ould its elements
be?
com pliance w ith the community
reinvestment obligation of regulated
banks and thrifts appropriate? Is the
community reinvestm ent obligation
appropriately stated?
(6) Should the performance of
affiliates be considered in CRA
examinations of a regulated bank or
thrift? Should the performance of
affiliates be considered in decisions on
corporate applications filed by a bank or
thrift?
(7) Does the formulation of the
regulation strike an appropriate balance
between the need of institutions for
certainty in the evaluation system and
the need for the flexibility to reflect
individual institutions’ service
capabilities and the credit needs of
particular locales? Will this proposal
result in a clearer, more objective
evaluation scheme? If sufficient
certainty and objectivity are not
achieved, what adjustm ents should be
made?
(8) Are the data collection provisions
under the proposed regulation
warranted and are the appropriate data
collection elements called for? What
adjustm ents should be m ade to the data
collection provisions? What costs will
be imposed and what benefits derived
from die data collection provisions?
(9) How would the proposed changes
affect the am ount of tim e that financial
institutions spend on CRA compliance?
Text of Proposed Common Appendix
The text of the proposed common
appendix appears below:
Appendix A to Part.
Loan Data Format
CRA
P art A.— Lo ans t o S mall B u s in e s s e s
[Total sales <$250M]
Census tract/
block numbering
area
Total * of apps.
Govt
Other
Total # of app. de
nials
Govt
Other
Total t of apps.
approved
Govt
Other
$ amount ap
proved
Govt
Other
Total * & $ pur
chased
Govt
*
$
Other
*
$
Indirect loans *
and $ amount
Govt
#
$
Other
#
S
----
____
P art B.— Loans t o S mall B u sin e s s e s
[Total sales S$250M but <$1 M ]
M
Census tract/
bock numbering
area
Total * of apps.
Govt
Other
Total # of app. de
nials
Govt
Other
Total f of apps.
approved
Govt
Other
S amount ap
proved
Govt
Other
Total * & $ pur
chased
Govt
•
$
Other
f
$
Indirect loans *
and $ amount
Govt
*
$
---—..........—
----
----
----
----
Other
«
S
63476
Federal Register / Vol. 5ft. Na. 243 / Tuesday, December 21. 1S93 / Proposed .Rules
P art C .— Lo a n s to S mall BustftESses
fTotsfl sales <$fM kUt^SIDMM]
- ------------- 1 ----
Total * of apps
approved
Total* of app. de
nials
Totel4f-of apps.
Census tract/ .
blot* numbering
area
1 Qovt.
Other
-Gout.
Other
Govt. , Other
S amount ap
proved
Govt.
Total * & SpurIndirect loans #
chased
; and S-amount
Govt.
#
$
Other
Other
#
$
Govt.
#
$
Other
*
S
- - ---P A m O —L o a n s t o S mall B u sin e sse s
[Total sales >$10Mlu! M <500 employees]
oth
Total * of apps.
Total i of app. de
Census tract/
nials
1
block numbering >
Govt, j Other i Govt.
area
Other
3 amount ap
proved
Total # of-apps.
approved
GDVt.
Other
Govt.
Total # & $ pur
chased
Other
Other
Govt.
«
S i *
$ :t
9
Govt.
#
$
Other
.Indirect loans #
and $ amount
i
.... -... .
.. ] ---- • ----
....
— ...... > ---- j ----
---- .
...— ,
C onsum er Lo ans
Total* of apps.
Census tract/
i
block -numbering >
area
Govt
-Other
Total > of app. de
nials
,
Govt.
Other ' ,
* amount ap
proved
Total t of appe. i
approved
i
Govt
Total # & $ pur
chased
Govt
#
$
Gout ■ Other
O ttw j
t
Other
«
‘
Indirect loans ■#
and $ amount
Govt.
*
5
Other
#
$
j
---- ,
: ----
----
---- i . .. .
S mall F arm L oans
Census tract? .
block numbering
area
Total * of-apps.
Govt
Total # of jjpp. de
nials
Other
Total # of apps. .
approved
Gevt. • -Other ■ Govt
Total # & S pur-chased
S amount .ap
proved
Govt . Other
#
$ #
$
■Other ■ ■Govt ■ Other
Indirect loans #
and S amount
Govt.
*
$
Other
#
$
---- ;
........... :
P art A.— H ome P urch a se Lo a n s
-[Loans -on 1 -to-4 -family dwellings]
Census tradtf :
block-rwmbering
area
Total # df apps.
<
Govt.
Other
Total # of 3RP- <>e-,
nials
-Govt
Other ■
Total # oT 4 pps. .
approved
$ amount ap
proved
■Other ■ Govt
Total # & $ pur
Indirect tctans*
chased
• and $ arran t
Govt . Other
#
$
*
$
■Other
— .......: ---- : - .......
---- :
■
Govt - Ofeer
«
$ *
S
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
67477
P art b .— Home Improvem ent Loans
[Loans on 1-to-4 (amity dwellings]
Census tract/
block numbering
area
Total # of apps.
Govt.
Other
Total # of app. de
ntals
Govt.
Other
Total # of apps
approved
Govt
Other
$ amount ap
proved
Govt
Other
Total # 4 $ pur
chased
Govt
#
$
Other
#
$
Indirect loans #
and $ amount
Govt
«
$
Other
*
$
P art C .— R efinancing
[Home purchase or home improvement 1-UM tamily dwellings]
Census tract/
block numbering
area
Total # of apps.
Govt.
Other
Total # of app. de
nials
Govt
Other
Total # of apps.
approved
Govt
Other
$ amount ap
proved
Govt.
Other
Total * & $ pur
chased
Govt
#
$
Other
*
$
Indirect loans #
and $ amount
Govt.
»
$
Other
*
S
P art D.— Multifamily Dwelling Loans
[Home purchase, home improvement and refinancings]
Census tract/
block numbering
area
Total « of apps.
Govt
Other
Total # of app. de
nials
Govt
Paperw ork Reduction Act
OCC: The collections of information
contained in this notice of proposed
rulemaking have been subm itted to the
Office of Management and Budget for
review in accordance w ith the
Paperwork Reduction Act of 1980 (44
U.S.C. 3504(h)). Comments on the
collections of information should be
sent to the Comptroller of the Currency,
Legislative, Regulatory, and
International Activities, Attention:
1557-0160, 250 E. Street, SW„
Washington, DC 20219, w ith a copy to
the Office of Management and Budget,
Paperwork Reduction Project (15570160), W ashington, DC 20503.
. The collections of information in this
proposed regulation are in 12 CFR
25.11, 25.12, 25.13, and 25.14. This
information is required to evidence
national bank efforts in satisfying their
continuing and affirmative obligation to
help meet the credit needs of their
comm unities, including low- and
moderate-income areas.
This information will be used to
assess national bank performance in
Other
Total # of apps.
approved
Govt.
Other
$ amount ap
proved
Govt
Other
satisfying the credit needs of their
com m unities and in evaluating certain
corporate applications. The likely
respondents/recordkeepers are for-profit
institutions including small businesses.
The estim ated annual burden per
respondent/recordkeeper varies from six
to 90 hours, depending on individual
circum stances, with an estimated
average of 18 hours.
There w ill be an estimated 532
respondents averaging two hours and
3,450 recordkeepers averaging 16 hours.
Board: In accordance with section
3507 of the Paperwork Reduction Act of
1980 (44 U.S.C. 3504(h)), the Federal
Reserve Board will review the proposed
collection under the authority delegated
to the Board by the Office of
M anagement and Budget after
consideration of comments received
during the public comment period.
Comments on the collections of
inform ation should be sent to William
W. Wiles, Secretary of the Board, Board
of Governors of the Federal Reserve
System, W ashington, DC 20551.
Total * & $ pur
chased
Govt
f
$
Other
*
$
Indirect loans «
and $ amount
Govt
#
$
Other
#
$
The collections of information in this
proposed regulation are in 12 CFR
228.11, 228.12, 228.13, and 228.14. This
information would be required to
evidence the efforts of banks in
satisfying their continuing and
affirmative obligation to help meet the
credit needs of their comm unities,
including low- and moderate-income
areas. This information will be used to
assess banks’ performance in satisfying
the credit needs of their communities
and in evaluating certain applications.
Approximately 973 banks would be
subject to recordkeeping requirem ents
under the proposed regulation; 274 of
them (respondents) would also be
subject to reporting requirements. It is
estimated that the annual burden per
bank under these requirem ents w ill vary
from 6 hours to 250 hours, including
time to m aintain the public disclosure
file under existing rules and to review
instructions, gather and m aintain the
new data needed and com plete the
information collection under the
proposed rules.
67478
Federal
/ VdL 58, No. 243 / Tuesday, December 21, 1-993 J Proposed Sales
FDIC: The collections of information
contained in this notice of proposed
rulem aking have been subm itted to the
Office o f Management an d Cudget for
review in accordance w ith th e
Paperwork R eduction Act of T9B0"(4*
LLS.C. ,3504{hp. Comments oh th e
iTht; cciliertioas o f iafom rfi-on in This
proposed regulation are in 12 CFR
5 6 3 e .ll, 5 63e.l2.563e.l3 and 563e.l4.
This information is required to evidesce
savings association efforts in satisfying
th e ir continuing and affirmative
obfigatioo to help m eet the credit needs
the data collection requirem ents in part
563e and will encourage greater small
o f a il sizes.
Executive O rder 12866
QCG It has been determ ined that this
docum ent is a significant regulatory
action. The proposal would clarify
and moderate-income areas.
sent to the Office of M anagement and
existing requirem ents and would
This inform ation will he used to
Budget, Paperwork R eduction Project
exem pt sm all banks from many of the
assess .savings association performance
(3604-0092), Washington, DC 20503,
requirem ents in part 25. Further, the
w ith copies o f s u d i -comments to be sent in satisfying the credit needs o f their
proposal will encourage greater small
com m unities and in evaluating certain
to Steven F. Hanft, Office of the
business lending by banks of all sizes.
corporate applications.
Executive Secretary, room F—
453,
OTS: It has been determined that this
The likely respondents/recordkeepers
Federal Deposit Insurance Corporation,
docum ent is a significant regulatory
are for-profit savings associations,
550 17th Street, NW., W ashington, DC
action. T h e proposal sets forth a more
including small businesses.
20429.
focused and streamlined m ethod of
The estimated annual burden per
The collection of information
respondent/recordkeeper varies from six evaluating savings associations’
requirem ent s tn th is proposed
com pliance with existing statutory
4o 90 hours, depending on individual
regulation are found :in 12 CFR 345.11
requirements; moreover it would
circumstances, with an estimated
through 345.14 and concern alternative
exempt small savings associations from
average of 18 hours. There will be an
assessm ent m ethods, including the
many of the requirements in part 563e.
estim ated 450 respondents averaging
option of being assessed according to a
Further, the proposal will encourage
two hours aad 1,800 recordkeepers
strategic CRA plan; the-delineation off
greater small business lending by
averaging 16 hours.
the institution’s service area;-the
savings associations of all sizes.
collection, reporting and disclosure of
Regulatory Flexibility Act
List of Subjects
specified data on the bank’s home OGC: ft is hereby •certified that this
mortgage, consumer, small business and proposed rule, i f adopted as a final rule, 12 CFR Part 25
small farm loans; and th e m aintenance
w ill not have a significant -economic
Community developm ent, Credit,
of a public CRA file.
im pact on a substantial mrmber of sm all Investments, National hanks. Reporting
This inform ation is required to
banks. Accordingly, a regulatoiy
■and Tecordkeeping requirements.
evidence efforts o f ■financial institutions flexibility analysis is not required. This
in satisfying fh eirco n tiiru in g an d
12 CFR Part 228
proposal -would enable most small
affirmative obligation to h elp m eet the
banks to avoid th e data collection
Banks, Banking, Community
credit needs of their com m unities,
requirem ents in part 25 and w ill
development, Credit. Investments.
including low- a n d moderate-incom e
encourage greater sm all business
Reporting and recordkeeping
areas. It w ill be used to assess aa
lending by banks of all sizes.
requirem ents.
institution’s perform ance in satisfying
Board: It is hereby .certified that this
the credit needs of its com m unities and
proposed rule, if adopted as a final rule, 12 CFR Part 345
in evaluating certain corporate
will not have a significant economic
Banks, Banking, Community
applications.
impact on a substantial nufrfoer of sm all development, Credit, Investments,
The likely respondents/recordkeepers banks. T h is proposal w ould enable most Reporting and recordkeeping
are for-profit financial.institutions,
small banks to avoid the'data collection
requirements.
including small businesses.
requirem ents m part 22® and w ill
J 2 CFR Part 563e
The estim ated annual burden per
encowrage -greater sm all business
respondent/racordkeeper varies .-from six lending by financial institutions of all
Community development. C re d it
to 90 hours, depending<on individual
Investments, Reporting and
sizes. A ccordingly. a regulatory
circum stances, a n d w hether an
recordkeeping requirem ents. Savings
flexibility analysis is not required.
institution qualifies as a sm all
associations.
FDIC: It is hereby certified that this
institution. The estimated average
proposed rule, if adopted as a fma.1 rule, Adoption of Proposed Common
burden is 18 hours. There will hie an
will not have a significant economic
Appendix
estim ated 645 respondents averaging
impact on a substantial num ber of small
The agency specific proposals to
two h o u rs and 7,300 recordkeepers
banks. T his proposal would enable most
adopt the com m on appendix, w hich
averaging 16 hours.
small banks to avoid the data collection
appears in the com m on preamble, are
OTS: The collections of information
requirem ents in part 345 and will
set forth below:
contained in th is notice o f ■proposed
encourage greater sm all business
rulemaking have been-submitted to the
lending by financial institutions ef all
A uthority and Issuance
Office of 'Management an d Budget Tor
sizes. Accordingly, a regulatory
review in accordance w ith th e
flexibility analysis is not required.
OTS: It is hereby oeitffied th a t this
Paperwork Reduction A rt o f 1980 (44
proposed rule, if adopted as a final rule, OFFICE OF THE COMPTROLLER OF
U.S.C. 3504{hJ). C om m ents on th e
THE CURRENCY
will ndt have a significant economic
collections of information should be
im pact «m a substantial num ber <of sms/11 12 CFR Chapter I
sent to th e ©ffioe o f M anagem ent and
savings associations. This proposal
Budget, 'Paperwork (Reduction Project
For the M asons set w it in the
provides an alternative means of
11556-0012), W ashington, ©C 20503,
preamble, the Office o f C om ptroller of
evaluating a sm all -savings association’s
with copies to th e Office o f T hrift
the Curwncy p ro p e sesto am end *2 CFR
CRA raqttinsniesfts that -would enable
Supervision, 1700 G Street, NW.,
chapter I as ■set forth beTew.
m ost such savings assocM^oiis to avoid
W ashington, DC 20552.
Federal Register J VoL 53, H a. 243 / Tuesday, December 21, 1993 / Proposed Rules
1. Part 25 « revised to m ad «s fallow s:
S7479
subsidiaries of fee bank, by non
chartered affiliates fended by fee bank,
PART 25—COMMUNITY
or by lawful investments in o r with
REINVESTMENT ACT REGULATIONS
community developm ent and affordable
housing lenders, women-owned o r
Sec.
m inority-owned financial institutions,
25.1 Authority and (5MB«oatrel jramber.
low-income-cred* unions, and others
25.2 Commuafty reinvestment obligation.
that lend to low- and moderate-income
25.3 Purposes.
geographies and individuals.
25.4 Scope.
25.5 Definitions.
(fc] Loan s -or investm ents benefiting
25.6 Assessment standards — summary.
low- and m oderate-incom e geographies
25.7 LendingTest.
or persons means loans o r investm ents
25.8 Investment Test
where fe e proceeds are provided to,
25.9 Service Test.
invested in, used by or otherwise
25.10 Composite ratings.
directly benefit—
25.11 Aitornaihrfi assessment methods.
(1) Persons th a t reside in low- or
25.12 Service area—(iehseabca.
25.13 bean data— coUactina. reporting. .ami
moderate-income geographies or have
disclosure.
low or moderate incomes;
25.14 Public file amd disclosure.
(2) Businesses located in low- or
25.15 Public notice by'banks.
moderate-income geographies or
25.1% Publication of planned examination
em ploying m ostly persons residing in
■schedule.
such geographies;
25.17 Effect of ratings — corporate
(3) Non-profit organizations located in
applications.
low- or moderate-income geographies or
25.18 TiHneifcao nries.
providing services m ainly lo persons
Appendix A To Pail 25—
CRA Loan Data
residing in such geographies; or
Format
{41 Construction o r renovation o f
Authority: 12 tl.S.C. 21,22, 26, 27,30, 36,
facilities located in low- or moderate§ 25.5 OeOoittons.
93a, 161,215, 215a, 4B1,1814,1W16,T81B,
inooine geographies o r providing
1828(c), and 2901 through 8907.
For purposes o f this part, the
serviaes m ainly to persons residing in
such geographies.
§ 25.1 Authority and OMB control number. following definitions xppiy:
ta) A utom ated Tetter M achines
•(i) Low- a n d m oderate-incom e
(a) A uthority. The Authority far this
(ATM s) m eans immobile, automated,
geographies m eans geogra ph ies where
part is 12 U -S £ . 21, 2 2 .2B, 27. 3 0 ,3 6 ,
unstaffed banking facilities at w hich
the m edian family incom e is less than
93a, 161.215. 215a, 481, 1814,1816,
deposits a re reaei ved, checks paid, or
80% o f th e m edian family income for
181-8,1828(c), and 2901 through 2907.
money leat.
the M etropolitan Statistical A rea {MSAJ
(b) OMB control a amber. The
(b) Branches m eans staffed banking
or (in the case o f geographies outside a
collection of inform ation nequirameBfts
facilities 1shared or -unshared) w ith a
contained in th is part were approved by fixed sites* w hich deposits are received MSA) less than 80% o f th e n o n
m etropolitan state-w ide m edian iam iiy
the Office of M anagement and Budget
or checks paid o r m oney teat, in ria d in g
income lo r th e state in which the
under OMB control num ber 1557-0160. m ini-branches in g ro c e ry stores or
geqgraphy is located.
branches 'operated in cnnjnnctioB w ith
§ 25.2 Community reinvestment obligation.
(1) Law-incom e geographies means
’National banks have a continuing and any a& er local businesses, churches, o r
geographies whom fee median family
other non-profit organizations.
affirmative obligation to h elp meet the
(cj Coasioner loans m eans closed-end income is las6 th an 50% e f th e median
credit needs of their communities,
family incom e lor th e Metropolitan
loans extended to a natural person
including low- and moderate-income
Statistical Area (MSA) o r <(in the case o f
primarily for personal, family, or
areas, consistent w ith safe and sound
geographies outside a MSA) leas than
household purposes, bill does not
operations.
include home mortgage loans a s defined 50% o f th e non-m etropolitan sta tew id e
median fam ily incom e for the state in
§2&8 Purposes.
in paragraph (e) of this section,, credit
w hich fe e geography is located.
card loans, or m otor vehicle toans.
The purposes of this part are to
1?) M oderate-incom e geographies
(dj G eographies .means cchhus tracts
implem ent th e com m unity reinvestm ent
means geographies where fee median
or block num bering areas.
obligation o f national banks: to explain
family income is a t least 50% a n d less
<(a) H om e mortgage loans means
how fee Office of the Com ptroller of th e
closed-end loans th a t are mortgage loans than 80% of-the m edian family income
Currency (OCC) assesses the
as defined in section 303(1) of the Home for the M etropolitan Statistical Area
performance o f national b anks in
(MSA) or (in the case of geographies
Mortgage Disclosure Act (HMDA) 112
satisfying th e com m unity reinvestm ent
outside a MSA) at least 50% -and less
U.&.C. 2862(1)). a n d implementing
obligation; and to describe how that
than 80% of th e non-m etropolitan state
regulations.
performance is la l» n into account in
wide m edian family income for fee state
(f] Illegal dtfcrim inattan m eans
certain corporate applications.
in which fe e geography is located.
discrim ination on a prohibited basis as
(j) Reportabie loans means home
§25.4 Scop*.
set forth in the Equal O e d it
mortgage loam , consumer loans, and
Opportunity A ct, IS 1LS.C. 1A91
4a$ General. This part applies to all
loans to sm all businesses and small
insured n*tkm al banks that are to the
through IfiBltf, o r the F air Housing A ct,
farms.
42 4J.SJC. 3801 through 3619.
business of expending credit to the
(k) Retail banks means insured hanks
(g) k td im d loans means iceos made
public, including wholesale and
feat are in the busiaess «rfextending
indirectly by a baek through
limited-purpose banks.
participation in s lendu^; consortium in credit to Ihe public and feat snake a
4b) B anks n o t engaged in lending
significant mm—it o f importable loans.
activities. This part does not apply to
w hich lenders pool their resources, by
banks that ■engage solely in fe e
correspondent fa»<rt i business, trust
company business, o r th e business ■of
acting as a clearing ageaL Such
institutioatL, a h h o a ^ i lb ey are chartered
as banks, do n o t perform ctarnneiria] or
retail banking services and do not
extend credit to th e public for th eir ow n
account.
(c) Federal branches and agencies. As
provided in § 28.102 of th is chapter, th is
part does n o t apply to Federal agencies,
limited Federal branches, and
uninsured Federal branches. However,
this past does apply to insured Federal
branches. References In this part to
“head office** mean, in the case of
insured Federal branches of foreign
banks, the principal branch w ithin the
Uiiited States. The “service area” of an
insured Federal branch refers to fee
community or com m unities located
w ithin the U nited States served b y the
branch as described in § 25.12. T he
phrase “ office or group -of offices" refers
to insured hranefces located w ithin th e
United States.
67480
Federal Register J Vol. 58, No. 243 I Tuesday, December 21, 1993 / Proposed Rules
(1) Sm all banks means—(1)
Independent banks with, total assets of
less than $250 m illion; or
(2) Banks w ith total assets of less than
S250 m illion that are subsidiaries of a
holding com pany w ith total banking
and thrift assets of less than $250
million.
(m) Sm all businesses means private
for-profit organizations that had for the
calendar or fiscal year preceding the
making of the loan—
(1) Average annual gross receipts of
less than $10 m illion for a concern
providing services; or
(2) Up to 500 employees for a
manufacturing concern.
(n) Sm all farm s means private
organizations engaged in farming
operations w ith average annual gross
receipts of less than $500,000 for the
calendar or fiscal year preceding the
making of the loan.
(o) W holesale a nd lim ited-purpose
banks means insured banks that are in
the business of extending credit to the
public but make no significant am ount
of reportable loans.
in losses or are otherwise inconsistent
with safe and sound operations.
However, banks are perm itted and
encouraged to develop and apply
flexible underwriting standards (that are
consistent with safe and sound
operations) for loans that benefit lowand moderate-income geographies or
individuals.
§ 25.7 Lending Test.
(a) Sum m ary. The Lending Test
evaluates primarily w hether a retail
bank is making loans in low- and
moderate-income geographies as well as
to wealthier geographies. The test
examines direct lending by the bank
itself and. if the bank elects, indirect
lending to the extent perm itted by this
part.
(b) Standards. The OCC rates a bank’s
lending performance in a service area
under the following rebuttable
presumptions.
(1) Outstanding. Subject to rebuttal,
the OCC presumes a bank is lending in
an outstanding fashion if—
(1) The bank’s market share of
reportable loans in low- and moderate§25.6 Assessment standards—summary.
income geographies in its service area
(a) Except for banks assessed under
significantly exceeds its market share of
the special standards of § 25.11, the
reportable loans in the rem ainder of its
OCC assesses a bank's CRA performance service area; and
as described in this section. The OCC
(ii) Either:
reviews, among other things, the bank’s
(A) It has made a significant am ount
CRA public file and any signed, w ritten
of reportable loans in the vast majority
comments about the bank’s CRA
of the low- and moderate-income
performance subm itted to the bank or
geographies in its service area; or
the OCC. In assessing a bank’s CRA
(B) Its reportable loans to low- and
performance, the OCC considers
moderate-income geographies in its
whether the bank is helping to meet the
service area represent a substantial
credit needs of its entire community. In
percentage of its reportable loans in its
examinations, however, the OCC pays
service area (provided that the bank
particular attention to the bank’s record
does not unreasonably exclude low- and
of helping to meet the credit needs in
moderate-income geographies from its
low- and moderate-income geographies. lending).
That record is prim arily evaluated using
(2) High Satisfactory. Subject to
three measures: the Lending Test .
rebuttal, the OCC presumes an
(described in § 25.7), the Investment
institution is lending in a high
Test (described in § 25.8) and the
satisfactory fashion if—
Service Test (described in § 25.9). Based
(i) The bank’s market share of
on these separate assessments, the OCC
reportable loans in low- and moderateassigns the bank one of four overall
income geographies in its service area is
composite ratings as described in
at'least roughly comparable to its market
§25.10. The four composite ratings are
share of reportable loans in the
Outstanding, Satisfactory, Needs to
rem ainder of its service area; and
(ii) Either:
Improve, and Substantial
(A) It has made a significant am ount
Noncompliance.
of reportable loans in most of the low(b) T he com posite ratings reflect the
extent of com pliance or noncom pliance and moderate-income geographies in its
service area; or
w ith the com m unity reinvestment
(B) Its reportable loans to low- and
obligation described in § 25.2. A bank
moderate-income geographies in its
that receives a composite rating of
service area represent a very significant
Substantial Noncompliance shall be
subject to enforcement actions pursuant percentage of its reportable loans in its
service area (provided that the bank
to 12 U.S.C 1818.
(c) This part and the CRA do not
does not unreasonably exclude low- and
require any bank to make loans or
moderate-income geographies from its
investments that are expected to result
lending).
(3) Low Satisfactory. Subject to
rebuttal, the OCC presumes a bank is
lending in a low satisfactory fashion if—
(i) The bank’s market share of
reportable loans in low- and moderateincome geographies in its service area is
at least roughly comparable to its market
share of reportable loans in the
remainder of its service area; and
(ii) Either:
(A) It has made a significant am ount
of reportable loans in many of the lowand moderate-income geographies in its
service area; or
(B) Its reportable loans to low- and
moderate-income geographies in its
service area represent a significant
percentage of its reportable loans in its
service area (provided that the bank
does not unreasonably exclude low- and
moderate-income geographies from its
lending).
(4) Needs to Improve. Subject to
rebuttal, the OCC presumes a bank
needs to improve its record under the
Lending Test if—
(i) The bank’s market share of
reportable loans in low- and moderateincome geographies in its service area is
less than, and not roughly comparable
to, its market share of reportable loans
in the remainder of its service area; or
(ii) It has made reportable loans in
only a few of the low- and moderateincome geographies in its service area,
and reportable loans to low- and
moderate-income geographies in its
service area represent an insignificant
percentage of its reportable loans in its
service area.
(5) Substantial Noncom pliance.
Subject to rebuttal, the OCC presumes a
bank is in substantial noncompliance
with the Lending Test if—
(i) The bank’s market share of
reportable loans in low- and moderateincome geographies in its service area is
significantly less than its market share
of reportable loans in the rem ainder of
its service area; and
(ii) It has made very few, if any,
reportable loans in the low- and
moderate-income geographies in its
service area.
(c) M ethod o f com putation—(1)
General. For purposes of the Lending
Test, the OCC, rather than the bank, is
responsible for making the
computations. The OCC bases such
com putations upon the bank's reported
loan data required under §25.13 and the
aggregate reported loan data supplied by
the Federal financial supervisory
agencies. In making lending test
computations, the OCC measures market
share, amount of loans, and percentage
using both volume of loans and num ber
of loans.
Federal Register J VoL 56, No. 243 / Tuesday, December 21, 1-933 J Proposed RuLas
{2j M arket shata. The-OCC com pates
market shave for volum e and num ber o f
loans for each type o f reportable loans:
Heme mortgage ioaas, consumer loans,
and sm all business and faun loans. H ie
OCC aw ards an overall m arket share
performance rating after Mrragtasg each
lauding category based o n such factors
as the s e e d s o f the <ac*nmunity being
served, th e h an k 's capabilities and
business plans, an d die degree to which
the batik's performance w ith respect to
one of the loan categories, in fact,
balances o r com pensates for its
performance und er another category.
(d) A djustm ents. <1} T he OCC may
increase a bank's lending rating if the
bank participates in a program for giving
farther iw w w s to loan applications that
would otherw ise b e denied. More credit
will be given for su ch a program if it is
done in conjunction w ith a com nranity
organization in such a way that the
organization either participates in the
review or offers applications from krv»and moderate-incom e individuals that
the h ank -will consider for credit. T he
OCC may also increase th e rating if the
bank h a s m ade a substantial am ount of
loans requiring creative or innovative
underw riting IwhOe m aintaining a safe
and sound quality^ o r loans for w hich
there is p articular need, such as loans
for multifam ily housing con struction
and rehabilitation, loans to start-trps,
very small businesses or community
developm ent organizations o r facilities
and loans to veiy low-income
individuals and areas. The OCC will
also consider favorably in T e a c h i n g a
rating loans made to third parties, such
as comm unity development
organizations and interm ediaries, that
make loans or facilitate lending in lowand moderate-income geographies, even
if the loans by th e bank are not
reportable under this part, are not made
to third parties in the bank’s service
area, or are m ade to third parties that
serve service areas other than the
bank’
s.
(2) In exceptional cases, the OCC may
reduce a rating achieved under this
section if it concludes that th e
quantitative measures in this section fail
to reflect the bank’s actual record of
lending to low- or moderate-income
individuals or geographies.
(e) Indirect lending. 11J If the bank
elects, the OCC will attribute to a bank
its reported attributable indirect loans.
(2) In th e usual case, th e indirect
loans attributable to a bank equal the
bank’s percentage share phased on th e
level of the bank’s investm ent or
participation) of each loan m ade
through the-entity in w hich the bank
has invested ta participated.
(3) At the option o f all investing-er
participating institutions, an alternative
m ethod of attributing loans among the
investing or participating institutions
may be established. In no case, however;
<i) May the indirect loans attributed to
any bank exceed its percentage share o f
the total loans (measured in both
num ber and volume) m ade directly by
the lending entity in which the
institutions invested or participated;
(ii) May th e investors or participants
claim, i a the aggregate,, indirect loans
(measured in both num ber mid volume)
in excess of the loans actually made in
any gecgraphy by ithe lending entity in
w hich they invested or participated; o r
(iii) May any bank he assigned a
disproportionate share of all loans
(measured in both nurrfoer and volume!
made in low- a n d moderate-income
geographies by a lending entity in
w hich th e institutions invested or
participated.
<(4) If a bank elects, indirect loans
attributed te a bank under Ittis
paragraph {e) m ay he included ia
“reportable lo an s" for purposes o f the
Leading Test if a hank reports them
under ■§25.L3(f) A pplication to wholesale and
lim ited-purpose b a sks. The Lending
Test of th is section does n o t apply to
wholesale o r lim ited-purpose backs. In
evaluating the neoard o f w holesale and
limitBd-puTpose banks m satisfying th eir
oommunity reinvestm ent obligation, the
OCC uses the Investment T est ia ■§ 25 >8
instead of the standards of paragraph (b)
of this section.. For purposes of
assigning a com posite rating as
described in ■§ 25.10, th e OCC
substitutes a wholesale o r limitedpurpose bank’ rating under the
s
Investment Test for a rating under the
Lending Test.
(g) Rebatting presum ptions. A bank
can rebut a presum ptive rating under
this section by clearly establishing to
the satisfaction o f the OCC that the
quantitative m easures in this section do
not accurately present its lending
performance because, am ong other
reasons—
(1) The quantitative measures o f this
section do not reflect the bank's
significant am ount of loans benefiting
low- and moderate-income geographies
or persons;
(2) O ther quantitative measures of the
bank’s lending performance
dem onstrate a higher level than that
reflected by th e m easures under this
section;
(3) Peculiarities in the demographics
of the bank’s service area exist that
significantly distort th e quantitative
measures o f th is section;
67481
(4) Economic or legal linrilations
peculiar te the hank o r its service area
or unusual general eraraainic conditions
have affected its performance an d ought
to be considered; or
(5) The bank's performance as
measured by th e m arket share
com ponent o f the Leading Test does not
reflect its overall lending performance
because o f the extraordinarily high level
of performance, in the aggregate, by
lenders in the bank's service area.
§ 25.8 Investment test
(a) Sum m ary■. The Investm ent Test
evaluates banks on th e amount o f their
investm ents benefiting low- and
moderate-income geographies o r
persons.
&>) Standards. The OCC rates a bank’s
investment perform ance under the
following rebuttable presumptions;
(1) O utstanding. Subject to rebuttal,
the OCC presum es a hank is providing
qualified investm ents in a n outstanding
fashion if the bank h as m ade such
investm ents in an am ount that is
substantial a s com pared to its capital.
(2) High satisfactory. Subject to
rebuttal, the O C C p resu m esah an k is
providing qualified investm ents in a
high satisfactory fashion if th e bank has
made such investments m a n am ount
that is very significant as compared to
its capitaL
(3) Low satisfactory. Subject to
rebuttal, the OCC presum es a hank is
providing qualified investments in a
low satisfactory fashion if the bank has
made such investm ents in an am onnt
that is significant as com pared to its
capital.
(4) N eeds to im prove. Subject to
rebuttal, the OCC presum es a bank
needs to improve its record of providing
qualified investm ents if the hank has
made such investm ents in an am ount
that is insignificant as compared to its
capitaL
|5) Substantial noncom pliance.
Subject to rebuttal, the OCC presumes a
bank is in substantial noncompliance
with the Investment Test if the bank has
devoted very little, if any, capital to
qualified investments.
(c) Q ualified investm ents. Qualified
investm ents are lawful investments that
demonstrably benefit low- and
moderate-income geographies or
persons in the bank’ servioe area.
s
Qualified investm ents may include
investments;
(1) In support of affordable housing,
small business, consum er, and other
economic development initiatives;
(2) In com m unity developm ent banks,
community developm ent corporations,
community developm ent projects, small
business investm ent corporations.
67482
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
m inority sm all business investment
corporations and m inority- and women*
ow ned financial institutions and other
com m unity developm ent financial
interm ediaries;
(3) In consortia or other structures
serving low- and moderate-income
individuals and neighborhoods and
poor rural areas;
(4) In state and local government
agency housing bonds or state and local
government revenue bonds specifically
aimed at helping low- and moderateincome com m unities and individuals.
(d) Capital. For purposes of the
Investment Test, the OCC w ill evaluate
the am ount of qualified investm ents
against the am ount of the bank’s riskbased capital.
(e) B enefit to service area. In order to
be eligible as a qualified investment
under paragraph (c) of this section, the
activity or entity supported by an
investm ent need not solely benefit the
bank’s service area. However, the
activity or entity supported by the
investm ent m ust significantly benefit
low- and m oderate-income geographies
or persons in the bank’s service area.
(t) Exclusion o f indirect loans.
Investments that a bank has elected to
report as indirect lending under the
Lending Test are not counted as
qualified investm ents under this Test.
(g) Grants. Grants that w ould
constitute qualified investm ents were
they in the form of investm ents will be
treated as qualified investm ents for
purposes of the Investment Test. A bank
may also donate, sell on favorable terms,
or make available on a rent-free basis
any branch which is located in a
predominately minority neighborhood
to a m inority depository institution or
w om en's depository institution as
defined in 12 U.S.C 2907.
(h) A pplication to wholesale and
lim ited purpose banks. For purposes of
determining qualified investm ents
under paragraph (c) of this section, the
service area of wholesale and limited
purpose banks is defined to include all
low- and m oderate-income geographies
or persons w ithin the U nited States and
its territories. Loans by wholesale and
limited purpose banks that would
constitute qualified investm ents were
they in the form of investm ents will be
treated as qualified investm ents for the
purposes of the Investment Test.
(ij A djustm ents to Investm ent Test.
The OCC may adjust a bank’s rating
under the Investment Test. Adjustments
may increase or, in exceptional cases,
decrease the rating. In making these
adjustm ents the OCC considers whether:
(1) The bank's qualified investments
are particularly innovative or meet a
special need, or if the bank’s activities
in connection w ith its qualified
readily accessible to low- and moderateinvestm ents have been particularly
income geographies in its service area.
(5) Substantial noncom pliance.
com plex, innovative or intensive for a
Subject to rebuttal, the OCC presumes a
bank of its size, or involve innovative
bank is in substantial noncompliance
partnerships with com m unity
organizations (examples include helping with the Service Test if very few, if any,
of the bank’s branches are located in or
to establish an entity to conduct
readily accessible to low- and moderatecom m unity developm ent activities or
income geographies in its service area.
providing significant service or
(c) A djustm ents fo r retail banks. If
assistance in support of a qualified
necessary, the OCC adjusts a retail
investment); or
(2) The bank has made a large amount bank’s rating to reflect more accurately
the service provided to low- and
of investm ents that would be qualified
investm ents but for the fact that they fail moderate-income geographies and
individuals.
to benefit the bank’s service area as
(1) A djustm ent to reflect more
required by paragraph (e) of this section,
accurately branch service. The OCC may
provided the bank has not neglected
adjust a bank’s record upw ard or
investm ents that benefit its service area.
dow nward to reflect more accurately its
branch service to low- or moderate§ 25.9 Service test
income geographies or individuals.
(a) Sum m ary. The Service Test
Downward adjustm ents will occur only
evaluates the accessibility of a retail
bank’s branches and the extent to which in exceptional cases. In determining the
appropriateness and degree of any
any bank provides other services that
adjustment, the OCC may consider the
enhance credit availability. The Service
bank’s record of opening and closing
Test does not require a bank to expand
branches. The OCC may also consider
the size of its branching network or to
w hether branches in or readily
operate facilities at a loss. Appropriate
accessible to low- and moderate-income
consideration is given to the limitations
geographies actually serve low- and
faced by banks with a small num ber of
moderate-income individuals and
branches. The OCC evaluates retail
w hether branches not located in or
banks w ith m ultiple branches under the
readily accessible to such geographies
Service Test primarily on the extent to
are nonetheless serving low- and
w hich they offer branches. The OCC
moderate-income individuals. The OCC
evaluates wholesale and limitedmay also take into account significant
purpose banks on the extent to which
differences in the quantity, quality or
they provide other services that enhance
types of services offered to low- or
credit availability.
moderate-income individuals or
(b) Standards fo r retail banks. The
geographies and similar considerations.
OCC rates a retail bank's service
(2j A djustm ent to reflect other
performance in a service area under the
services that prom ote credit availability.
following rebuttable presumptions.
The OCC may adjust a bank’s rating
(1) O utstanding. Subject to rebuttal,
upw ard to reflect a strong record of
the OCC presumes a bartk is providing
offering or supporting services that
service in an outstanding fashion if a
promote credit availability for low- and
substantial percentage of the bank’s
moderate-income geographies or
branches are located in or readily
individuals. These services include
accessible to low- and moderate-income credit counseling, low-cost check
geographies in its service area.
cashing, “ lifeline” checking accounts,
(2) High satisfactory. Subject to
financial planning, home ownership
rebuttal, the OCC presumes a bank is
counseling, loan packaging assisting
providing service in a high satisfactory
small and minority businesses,
fashion if a very significant percentage
partnerships with community-based
of the bank's branches are located in or
organizations to promote credit-related
readily accessible to low- and moderate- services, extensive provision of ATMs
income geographies in its service area.
or other non-branch delivery systems
(3) Low satisfactory. Subject to
that are particularly accessible and
rebuttal, the OCC presumes a bank is
convenient to low^-and moderateproviding service in a low satisfactory
income geographies or individuals, and
fashion if a significant percentage of the sim ilar programs.
bank’s branches are located in or readily
(d) A pplication to wholesale and
accessible to low- and moderate-income lim ited-purpose banks. The OCC rates a
geographies in its service area.
wholesale or lim ited-purpose bank’s
(4) Needs to improve. Subject to
service performance under the following
rebuttal, the OCC presumes a bank
rebuttable presumptions:
(1) Outstanding. Subject to rebuttal,
needs to improve its record of providing
the OCC presumes a bank is providing
service if an insignificant percentage of
the bank’s branches are located in or
service in an outstanding fashion if it is
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
For wholesale or lim ited-purpose banks,
the bank’s rating under the Investment
Test serves as the basis for the
composite rating. The base rating under
this paragraph is adjusted as described
in paragraphs (a)(2) and (a)(3) of this
section.
(2) Effect o f investm ent rating. For
retail banks, the base rating is increased
by two levels if the bank has an
outstanding rating in the Investment
Test or by one level if the bank has a
high satisfactory rating in the
Investment Test.
(3) Effect o f service rating. The base
rating is increased by one level if the
bank has an outstanding rating in the
Service Test and is decreased by one
level if the bank has a rating of
substantial non-compliance in the
Service Test.
(4) Final com posite rating. Subject to
paragraph (b) of this section, the OCC
converts the rating resulting from
paragraphs (a)(1) through (a)(3) of this
section into a final composite rating as
described in this paragraph. High
satisfactory and low satisfactory ratings
are both scored as satisfactory in the
final composite rating. A bank that
would otherwise receive a composite
rating of needs to improve will receive
a final composite rating of substantial
noncom pliance if the bank received no
better than a needs to improve rating on
both of its last two examinations.
(b) Effect o f discrim ination. Evidence
that a bank has engaged in illegal
discrim ination may affect the bank’s
CRA rating. Notwithstanding paragraph
(a) of this section and subject to rebuttal,
the OCC assigns a bank a final
composite rating lower than satisfactory
if the bank has—
(1) Engaged in a pattern or practice of
illegal discrim ination that it has not
corrected fully; or
(2) Committed an isolated act of
illegal discrim ination of w hich it has
knowledge and that it has not corrected
fully or is not in the process of
correcting fully.
(c) M ultiple service areas. Where a
bank operates in more than one service
area, the OCC conducts Lending,
Investment and Service tests in a sample
of all of the service areas in w hich a
bank operates. The OCC assigns separate
composite CRA ratings to the bank’s
performance in each of the service areas
studied. A list of the service areas in
which the bank’s CRA performance was
§25.10 Composite ratings.
exam ined, along with the rating
(a) Com posite rating standards. OCC assigned to the bank’s CRA record in
each of the service areas, shall be
assigns com posite ratings as follows:
(1) Base rating. For retail banks, the included in the bank’s public
bank’s rating u nder the Lending Test
performance evaluation. The overall
forms the basis for its composite rating.
rating for the bank reflects the
providing a substantial amount of the
services described in paragraph (c)(2) of
this section or providing substantial
support for organizations that furnish
such services.
(2) High satisfactory. Subject to
rebuttal, the OCC presumes a bank is
providing service in a high satisfactory
fashion if it is providing a very
significant am ount of the services
described in paragraph (c)(2) of this
section or providing very significant
support for organizations that furnish
such services.
(3) Low satisfactory. Subject to
rebuttal, the OCC presumes a bank is
providing service in a low satisfactory
fashion if it is providing a significant
amount of the services described in
paragraph (c)(2) of this section or
providing significant support for
organizations that furnish such services.
(4) Needs to im prove. Subject to
rebuttal, the OCC presum es a bank
needs to improve its record of providing
service if it is providing an insignificant
amount of the services described in
paragraph (c)(2) of this section or
providing insignificant support for
organizations that furnish such services.
(5) Substantia] noncom pliance.
Subject to rebuttal, the OCC presum es a
bank is in substantial noncom pliance
with the Service Test if it provides very
few, if any, services described in
paragraph (c)(2) of this section or very
little, if any, support for organizations
that furnish such services.
(e) Rebutting presum ptions. A bank
can rebut a presum ptive rating under
this section by clearly establishing to
the satisfaction of the OCC that the
quantitative measures in this section do
not accurately represent its service
performance because, among other
reasons—
(1) The quantitative measures of this
section do not reflect the bank's
significant degree of services that
promote credit availability to low- and
moderate-income geographies or
persons;
(2) Peculiarities in the demographics
of the bank’s service area exist that
significantly distort the quantitative
measures of th is section; or
(3) Lim itations im posed by the bank’s
financial condition, economic or legal
limitations on branch operation or
location, or sim ilar circum stances have
affected its performance and ought to be
considered.
67483
performance of the bank in the service
areas studied.
§25.11 Alternative assessment methods.
(a) Sm all bank assessm ent standards.
A small bank (as defined in § 25.5(1))
may choose to have the OCC assess its
CRA performance under this section
rather than the general standards
described in §§ 25.6 through 25.10.
(1) The OCC presum es a small bank’s
overall CRA performance is satisfactory
if the bank:
(1) Has a reasonable loan-to-deposit
ratio (a ratio of 60 percent, adjusted for
seasonal variation, is presumed to be
reasonable) given its size, its financial
condition, and the credit needs in its
service area;
(ii) Makes the majority of its loans in
its service area;
(iii) Has a good loan mix (i.e., makes,
to the extent perm itted by law and
regulation, a variety of loans to
customers across economic levels);
(iv) Has no legitimate, bona-fide
com plaints from community members;
(v) Has not engaged in a pattern or
practice of illegal discrim ination that it
has not corrected fully; and has not
committed isolated acts of illegal
discrim ination, of w hich it has
knowledge, that it has not corrected
fully or is not in the process of
correcting fully; and
(vi) In tne case of a bank already
subject to reporting home mortgage
lending data uqder HMDA, has a
reasonable geographic distribution of
such loans.
(2) A small bank that meets each of
the standards for a satisfactory rating
under this paragraph and exceeds some
or all of those standards may warrant
consideration for an overall rating of
outstanding. In assessing w hether a
small bank’s CRA record is outstanding,
the OCC w ill consider the extent to
which the bank’s loan-to-deposit ratio,
its lending to its service area, and its
loan mix exceed the standards for a
satisfactory rating. In addition, at the
option of the bank, the OCC will
evaluate:
(i) Its record of making qualified
investm ents (as described in § 25.8(c));
and
(ii) Its record of providing branches,
ATMs, and other services that enhance
credit availability or in other ways meet
the convenience and needs of low- and
moderate-income persons in its service
area.
(3) A sm all bank that fails to meet or
exceed all of the standards for a
satisfactory rating under this paragraph
is not presum ed to be performing in a
less than satisfactory manner. Rather,
for those banks, the OCC conducts a
67484
Federal Register 1 Vol. 58, No. 243 / Tuesday, December 21, 1903 1 Proposed Rules
more extensive «xamin?rtkm of the
goals. However, if the hank fails to meet
bank’s loan-to-deposit record, its record or exceed th e preponderance o f th e
measurable goals set forth in die plan,
of landing to its local community, and
its perform ance w ill he e*ah*ated tinder
its loan mix. T he OCC will also contact
members o f th e community, particularly the lending, service and investm ent
tests or d ie small hank assessment
in response to com plaints about th e
method, as applicable.
bank, and review the findings o f its
most recent fair lending exam ination. In
§25.12 Sendee area—
deUnaation.
addition, at th e option of th e bank, the
(a) The effective tending tem tory o f a
OCC will assess:
retail bank defines th e hank’ service
s
fi) Its record of making qualified
area. The effective lending tem tory is
-investm ents {as described in § 25.81c));
that area around each ndGficecr groep of
and
offices where the preponderance o f
(ii) Its record o f providing branches,
direct reportable loans n u d e through
ATMs, and o th e r services th at enhance
credit -availability o r in other ways serve the office or offices axe located.
(b) Subject to rebuttal, a bank’ service
s
the convenience an d needs of low- and
area is presum ed to be acceptable if the
moderate-income persons m its service
area is broad enough to include lowarea.
(4) M ultiple service areas. If a sm all and moderate-income geographies and
bank operates in more than one -service
does not arbitrarily exclude low- and
area, th e OCC evaluates th e bank’s
moderate-income geographies.
(cj A hank can show that its service
performance in all o f those service
area is acceptable despite its failure to
areas.
(b) Strategic pfan assessm ent. (!) As satisfy the criteria o f paragraph (bj o f
an alternative to being rated after th e
this section by clearly demonstrating to
fact tm der th e lending, service an d
the satisfaction o f th e OCC th a t the
investment tests or tin small bank
criteria o f para& aph (i>) o f th is section
assessment m eth o d , a bank m ay subm it
are inappropriate because, for exam ple,
to the OCC fa r a pproval a strategic p lan
there are no lo w -orm oderate-iacom e
detailing h ow th e bank proposes to m eet geographies w ithin any reasonable
its CRA obligation.
distance given the size an d financial
(i)
The p tan m o st b e subm itted at leastcondition of th e bank.
three m onths p rio r to th e proposed
(d) The OCC can reject as
effective date of the plan so that the
unacceptable a service area «neetu$ the
OCC has sufficient tim e to review th e
criteria of paragraph <bj of this section
plan and to determ ine w hether to
if th e OCC finds that th e service area
approve it.
does not accurately reflect th e true
(ifl A h an k subm itting a proposed
effective lending territory of the bank o r
plan for approval m ust puhlish notice in reflects past redlining or illegal
a ne wsp aper o f general circulation in
discrim ination by the hank.
each o f its service areas stating th at a
(e) A bank shall delineate m ore th an
plan has been subm itted to the OCC for
one service area w hen th e geographies
review, th a t copies o f th e p lan are
it serves extend substantially across
available for re vie w a t offices o f th e
state boundaries o r extend substantially
bank, and th a t com ments on the
across boundaries o fa M etropolitan
proposed p la n m ay b e sent to the OCC
Statistical Area.
in accord w ith 55 5.10 an d 5.11 o f th is
(f) A hank whose business
chapter.
predom inantly consists o f serving
(iii) T h e OCC assesses every plan
persons who are active duty o r retired
under th e standards o f th is p art and will military personnel o r th eir dependents
not approve a p lan unless it provides
and who are located outside its local
m easurable goals against w hich
community « r com m unities m ay
subsequent perform ance can be
delineate a “milLtaiy com m unity” for
evaluated a n d th e proposed
those customers as a service area.
performance ts at least overall
(g) A wholesale n r lim ited-purpose
satisfactory und er the standards of this
bank need n o t delineate a service area.
part.
ih) A hank shall com pile and
pv) No p la n nray have a terra that
maintain a list o f a ll the geographies
exceeds tw o years. Further, durin g the
w ithin its service area o r areas and a
term o f a plan, th e hanfk may petition
map of each service area show ing the
the OCC to approve an am endm ent to
geographies contained therein.
the plan on grounds that a material
§25.13 Laan4at»—
oeftecton,reporttog,
change in q r c nm stances h a s m ade the
and cftscteoum.
plan no longer ap p ropriate.
(21 T h e OOC w m ■assess th e
(a) Every h e r* , except sralH hanks
performance eff a hank operating w d e r
electing the sm ell bank assessm ent
an approved p la n t® determine i f th e
method, shaR collect a n d ma'n rtai n the
bank has -met o r exceeded th e p lan
following data on its-government
insured a n d other reportA le loans;
nmriber o f w ritten applications, num ber
of application -denials, num ber and
amount o f approvals, nunstoer and
amount of loans purchased, and num ber
and amount of indirect loans th e hank
elects to have evaluated using th e
lending test. All inform ation « to he
provided by the-geography where the
loan is located.
(1) A bank choosing to be rated -under
the strategic p lan assessment -described
in § 25 l l f b ) is n o t relieved from its
obligation to report the data as required
by this section.
(2) T he inform ation required under
this section d iall be collected:
(1) Beginning July 1,1994, for the
remaining six m onths of 1994. A
summary of the bank's delta for the six
months shall be subm itted to OCC by
January 31,1995.
(ii) Beginning January 1,1995, on an
annual basis, a summary of the bank’s
data collected under this section shall
be submitted to OCChy January 31 of
the following year. T he summary data
shall be subm itted in the format
prescribed in appendix A nf this part.
t3) Small business loan data sh all h e
collected, reported, and disclosed in the
summary format described in paragraph
(a) of this section for the following
categories: small businesses w ith
average annual gross receipts of less
than $250,000, those with average
annual gross receipts of $250,000 o r
more anri less than $1 m illion; those
with average annual gross receipts o f SI
million or m ore and less than $10
million; a n d m anufacturing businesses
with average aamtai gross receipts of
$10 mm i n n o r m ore and less than 500
employees.
(4) Home mortgage loan data shall be
collected, reported, an d disclosed in th e
summary fo n aat described in paragraph
(a) of this section for th e following
categories: 1-4 family home purchase,
1-4 family hosae improvem ent, 1-4
family refinancings, and multi-family
loans.
(b) The OOC w ill make summary data
collected pursuant to this section
available to the public and to the hanks.
The data w illb e used by the OCC to
apply the Lending Test under $25.7.
(c) For p*trposes o f th is section, a loac
is located in a geography as follows:
i l ) Consumer loans are located in th e
geography where the borrower resides.
(2) Loans secured by real estate are
located in the geography w here th e
relevant r e d estate is located.
(3) Small business loans are located hi
the geography wh ere the headquarters
or principal office o f the business is
locirted.
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
(4) Small farm loans are located in the
geo'graphy where the farm property is
located.
(d) A bank is not required to report
under this section indirect loans unless
the bank elects to have the indirect
loans attributed to it as described in
§ 25.7(e) for purposes of the Lending
Test. If a bank elects to report its
indirect loans, it shall report all
attributable indirect loans outside lowor moderate-incom e geographies as well
as loans inside such geographies.
§ 25.14 Public file and disclosure.
(a) Banks shall m aintain files that are
readily available for public inspection
containing the information required by
this section.
(b) Each bank shall include in its
public file the following information—
(1) All signed, w ritten comments
received from the public for the current
year and past two calendar years that
specifically relate to the bank’s
performance in helping to meet the
credit needs of its community or
comm unities, and any response to the
com m ents by the bank;
(2) A copy of the public section of
bank’s most recent CRA Performance
Evaluation prepared by the OCC. The
bank shall place this copy in the public
file w ithin 30 business days after its
receipt from the OCC; and
(3) A list of the bank’s service areas
and the geographies w ithin each service
area and a map of each service area
showing the geographies contained
therein.
(c) A bank that is not a small bank
shall include in its public file the
lending data the bank has reported to
the OCC under § 25.13 for the current
and past two calendar years.
(d) A small bank shall include in its
public file the bank’s Loan-to-Deposit
ratio com puted at the end of the most
recent calendar year.
(e) A bank that has been approved to
be assessed under a strategic plan as
described in § 25.11(b) shall include in
its public file a copy of that plan.
(f) Each bank that received a less than
satisfactory rating during its most recent
exam ination shall include in its public
file a description of its current efforts to
improve its performance in helping to
meet comm unity credit needs.
(g) A bank shall m aintain its public
file or required portions of the file at the
following offices—
(1) Head offices shall have a copy of
the com plete public file; and
(2) Branches shall have copies of all
materials in the public file relating to
the service area in which the branch is
located.
(h) A bank shall provide copies of the
information in the public file to
67485
5 25.17 Effect of ratings—
corporate
applications.
(a) The OCC takes into account the
applicant’s record of performance in
considering applications for—
§ 25.15 Public notice by banks.
(1) Establishment of a domestic
A bank shall provide, in the public
branch, ATM, or other facility w ith the
lobby of its head office and each branch, ability to accept deposits;
(2) Relocation of the main office, a
the public notice set forth in this
branch office or ATM;
section. Bracketed material shall be
(3) Merger or consolidation with or
used only by banks having more than
one service area. The last two sentences the acquisition of assets or assumption
of liabilities of a federally-insured
shall be included only if the bank is a
depository institution; and
subsidiary of a holding company and
(4) Conversion of a federally-insured
the last sentence only if the company is
depository institution to a national bank
not prevented by statute from acquiring
charter.
additional banks.
(b) An applicant for a national bank
Community Reinvestment Act Notice
charter (other than a federally-insured
U nder the Federal Community
depository institution) shall submit a
Reinvestment Act (CRA), the
description of its proposed CRA
Comptroller of the Currency evaluates
performance when the application is
and enforces our com pliance with our
made. In considering the application,
obligation to help meet the credit needs
the OCC takes into account the bank’s
of this community consistent with safe
proposed CRA performance.
(c) In considering CRA performance
and sound operations. The Comptroller
in a corporate application, the OCC will
also takes our CRA performance into
take into account any views expressed
account when the Comptroller decides
on certain applications subm itted by us. by State or other Federal financial
supervisory agencies or other interested
Your involvement is encouraged. You
parties, which are submitted in
should know that:
accordance with the OCC’s procedures
You may look at and obtain in this office
set forth in part 5 of this chapter or
information on our performance in this
§25.16.
community. This information includes a file
(d) In the OCC’s consideration of the
of all signed, written com ments received by
bank’s CRA record in a corporate
us, any responses we have made to the
com ments, evaluations by the Comptroller of application, the CRA rating assigned to
our CRA performance, and data on the loans
a bank is an important, and often
we have made in this com munity during the
controlling, factor. However, the rating
past two years. (Current CRA information on
is not conclusive evidence of
our performance in other com m unities
performance. Absent other evidence on
served by us is available at our head office,
performance, CRA ratings generally
located a t _____ .)
affect corporate applications as follows:
You may send signed, w ritten comments
(1) An ‘‘outstanding” rating generally
about our CRA performance in helping to
will result in a finding that the CRA
meet com munity credit needs to (title and
aspect of the application is consistent
address of bank official) and to the Deputy
with approval of the application and
Comptroller (address). Your letter, together
w ith any response by us, may be made
will receive extra weight in reviewing
public.
the application.
You may ask the Comptroller to look at any
(2) A "satisfactory” rating generally
comments received by the Deputy
will result in a finding that the CRA
Comptroller. You also may request from the
aspect of the application is consistent
Deputy Comptroller an announcem ent of our
with approval of the application.
applications covered by the CRA filed with
(3) A “needs to improve” rating
the Comptroller. We are a subsidiary of
generally will be an adverse factor in the
(name of holding company), a bank holding
CRA aspect of the application, and
company. You may request from the Federal
absent demonstrated improvement in
Reserve Bank of (city, address) an
announcem ent of applications covered by the the bank’s CRA performance or other
countervailing factors, generally will
CRA filed by bank holding companies.
result in denial or conditional approval
§ 25.16 Publication of planned
of the application.
examination schedule.
(4) A “substantial noncom pliance”
The OCC will publish at least 30 days rating generally will be so adverse a
in advance of the beginning of each
finding on the CRA aspect of the
calendar quarter a list of the banks that
application as to result in denial of the
are scheduled for CRA examinations in
application.
that quarter. Any member of the public
§ 25.18 Transltion rules.
may submit comments to the OCC
(a) Data collection. The data
regarding the CRA performance of any
collection and reporting requirements of
bank whose name appears on the list.
members of the public upon request. A
bank may charge a reasonable fee not to
exceed the cost of reproduction and
mailing (if applicable).
674M
Federal Frpirtnr J VoL 56, No. 242 1 Tuesday, December 21, 1083 J ftopoaed fefles
§ 25.13 w ill g o io ta -effect Juiy 1 , 19S4.
Data collected from July 1 , 1 9 S 4toy*sr
end m ust h e reported to th e OGC a o
later than January 31.1995. Thereafter
banks w ill c o lle d d ata o n an annual
basis and (he d ata atwdJ he reported no
later th an January 31 o f th e fallowing
year.
(b) j^snessm en t standards. Evaluation
under the new standands is m andatary
after $ufy L, 1935, except th at, u n til
A pril L, 1396, far good cause, an
institution m ay request the OCC to
evaluate it und er th e standards in place
prior to (effective date of final
regulation]. During the tim e period from
April 1,1995 until July 1,1995, a bank
may, a t its op tio n , choose to be
evaluated u n d er th e new standards or
under th e standards in place p rio r to
[effective d a te of fin d regulation].
(c) Strategic plan. Jf a bank elects to
be evaluated und er an approved
strategic plan during She transition
period, a bank m ay subm it a -strategic
plan anytim e after ^effective -date of final
regulation].
(d) Corporate ‘
applications. If th e first
rating a baflk receives tinder th e new
standards (»\ft»etber th a t rating is given
during the transition p eriod o r after th e
new standards becom e effective] is m ore
than one rating-category below th e last
rating the bank received prior to
[effective date of final regulation!, th e
OCC w ill not disapprove any corporate
application d t take any other
enforcement action againrt th e bank
based o n that low er rating if th e OCC
has determ ined th a t th e drop in th e
bank's Taring occurred despite th e
bank’s good faith efforts to perform at
least satisfactorily und er th e n ew
standards.
2.
A ppendix A to part 25 is added as
set forth in th e common .preamble.
Sec.
228.3
228.4
228.5
228.6
228.7
228.8
228.9
Purposes.
Scope.
Definitions.
Assessment standards—summary.
Lending Test.
Investm ent TeSt.
Service Test.
228.10 Composite ratings.
228.11 AHemative assessm ent m ethods.
228.12 Service area—deEneatioa.
228.13 Loan d ata collection, jseporting, and
disclosure.
228.14 Public Tile and disclosure.
228.15 Public n otice -by banks.
228.16 Publication o f planned exam ination
schedule.
228.17 Effect o f ia±in|p—applications.
229.18 Transition rules.
Appendix A to Part 220—OKA Lamm
Data Format
Authority: 12 U.S.C. 8*1. 325,181-4,18*6,
1828,1842, and 29©1 etjoq.
explain how th e Board assesses the
performance -of State member banks in
satisfying the com m unity reinvestment
obligation; a n d >to describe how that
performance is taken irrto account in
certain -applications.
228.4 Scqpe.
(a) G eneral This .part applies to all
insured State member banks th at are in
the business of extending credit to the
public, including wholesale and
lim ited-purpose banks.
(b) Banks not engaged in lending
activities. T h is part does not apply to
banks that -engage solely in the
correspondent banking business, trust
company business, o r th e business of
acting as a clearing agent. Such
institutions, although th ey are chartered
as banks, d o not perform com m ercial or
retail banking services and do not
extend credit to the public for th eir own
account.
(c) A pplications b y bank holding
com panies. Section 228.17 applies to
applications filed by bank holding
companies u n d e T section 3 of the Bank
Holding Company Act.
§ 228.1 Authority.
taj The Board of Governors o f the
Federal Reserve System issues this part
to im plement the C om nsunity
Reinvestment A ct {12 U.S.C. 2901 et
sey j. The regulations com prising this
part are issued under the authority of
the Community Reinvestment A ct and
§ 2285 Definitions.
under the provisions of the United
For purposes o f Oris part, th e
States Code authorizing th e Board to
following definitions apply:
conduct exam inations «rfState-chartered
(a) A utom ated Teller M achines
banks that are members o f tha Federal
(ATM s) means immobile, automated,
Reserve System (12 U-S>C. 325}, to
unstaffed banking facilities at w hich
conduct -examinations -of bank holding
deposits are received, checks paid, or
companies and th eir subsidiaries (12
money lent.
U.SjC 1844). an d to consider
(b) Branches means staffed banking
applications for dom estic branches by
facilities (shared or unshared) w ith a
state member banks {12 U.S.C. 321), for
fixed site at w hich deposits are received
federal deposit insurance in connection
or checks paid or money lent, including
w ith applications for mem bership in the mini-branches in grocery stores or
Federal Reserve System by state banks
branches operated in conjunction with
(12 U-S.C. 321,1814, 1816), for merger
any othar local businesses, churches, or
in which th e resulting bank w ould be a
other non-profit organisations.
state m em ber bank {12 U.S.C. JS2B), and
(c) Consum er loans m eans closed-end
Appendix A to Pait 2S—CRA Loan Data for formation of, acquisitions o f banks
loans extended to a natural person
by, and mergers of, bank holding
Format
primarily for personal, family, or
companies (12 U.S.C. 1842}.
household purposes, but does not
Dated: December 2.1993.
(bj Information collection
include home mortgage loans a s defined
Eugene A. Ludwig,
requ irements contained in th is p art have in paragraph (ej of this section, cred it
Comptroller of the Currency.
been approved by the Office of
card loans, or m otor vehicle loans.
Management a n d Budget under the
(d) Geographies m eans census tracts,
provisions o f 44 ILSC. .3501 at seq. a a d
or block num bering areas.
FEDERAL RESERVE SYSTEM
have been assigned OMB N o .______,
(ej H om e mortgage loans means
closed-end loans that are mortgage loans
§ 228.2 Community reinvestment
12 CFR Chapterfl
as defined in section 303(1) o f -the Home
obligation.
For the seasons outlined is the
Mortgage Disclosure A ct (12 LLS-C.
State member banks have a
preamble, the Board proposes to amend
continuing and affirmative obligation to 2802j(lj, hereinafter HMDA) and
12 CFR chapter II as set forth below:
im plem enting regulations.
help meet the credit needs of th e ir
3. Part 228 is rertsed to read as
(f) Illegal discrim ination m eans
com m unities, including k>w- an d
follows:
discrim ination o n a prohibited basis as
moderate-income areas, consistent w ith
set forth in th e Equal Credit
safe and eoand operations.
PART 22B—COMMUNITY
Opportunity A ct, 15 I15LC. t£91
REINVESTMENT (REGULATION BS)
§ 228.3 Purposes.
through 1-6911 ®r th e F air Housing Act,
The purposes o f thifi part ane to
42 U.S.C. 3601 through 3619.
Sec.
fgj iu d k e c t loans m eans loans m ade
im plem ent th e o w m u n i t j reinvestm ent
228.1 Authority.
indirectly by a bonk through
228.2 Community xeinwestxaent -obl^stioo.
obligation o f State m em ber banks, to
Federal Register / Vol. 58, No. 243 1 Tuesday, December 21, 1993 I Proposed Rules
participation in a lending consortium in
w hich lenders pool th e ir resources, by
subsidiaries of the bank, by affiliates
funded by the bank, or by law ful
investm ents in o r with com m unity
developm ent and affordable housing
lenders, women-owned or m inorityow ned financial institutions, lowincom e credit unions, and others that
lend to low- and moderate-income
geographies and individuals.
(h) Loans or investm ents benefiting
low- and m oderate-incom e geographies
or persons m eans loans or investm ents
w here the proceeds are provided to,
invested in, used by or otherw ise
directly benefit the following entities:
(1) Persons that reside in low- or
moderate-income geographies or have
low or moderate incomes;
(2) Businesses located in low- or
moderate-income geographies or
em ploying mostly persons residing in
such geographies;
(3) Non-profit organizations located in
low- or moderate-income geographies or
providing services m ainly to persons
residing in such geographies; or
(4) Construction or renovation of
facilities located in low- or moderateincom e geographies or providing
services mainly to persons residing in
such geographies.
(i) Low- and m oderate-incom e
geographies m eans geographies where
the m edian family incom e is less than
80% of the m edian family incom e for
the M etropolitan Statistical Area (MSA)
or (in the case of geographies outside a
MSA) less than 80% of the n o n
metropolitan State-wide m edian family
income for the State in w hich the
geography is located.
(1) Low-income geographies means
geographies where the m edian family
income is less than 50% of the m edian
family income for the M etropolitan
Statistical Area (MSA) or (in the case of
geographies outside a MSA) less than
50% of the non-m etropolitan State-wide
median family income for th e State in
which the geography is located.
(2) M oderate-incom e geographies
m eans geographies where the median
family income is at least 50% and less
than 80% of the median family income
for the M etropolitan Statistical Area
(MSA) or (in the case of geographies
outside a MSA) a t least 50% an d less
than 80% of the non-m etropolitan State
wide m edian family income for the
State in which the geography is located.
(j) Reportable loans m eans home
mortgage loans, consum er loans, and
loans to small businesses an d small
farms.
(k) Retail banks m eans insured banks
that are in the business of extending
credit to the public and that make a
significant amount of reportable loans.
(1) Sm all banks means:
(1) Independent banks with total
assets of less than $250 m illion; or
(2) Banks with total assets o f less than
$250 m illion that are subsidiaries o f a
holding com pany w ith total banking
and thrift assets of less than $250
m illion.
(m) S m all businesses m eans private
for-profit organizations that had for the
calendar or fiscal year preceding the
making of the loan:
(1) Average annual gross receipts of
less than $10 m illion for a concern
providing services; or
(2) Up to 500 employees for a
m anufacturing concern.
(n) Sm all farm s means private
organizations engaged in farming
operations w ith average annual gross
receipts of less than $500,000 for the
calendar or fiscal year preceding the
making of the loan.
(o) W holesale and lim ited-purpose
banks means insured banks that are in
the business of extending credit to the
public b u t make no significant am ount
of reportable loans.
67487
(c) T his part and the CRA do not
require any bank to make loans or
investm ents that are expected to result
in losses or are otherwise inconsistent
w ith safe and sound operations.
However, banks are perm itted and
encouraged to develop and apply
flexible underw riting standards (that are
consistent w ith safe and sound
operations) for loans that benefit lowand moderate-income geographies or
individuals.
§ 228.7 Lending teal
(a) Summary. T he lending test
evaluates primarily w hether a retail
bank is making loans in low- and
moderate-income geographies, as well
as to w ealthier geographies. The test
examines direct lending by the bank
itself and, if the bank elects, indirect
lending to the extent perm itted by this
part.
(b) Standards. T he Board rates a
bank’s lending performance in a service
area under the following rebuttable
presumptions.
(1) Outstanding. Subject to rebuttal,
the Board presumes a bank is lending in
an outstanding fashion if:
(1) The bank's market share of
§22&6 Assessment standards—summary. reportable loans in low- and moderate(a) Except for banks assessed under
income geographies in its service area
the special standards of §228.11, the
significantly exceeds its market share of
Board assesses a bank’s CRA
reportable loans in the rem ainder of its
performance as described in this
service area; and
section. The Board reviews, among
(ii) E ith e r
other things, the bank’s CRA public file
(A) It has made a significant am ount
and any signed, w ritten com m ents about of reportable loans in the vast majority
the bank’s CRA performance subm itted
of the low- and moderate-income
to the bank or the Board. In assessing a
geographies in its service area; or
bank’s CRA performance, th e Board
(B) Its reportable loans to low- and
considers whether the bank is helping to moderate-income geographies in its
meet the credit needs of its entire
service area represent a substantial
com m unity. In examinations, however,
percentage of its reportable loans in its
the Board pays particular attention to
service area (provided that the bank
the bank’s record of helping to meet the
does not unreasonably exclude low- and
credit needs in low- and moderatemoderate-income geographies or
incom e geographies. That record is
persons from its lending).
prim arily evaluated using three
(2) High satisfactory. Subject to
• measures: the Lending Test (described
rebuttal the Board presum es an
in § 228.7), the Investment Test
institution is lending in a high
(described in § 228.8), and the Service
satisfactory fashion if:
(i) The bank's market share of
Test (described in § 228.9). Based on
reportable loans in low- and moderatethese separate assessments, the Board
incom e geographies in its service area is
assigns the bank one of four overall
at least roughly comparable to its market
com posite ratings as described in
§ 228.10. The four composite ratings are share of reportable loans in the
rem ainder o f its service area; and
O utstanding, Satisfactory, Needs to
(ii) Either:
Improve, and Substantial
(A) It has made a significant am ount
Noncompliance.
of reportable loans in most of the low(b) The composite ratings reflect the
extent of com pliance or noncom pliance and moderate-income geographies in its
service area; or
w ith the com m unity reinvestm ent
(B) Its reportable loans to low- and
obligation described in § 228.2. A bank
moderate-income geographies in its
that receives a composite rating of
service area represent a very significant
Substantial Noncompliance shall be
subject to enforcement actions pursuant percentage o f its reportable loans in its
service area (provided that th e bank
to 12 U.S.C 1818.
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Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
through the entity in which the bank
does not unreasonably exclude low- and percentage using both volume of loans
has invested or participated.
and num ber of loans.
moderate-incom e geographies from its
lending).
(2) M arket share. The Board computes (3) At the option of all investing or
(3) Low satisfactory. Subject to
participating institutions, an alternative
market share for volume and num ber of
rebuttal, the Board presumes a bank is
m ethod of attributing loans among the
loans for each type of reportable loans:
investing or participating institutions
lending in a low satisfactory fashion if:
home mortgage loans, consumer loans,
(i) The bank’s market share of
may be established. In no case, however:
and small business and farm loans. The
reportable loans in low- and moderate(i) May the indirect loans attributed to
Board awards an overall market share
incom e geographies in its service area is performance rating after weighing each
any bank exceed its percentage share of
at least roughly comparable to its market lending category based on such factors
the total loans (measured in both
share of reportable loans in the
num ber and volume) made directly by
as the needs of the community being
rem ainder of its service area; and
the lending entity in which the
served, the bank’s capabilities and
(ii) Either:
business plans, and the degree to w hich
institutions invested or participated;
(A) It has made a significant am ount
the bank’s performance with respect to
(ii) May the investors or participants
of reportable loans in many of the lowclaim, in the aggregate, indirect loans
one of the loan categories, in fact,
and moderate-income geographies in its balances or com pensates for its
(measured in both num ber and volume)
service area; or
in excess of the loans actually made in
performance under another category.
(B) Its reportable loans to low- and
any geography by the lending entity in
(d) A djustm ents. (1) The Board may
moderate-income geographies in its
w hich they invested or participated; or
increase a bank’s lending rating if the
service area represent a significant
(iii) May any bank be assigned a
bank participates in a program for giving
percentage of its reportable loans in its
further reviews to loan applications that disproportionate share of an loans
service area (provided that the bank
w ould otherwise be denied. More credit (measured in both num ber and volume)
does not unreasonably exclude low- and will be given for such a program if it is
made in low- and moderate-income
moderate-income geographies from its
geographies by a lending entity in
done in conjunction with a community
lending).
which the institutions invested or
organization in such a way that the
(4) N eeds to im prove. Subject to
participated.
organization either participates in the
rebuttal, the Board presum es a bank
(4) If a bank elects, indirect loans
review or offers applications from lowneeds to im prove its record under the
attributed to a bank under this
and moderate-income individuals that
Lending Test if:
paragraph (e) may be included in
the bank will consider for credit. The
(i) The bank’s market share of
Board may also increase the rating if the “ reportable loans” for purposes of the
reportable loans in low- and moderateLending Test if a bank reports them
^ income geographies in its service area is bank has made a substantial amount of
under §228.13.
loans requiring creative or innovative
less than, and not roughly comparable
(f) A pplication to wholesale and
underw riting (while m aintaining a safe
to, its market share of reportable loans
lim ited-purpose banks. The Lending
and sound quality) or loans for which
in the rem ainder of its service area; or
Test of this section does not apply to
there is particular need, such as loans
(ii) It has m ade reportable loans in
wholesale or limited-purpose banks. In
for m ultifamily housing construction
only a few of the low- and moderateevaluating the record of wholesale and
and rehabilitation, loans to start-ups,
income geographies in its service area,
lim ited-purpose banks in satisfying their
very small businesses or community
and reportable loans to low- and
com m unity reinvestm ent obligation, the
developm ent organizations or facilities
moderate-income geographies in its
Board uses the Investment Test in
and loans to very low-income
service area represent an insignificant
§ 228.8 instead of the standards of
individuals and areas. The Board will
percentage of its reportable loans in its
paragraph (b) of this section. For
also consider favorably in reaching a
service area.
purposes of assigning a composite rating
rating loans made to third parties, such
(5) Substantial noncom pliance.
as described in § 228.10, the Board
as community development
Subject to rebuttal, the Board presum es
substitutes a wholesale or limitedorganizations and interm ediaries, that
a bank is in substantial noncom pliance
purpose bank’s rating under the
make loans or facilitate lending in lowwith the Lending Test if:
and moderate-income geographies, even investm ent test for a rating under the
(i) The bank’s market share of
lending test.
if the loans by the bank are not
reportable loans in low- and moderate(g) Rebutting presum ptions. A bank
income geographies in its service area is reportable under this part, are not made
can rebut a presum ptive rating under
to third parties in the bank’s service
significantly less than its market share
this section by clearly establishing to
area, or are made to third parties that
of reportable loans in the rem ainder of
the satisfaction of the Board that the
serve service areas other than the
its service area; and
quantitative measures in this section do
bank’s.
(ii) It has m ade very few, if any,
not accurately present its lending
(2) In exceptional cases, the Board
reportable loans in the low- and
may reduce a rating achieved under this performance because, among other
moderate-income geographies in its
reasons:
section if it concludes that the
service area.
quantitative measures in this section fail
(1) The quantitative measures of this
(c) M ethod o f com putation—(1)
section do not reflect the bank’s
to reflect the bank’s actual record of
General. For purposes of the Lending
significant amount of loans benefiting
lending to low- or moderate-income
Test, the Board, rather than the bank, is
low- and moderate-income geographies
individuals or geographies.
responsible for making the
or persons;
(e) Indirect lending. (1) If the bank
com putations. The Board bases such
elects, the Board w ill attribute to a bank
(2) O ther quantitative measures of the
com putations upon the bank’s reported
its reported attributable indirect loans.
bank’s lending performance
loan data required under § 228.13 and
dem onstrate a higher level than that
(2) In the usual case, the indirect
the aggregate reported loan data
reflected by the measures under this
loans attributable to a bank equal the
supplied by the Federal financial
section;
supervisory agencies. In making lending bank’s percentage share (based on the
(3) Peculiarities in the demographics
level of the bank’s investment or
test com putations, the Board measures
of the bank's service area exist that
participation) of each loan made
market share, am ount of loans, and
Federal Register / VoL 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
significantly distort the quantitative
measures of this section;
(4) Economic or legal lim itations
peculiar to the bank or its service area
or unusual general economic conditions
have affected its performance and ought
to be considered; or
(5) The bank’s performance as
measured by the market share
com ponent of the Lending Test does not
reflect its overall lending performance
because of the extraordinarily high level
of performance, in the aggregate, by
lenders in the b ank’s service area.
§ 228.8 Investment lo st
(a) Sum m ary. The investm ent test
evaluates banks on the am ount of their
investm ents benefiting low- and
moderate-income geographies or
persons.
(b) Standards. The Board rates a
bank’s investm ent performance under
the following rebuttable presumptions:
(1) Outstanding. Subject to rebuttal,
the Board presum es a bank is providing
qualified investm ents in an outstanding
fashion if the bank has made such
investm ents in an am ount that is
substantial as com pared to its cap ital
(2) High satisfactory. Subject to
rebuttal, the Board presum es a bank is
providing qualified investm ents in a
high satisfactory fashion if the bank has
made such investm ents in an am ount
that is very significant as com pared to
its capital.
(3) Low satisfactory. Subject to
rebuttal, the Board presum es a bank is
providing qualified investm ents in a
low satisfactory fashion if the bank has
made such investm ents in an amount
that is significant as compared to its
capital.
(4) Needs to improve. Subject to
rebuttal, the Board presum es a bank
needs to improve its record of providing
qualified investm ents if the bank has
made such investm ents in an am ount
that is insignificant as compared to its
capital.
(5) Substantial noncom pliance.
Subject to rebuttal, the Board presumes
a bank is in substantial noncom pliance
with the Investm ent Test if the bank has
devoted very little, if any, capital to
qualified investments.
(c) Q ualified investm ents. Qualified
investm ents are lawful investm ents that
demonstrably benefit low- and
moderate-income geographies or
persons in the bank’s service area.
Qualified investm ents may include
investments:
(1) In support of affordable housing,
small business, consum er, and other
economic developm ent initiatives;
(2) In com m unity developm ent banks,
community developm ent corporations.
67489
(1) The bank’s qualified investments
com m unity development projects, small
are particularly innovative or meet a
business investment corporations,
special need, or if the bank’s activities
minority small business investm ent
corporations and minority- and women- in connection w ith its qualified
investm ents have been particularly
owned financial institutions and other
complex, innovative or intensive for a
comm unity development financial
bank of its size, or involve innovative
intermediaries;
(3) In consortia or other structures
partnerships w ith com m unity
serving low- and moderate-income
organizations (examples include helping
individuals and neighborhoods and
to establish an entity to conduct
poor rural areas;
com m unity developm ent activities or
(4) In State and local government
providing significant service or
agency housing bonds or State and local assistance in support of a qualified
government revenue bonds specifically
investment); or
aimed at helping low- and moderate(2) The bank has made a large am ount
income com m unities and individuals.
of investments that would be qualified
(d) Capital. For purposes of the
investm ents but for the fact that they fail
Investment Test, the Board will evaluate to benefit the bank’s service area as
the amount of qualified investments
required by paragraph (e) of this section,
against the am ount of the bank’s riskprovided the bank has not neglected
based capital.
investm ents that benefit its service area.
(e) B enefit to service area. In order to
§ 228.9 Service test
be eligible as a qualified investment
under paragraph (c) of this section, the
(a) Sum m ary. The service test
activity or entity supported by an
evaluates the accessibility of a retail
investm ent need not solely benefit the
bank’s branches and the extent to w hich
bank's service area. However, the
any bank provides other services that
activity or entity supported by the
enhance credit availability. The service
investm ent must significantly benefit
test does not require a bank to expand
low- and moderate-income geographies
the size of its branching network or to
or persons in the bank’s service area.
operate facilities at a loss. Appropriate
(0 Exclusion o f indirect loans.
consideration is given to the lim itations
Investm ents that a bank has elected to
faced by banks w ith a sm all num ber of
report as indirect lending under the
branches. The Board evaluates retail
lending test are not counted as qualified banks w ith m ultiple branches under the
investm ents under this test.
service test prim arily on the extent to
C Grants. Grants that would
g)
which they offer branches. The Board
constitute qualified investm ents were
evaluates wholesale and limitedthey in the form of investm ents will be
purpose banks on the extent to which
treated as qualified investm ents for
they provide other services that enhance
purposes of the investm ent test. A bank
credit availability.
may also donate, sell on favorable terms,
(b) Standards fo r retail banks. The
or make available on a rent-free basis
Board rates a retail bank’s service
any branch w hich is located in a
performance in a service area under the
predom inately m inority neighborhood
following rebuttable presumptions.
to a m inority depository institution or
(1) Outstanding. Subject to rebuttal,
wom en’s depository institution as
the Board presumes a bank is providing
defined in 12 U.S.C. 2907.
service in an outstanding fashion if a
(h) A pplication to wholesale and
substantial percentage of the bank’s
lim ited purpose banks. For purposes of
branches are located in or readily
determ ining qualified investments
accessible to low- and moderate-income
under paragraph (c) of this section, the
geographies in its service area.
service area of wholesale and limited
(2) High satisfactory. Subject to
purpose banks is defined to include all
rebuttal, the Board presumes a bank is
low- and moderate-income geographies
providing service in a high satisfactory
or persons w ithin the U nited States and
fashion if a very significant percentage
its territories. Loans by wholesale and
of the bank’s branches are located in or
lim ited purpose banks that w ould
readily accessible to low- and moderateconstitute qualified investm ents were
income geographies in its service area.
they in the form of investm ents will be
(3) Low satisfactory. Subject to
treated as qualified investm ents for the
rebuttal the Board presum es a bank is
purpose of the Investm ent T e st
providing service in a low satisfactory
(i) A djustm ents to investm ent te s t
fashion if a significant percentage of the
The Board may adjust a bank’s rating
bank’s branches are located in or readily
under the investm ent test. Adjustments
accessible to low- and moderate-income
may increase or, in exceptional cases,
geographies in its service area.
decrease the rating. In making these
(4) N eeds to im prove. Subject to
rebuttal, the Board presum es a bank
adjustm ents the Board considers
whether:
needs to improve its record o f providing
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Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
service if an insignificant percentage of
the bank’s branches are located in or
readily accessible to low- and moderateincome geographies in its service area.
(5) Substantial noncom pliance.
Subject to rebuttal, the Board presumes
a bank is in substantial noncom pliance
with the Service Test if very few, if any,
of the bank’s branches are located in or
readily accessible to low- and moderateincome geographies in its service area.
(c) A djustm ents fo r retail banks. If
necessary, the Board adjusts a retail
bank’s rating to reflect more accurately
the service provided to low- and
moderate-income geographies and
individuals.
(1) A djustm ent to reflect more
accurately branch service. The Board
may adjust a bank’s record upw ard or
downward to reflect more accurately its
branch service to low- or moderateincome geographies or individuals.
Downward adjustments will occur only
in exceptional cases. In determ ining the
appropriateness and degree of any
adjustm ent, the Board may consider the
bank’s record of opening and closing
branches. The Board may also consider
w hether branches in or readily
accessible to low- and moderate-income
geographies actually serve low- and
moderate-income individuals and
w hether branches not located in or
readily accessible to such geographies
are nonetheless serving low- and
moderate-income individuals. The
Board may also take into account
significant differences in the quantity,
quality or types of services offered to
low- or moderate-income individuals or
geographies and similar considerations.
(2) A djustm ent to reflect other
services that prom ote credit availability.
The Board may adjust a bank’s rating
upw ard to reflect a strong record of
offering or supporting services that
promote credit availability for low- and
moderate-income geographies or
individuals. These services include
credit counseling, low-cost check
cashing, “lifeline” checking accounts,
financial planning, home ow nership
counseling, loan packaging assisting
small and minority businesses,
partnerships with community-based
organizations to promote credit-related
services, extensive provision of ATMs
or other non-branch delivery systems
that are particularly accessible and
convenient to low- and moderateincome geographies or individuals, and
sim ilar programs.
(d) A pplication to wholesale and
lim ited-purpose banks. The Board rates
a wholesale or limited purpose bank’s
service performance under the following
rebuttable presum ptions:
(1) Outstanding. Subject to rebuttal,
the Board presumes a bank is providing
service in an outstanding fashion if it is
providing a substantial am ount of the
services described in paragraph (c)(2) of
this section or providing substantial
support for organizations that furnish
such services.
(2) High satisfactory. Subject to
rebuttal, the Board presumes a bank is
providing service in a high satisfactory
fashion if it is providing a very
significant amount of the services
described in paragraph (c)(2) of this
section or providing very significant
support for organizations that furnish
such services.
(3) Low satisfactory. Subject to
rebuttal, the Board presumes a bank is
providing service in a low satisfactory
fashion if it is providing a significant
am ount of the services described in
paragraph (c)(2) of this section or
providing significant support for
organizations that furnish such services.
(4) Needs to improve. Subject to
rebuttal, the Board presumes a bank
needs to improve its record of providing
service if it is providing an insignificant
amount of the services described in
paragraph (c)(2) of this section or
providing insignificant support for
organizations that furnish such services.
(5) Substantial noncom pliance.
Subject to rebuttal, the Board presumes
a bank is in substantial noncom pliance
with the Service Test if it provides very
few, if any, services described in
paragraph (c)(2) of this section or very
little, if any, support for organizations
that furnish such services.
(e) Rebutting presum ptions. A bank
can rebut a presum ptive rating under
this section by clearly establishing to
the satisfaction of the Board that the
quantitative measures in this section do
not accurately represent its service
performance because, among other
reasons:
(1) The quantitative measures of this
section do not reflect the bank’s
significant degree of services that
promote credit availability to low- and
moderate-income geographies or
persons;
(2) Peculiarities in the demographics
of the bank’s service area exist that
significantly distort the quantitative
measures of this section; or
(3) Limitations imposed by the bank’s
financial condition, economic or legal
lim itations on branch operation or
location, or similar circum stances have
affected its performance and ought to be
considered.
§228.10 Composite ratings.
(a) Composite rating standards. The
Board assigns composite ratings as
follows:
(1) Base rating. For retail banks, the
bank’s rating under the lending test
forms the basis for its composite rating.
For wholesale or lim ited-purpose banks,
the bank’s rating under the investment
test serves as the basis for the composite
rating. The base rating under this
paragraph is adjusted as described in
paragraphs (a)(2) and (a)(3) of this
section.
(2) Effect o f investm ent rating. For
retail banks, the base rating is increased
by two levels if the bank has an
outstanding rating in the investment test
or by one level if the bank has a high
satisfactory rating in the investment test.
(3) Effect o f service rating. The base
rating is increased by one level if the
bank has an outstanding rating in the
service test and is decreased by one
level if the bank has a rating of
substantial non-compliance in the
service test.
(4) Final com posite rating. Subject to
paragraph (b) of this section, the Board
converts the rating resulting from
paragraphs (a)(1) through (a)(3) of this
section into a final composite rating as
described in this paragraph. High
satisfactory and low satisfactory ratings
are both scored as satisfactory in the
final composite rating. A bank that
w ould otherwise receive a composite
rating of needs to improve w ill receive
a final composite rating of substantial
noncom pliance if the bank received no
better than a needs to improve rating on
both of its last two examinations.
(b) Effect o f discrim ination. Evidence
that a bank has engaged in illegal
discrim ination may affect the bank’s
CRA rating. Notwithstanding paragraph
(a) of this section and subject to rebuttal,
the Board assigns a bank a final
composite rating lower than satisfactory
if the bank has:
(1) Engaged in a pattern or practice of
illegal discrimination that it has not
corrected fully; or
(2) Committed an isolated act of
illegal discrimination of w hich it has
knowledge and that it has not corrected
fully or is not in the process of
correcting fully.
(c) M ultiple service areas. Where a
bank operates in more than one service
area, the Board conducts lending,
investm ent and service tests in a sample
of all of the service areas in w hich a
bank operates. The Board assigns
separate composite CRA ratings to the
bank’s performance in each of the
service areas studied. A list of the
service areas in which the bank’s CRA
performance was examined, along with
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
the rating assigned to the bank’s CRA
record in each of the service areas, shall
be included in the bank’s public
performance evaluation. The overall
rating for the bank reflects the
performance of the bank in the service
areas studied.
(3) A small bank that fails to meet or
exceed all of the standards for a
satisfactory rating under this paragraph
is not presum ed to be performing in a
less than satisfactory manner. Rather,
for those banks, the Board conducts a
more extensive examination of the
bank’s loan-to-deposit record, its record
§ 228.11 Alternative assessment methods. of lending to its local community, and
(a) Sm all bank assessm ent standards. its loan mix. The Board will also contact
A small bank (as defined in § 228.5(1))
members of the community, particularly
may choose to have the Board assess its
in response to complaints about the
CRA performance under this section
bank, and review the findings of its
rather than the general standards
most recent fair lending examination. In
described in §§ 228.6 through 228.10.
addition, at the option of the bank, the
(1) The Board presum es a small
Board w ill assess:
bank’s overall CRA performance is
(i) Its record of making qualified
satisfactory if the bank:
investm ents (as described in § 228.8(c));
(1) Has a reasonable loan-to-deposit
and
ratio (a ratio of 60 percent, adjusted for
(ii) Its record of providing branches,
seasonal variation, is presum ed to be
ATMs, and other services that enhance
reasonable) given its size, its financial
credit availability or in other ways serve
condition, and the credit needs in its
the convenience and needs of low- and
service area;
moderate-income persons in its service
(ii) Makes the majority of its loans in
area.
its service area;
(4) M ultiple service areas. If a small
(iii) Has a good loan mix (i.e., makes,
bank operates in more than one service
to the extent perm itted by law and
area, the Board evaluates the bank’s
regulation, a variety of loans to
performance in all of those service
customers across economic levels);
areas.
(iv) Has no legitimate, bona-fide
(b) Strategic plan assessm ent. (1) As
complaints from com munity members;
an alternative to being rated after the
(v) Has not engaged in a pattern or
fact under the lending, service and
practice of illegal lending
investment tests or the small bank
discrim ination that it has not corrected
assessment method, a bank may submit
fully; and has not comm itted isolated
to the Board for approval a strategic
acts of illegal discrim ination, of which
plan detailing how the bank proposes to
it has knowledge, that it has not
meet its CRA obligation.
corrected fully or is not in the process
(i) The plan m ust be subm itted at least
of correcting fully; and
three m onths prior to the proposed
(vi) In the case of a bank already
effective date of the plan so that the
subject to reporting home mortgage
Board has sufficient time to review the
lending data under HMDA or part 203
plan and to determ ine w hether to
of this chapter, has a reasonable
approve it.
geographic distribution of such loans.
(ii) A bank submitting a proposed
(2) A small bank that meets each of
plan for approval must publish notice in
the standards for a satisfactory rating
a new spaper of general circulation in
under this paragraph and exceeds some
each of its service areas stating that a
or all of those standards may warrant
plan has been submitted to the Board for
consideration for an overall rating of
review, that copies of the plan are
outstanding. In assessing w hether a
available for review at offices of the
small bank’s CRA record is outstanding, bank, and that comments on the
the Board w ill consider the extent to
proposed plan may be sent to the
w hich the bank’s loan-to-deposit ratio,
appropriate Federal Reserve Bank.
its lending to its service area, and its
(iii) The Board assesses every plan
loan mix exceed the standards for a
under the standards of this part and will
satisfactory rating. In addition, at the
not approve a plan unless it provides
option of the bank, the Board will
measurable goals against which
evaluate:
subsequent performance can be
(i) Its record of making qualified
evaluated and the proposed
investments (as described in § 228.8(c)); performance is at least overall
and
satisfactory under the standards of this
part.
(ii) Its record of providing branches,
(iv) No plan may have a term that
ATMs, and other services that enhance
credit availability or in other ways meet exceeds two years. Further, during the
term of a plan, the bank may petition
the convenience and needs of low- and
the Board to approve an am endm ent to
moderate-income persons in its service
area.
the plan on grounds that a material
67491
change in circumstances has made the
plan no longer appropriate.
(2) The Board will assess the
performance of a bank operating under
an approved plan to determine if the
bank has met or exceeded the plan
goals. However, if the bank fails to meet
or exceed the preponderance of the
measurable goals set forth in the plan,
its performance will be evaluated under
the lending, service and investment
tests or the small bank assessment
method as applicable.
§ 228.12 Service area—delineation.
(a) The effective lending territory of a
retail bank defines the bank’s service
area. The effective lending territory is
that area around each office or group of
offices where the preponderance of
direct reportable loans made through
the office or offices are located.
(b) Subject to rebuttal, a bank’s service
area is presumed to be acceptable if the
area is broad enough to include lowand moderate-income geographies, and
does not arbitrarily exclude low- and
moderate-income geographies.
(c) A bank can show that its service
area is acceptable despite its failure to
satisfy the criteria of paragraph (b) of
this section by clearly dem onstrating to
the satisfaction of the Board that the
criteria of paragraph (b) of this section
are inappropriate because, for example,
there are no low- or moderate-income
geographies w ithin any reasonable
distance given the size and financial
condition of the bank.
(d) The Board can reject as
unacceptable a service area meeting the
criteria of paragraph (b) of this section
if the Board finds that the service area
does not accurately reflect the true
effective lending territory of the bank or
reflects past redlining or illegal
discrim ination by the bank.
(e) A bank shall delineate more than
one service area when the geographies
it serves extend substantially across
State boundaries or extend substantially
across boundaries of a m etropolitan
statistical area.
(f) A bank whose business
predom inantly consists of serving
persons who are active duty or retired
military personnel or their dependents
and who are located outside its local
community or communities may
delineate a “military com m unity” for
those customers as a service area.
(g) A wholesale or limited-purpose
bank need not delineate a service area.
(h) A bank shall compile and
m aintain a list of all the geographies
w ithin its service area or areas and a
map of each service area showing the
geographies contained therein.
67492
Federal Register J VoL 56, N a 243 / Tuesday, December 21, 2993 J Proposed Rules
$228.13 Loan data collection, reporting,
and disclosure.
(1) Head offices shall have a copy of
(2j Loans secured by real estate are
the complete p u hlic file; and
located in the geography w here the
relevant real estate is located.
(2) Branches shall have copies of all
(a) Every bank, except small banks
(3) Small business loans are located in materials in the public file relating to
electing the sm all bank assessment
the geography where the headquarters
the service area in w hich the branch is
m ethod.shall collect and m aintain the
or principal office o f the business is
located.
following d ata on its government
located.
insured and eth er reportable loans:
(h) A bank shall provide copies of the
(4) Small farm loans are located in th e information in the public file to
num ber of w ritten applications, num ber
geography where the farm property is
o f application denials, num ber a id
members of the public upon request. A
located.
am ount o f approvals, num ber and
bank may charge a reasonable fee not to
(d) A bank is not required to report
am ount o f loans purchased, e n d num ber
exceed the cost of reproduction and
under this section indirect loans unless
and am ount of indirect loans the bank
mailing (if applicable).
the bank elects to have the indirect
elects to have evaluated u sin g the
loans attributed to it as described in
§ 228.15 Public notice toy banks.
lending test. All information is to be
§ 228.7(e) for purposes of the lending
provided by th e geography where th e
A bank shall provide, in the public
test. If a bank elects to report its indirect lobby of its head office and each branch,
loan is located.
the public notice set forth in this
(1) A bank choosing to be rated under loans, it shall report all attributable
indirect loans outside low- or moderate- section. Bracketed material shall be
the strategic p lan assessm ent described
income geographies as well as loans
used only by banks having more than
in § 228.11(b) is not relieved from its
inside such geographies.
one service area. The last two sentences
obligation to report th e data as required
shall be included only if the bank is a
by this section.
§ 228.14 Public file and disclosure.
subsidiary of a holding company and
t2) The inform ation required under
(a) Banks shall m aintain files that are
the last sentence only if the com pany is
this section shall be collected:
readily available for public inspection
not prevented by statute from acquiring
fi) Beginning July 1 , 1994, for the
containing the information required by
additional banks.
remaining six m onths of 1994. A
this section.
summary of the b a n k ’s data fa r the six
(b) Each bank shall include in its
Community Reinvestment Act Notice
months shall be subm itted to Board by
public file the following information:
Under the Federal Com m unity
January 31,1995.
(1) All -signed, w ritten com m ents
Reinvestment Act (CRA), the Federal
(ii) Beginning Januaiy 1,1 9 9 5 , on an received from the public for the current
Reserve Board evaluates and enforces
year and past two calendar years that
annual basis, a summ ary of th e b a n k ’s
our com pliance w ith our obligation to
specifically relate to the bank’s
data collected u nder th is section shall
help meet the credit needs of this
performance in helping to m eet th e
be subm itted to Board by January 31 Of
community consistent with safe and
credit needs of its com m unity or
the following year. The sum m ary data
sound operations. The Board also takes
com m unities, and any response to the
shall be subm itted m th e format
our CRA performance into account
comments by the bank;
prescribed in appendix A of this part.
when the Board decides on certain
(2) A copy of the public section of
(3) Small business loan data shall be
applications subm itted by us. Your
bank's most recent CRA performance
collected, reported, and disclosed in the
involvement is encouraged. You should
summary format described in paragraph evaluation prepared by the Board. The
know that:
bank shall place th is copy in the public
(a) of this section for the following
You may look at and obtain in this office
file w ithin 30 business days after its
categories: small businesses w ith
information on o u r performance in this
receipt from the Board; and
average annual gross receipts of less
community. This information includes a file
(3) A list of the bank’s service areas
than $250,000, those w ith average
of all signed, w ritten comments received by
and the geographies w ithin each service us, any responses w e have made to the
annual gross receipts of $250,000 or
area and a map of each service area
more and less than $1 m illion; those
comments, evaluations by the Board of our
CRA performance, and data on the loans w e
with average annual gross receipts of $1 showing th e geographies contained
within.
have made in this com m unity during the past
m illion or more and less than 310
(c) A bank that is not a small bank
two years. (Current CRA information on our
million; and m anufacturing businesses
performance in oth er com m unities served by
shall include in its public file th e
with average annual gross receipts of
us is available a t o u t head office, located at
lending data the bank has reported to
$10 m illion or more and less than 500
the Board under § 228.13 for the current _____ -)
employees.
You m ay send signed, written comments
and past two calendar years.
(4) H om e mortgage loan data shall be
about our CRA performance in helping to
(d) A small bank shall include in its
meet com m unity credit needs to (title and
collected, reported, and disclosed in the
public file th e bank’s loan-to-deposit
address of bank official) and to the
summary format described in paragraph
ratio com puted at the end of the most
Community Reinvestment Officer, Federal
(a) of this section for the following
recent calendar year.
Reserve Bank o f _____ (address). Your letter,
categories: 1— family hom e purchase,
4
(e) A bank that has been approved to
together w ith any response by us, may be
1— family hom e improvem ent, 1—
4
4
be assessed under a strategic plan as
made public.
family refinancings, and m ulti-fam ily
You may look at any comments received by
described in § 228.11(b) shall include in
loans.
the Federal Reserve Bank o f _____ . You also
its public file a copy of that plan.
(h) The Board will make sum m ary
(f) Each bank that received a less th an may request from the Federal Reserve Bank
data collected pursuant to this section
satisfactory rating during its most recent o f _____ an announcem ent of our
applications covered by the CRA filed with
available to the public and to the banks. examination shall include in its public
the Federal Reserve System. We are a
The data w ill be used by the Board to
file a description of its current efforts to subsidiary of (nam e of holding company), a
apply the lending test under §228.-7.
improve its performance in helping to
bank holding company. You may request
(c) F or purposes of th is section, a loan meet com m unity credit needs.
from the Federal Reserve Bank of (city,
is located i n a geography a s follows:
(g) A bank sh all m aintain its public
address) an announcem ent o r applications
(1) Consumer loans are located in the file o r required portions o f the file at th e covered by th e CRA filed b y bank holding
companies.
geography w here the borrower resides.
following offices:
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
§ 228.16 Publication of planned
examination schedule.
The Board w ill publish at least 30
days in advance of the beginning of each
calendar quarter a list of the banks that
are scheduled for CRA examinations in
that quarter. Any member of the public
may subm it comments to the Board
regarding the CRA performance of any
bank whose name appears on the list.
§ 228.17 Effect of ratings—applications.
(a) Among other factors, the Board
takes into account the record of
performance under the CRA of each
applicant bank, and, for applications
under section 3 of the Bank Holding
Company Act, each subsidiary bank of
an applicant bank holding company,
and each proposed subsidiary bank, in
considering any application—
(1) By a state member bank for the
establishment of a domestic branch or
other facility that would be authorized
to receive deposits;
(2) By a state member bank for the
relocation of a domestic branch;
(3) For merger, consolidation,
acquisition of assets, or assum ption of
liabilities if the acquiring, assuming, or
resulting bank is to be a state member;
(4) To become a bank holding
company; and
(5) By a bank holding company to
acquire ow nership or control of shares
or assets of a bank, or to merge or
consolidate w ith any other bank holding
company.
(b) In the Board's consideration of the
CRA records under paragraph (a) of this
section, the CRA rating assigned to a
bank is an important, and often
controlling, factor. However, the rating
is not conclusive evidence of
performance.
(1) Absent other evidence on
performance, CRA ratings generally
affect applications as follows:
(i) An “outstanding” rating generally
will result in a finding that the CRA
aspect of the application is consistent
with approval of the application and
will receive extra weight in reviewing
the application.
(ii) A “satisfactory” rating generally
will result in a finding that the CRA
aspect of the application is consistent
with approval of the application.
(iii) A “needs to im prove” rating
generally w ill be an adverse factor in the
CRA aspect of the application, and
absent dem onstrated improvement in
the bank’s CRA performance or other
countervailing factors, generally will
result in denial or conditional approval
of the application.
(iv) A “substantial noncom pliance”
rating generally will be so adverse a
finding on the CRA aspect of the
application as to result in denial of the
application.
(2) The CRA aspect of an application
by a bank holding company under
paragraph (a)(4) or (a)(5) of this section
will be determ ined by weighing the
CRA ratings assigned to each of the
individual banks involved in the
proposal to determ ine the weight that
will be given to the CRA performance
record in accordance with paragraph
(b)(1) of this section.
§228.18 Transition rules.
(a) Data collection. The data
collection and reporting requirem ents of
§ 228.13 will go into effect July 1,1994.
Data collected from July 1,1994 to year
end must be reported to the Board no
later than January 31,1995. Thereafter
banks will collect data on an annual
basis and the data shall be reported no
later than January 31 of the following
year.
(b) A ssessm ent standards. Evaluation
under the new standards is mandatory
after July 1,1995, except that, until
April 1,1996, for good cause, an
institution may request the Board to
evaluate it under the standards in place
prior to [effective date of final
regulation). During the tim e period from
A pril 1, 1995 until July 1,1995, a bank
may, at its option, choose to be
evaluated under the new standards or
under the standards in place prior to
[effective date of final regulation].
(c) Strategic plan. If a bank elects to
be evaluated under an approved
strategic plan during the transition
period, a bank may submit a strategic
plan anytime after [effective date of final
regulation],
(d) A pplications. If the first rating a
bank receives under the new standards
(whether that rating is given during the
transition period or after the new
standards become effective) is more
than one rating category below the last
rating the bank received prior to
[effective date of final regulation] the
Board will not disapprove any corporate
application or take any other
enforcement action against the bank
based on that lower rating provided that
the Board has determ ined that the drop
in the bank’s rating occurred despite the
bank’s good faith efforts to perform at
least satisfactorily under the new
standards.
4.
A ppendix A to part 228 is added
as set forth in the common preamble.
Appendix A to Part 228—CRA Loan
Data Format
Dated: December 13,1993.
b7493
By order of the Board of Governors of the
Federal Reserve System.
William W. Wiles,
Secretary of the Board.
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Chapter III
For the reasons outlined in the
preamble, the Board of Directors of the
Federal Deposit Insurance Corporation
proposes to am end 12 CFR chapter III as
set forth below:
5. Part 345 is revised to read as
follows:
PART 345—COMMUNITY
REINVESTMENT ACT REGULATIONS
w vv.
345.1 Authority.
345.2 Comm unity reinvestm ent obligation.
345.3 Purposes.
345.4 Scope.
345.5 Definitions.
345.6 Assessment standards—summary.
345.7 Lending test.
345.8 Investm ent test.
345.9 Service test.
345.10 Composite ratings.
345.11 Alternative assessment methods.
345.12 Service area—delineation.
345.13 Loan data—collection, reporting,
and disclosure.
345.14 Public file and disclosure.
345.15 Public notice by banks.
345.16 Publication of planned examination
schedule.
345.17 Effect of ratings—corporate
applications.
345.18 Transition rules.
Appendix A to Part 345—CRA Loan Data
Format
Authority: 12 U.S.C 1815, 1816, 1818,
1819, 1828(cH d), 2901-2907, and 3104._
§345.1 Authority.
The authority for this part is 12 U.S.C.
1815, 1816, 1818, 1819, 1828(c)-(d).
2901-2907, and 3104.
§ 345.2 Community reinvestment
obligation.
Insured State nonmember banks have
a continuing and affirmative obligation
to help meet the credit needs of their
communities, including low- and
moderate-income areas, consistent with
safe and sound operations.
§345.3 Purposes.
The purposes of this part are to
implement the community reinvestment
obligation of insured State nonmember
banks; to explain how the Federal
Deposit Insurance Corporation (FDIC)
assesses the performance of insured
State nonm em ber banks in satisfying the
com m unity reinvestment obligation;
€7494
fe d e r a l JtagM er / Vdi. 58, Nn. 243 / Tuesday, Qecemiber 21, 1903 1 fVoposed R ules
«n*i itodeacrihe hnw th at ipm fem m anw is
taken into account in certain corporate
applications.
IfcS fl 2802(1)1, a n d im plem enting
regulations.
10 Illegal discanunation means
discrim ination on a prohibited basis a s
§345.4 Scope.
set forth in the Equal Credit
la) General. T his p art ap p lies to all
O pportunity Act. 15 U.S.C. 1691
insured .State nonm em ber banks that are through 16911, or the Fair Housing Act,
in the b usiness of extending .credit to
42 U.S.C. 3601 through 3619.
the public, including wholesale and
(g) Indirect loans means loans made
lim ited-purpose banks.
indirectly by a bank through
(b) B anks not engaged in lending
participation in a lending consortium in
activities. T h is part dees net apply to
w hich lenders pool th e ir resources, by
insured State nonraem ber banks that
subsidiaries of the bank, b y non
engage «ole}y in the correspondent
chartered affiliates funded by th e bank,
banking business, trust com pany
or by lawful investm ents in or with
business, or the business of acting as a
com m unity developm ent and affordable
clearing agent. Such institutions,
housing lenders, wom en-ow ned n r
although they are chartered as banks, do im nerity-ow ned financial institutions,
not perform commercial or retail
low-income credit unions, and ethers
banking sendees And do not extend
that lend to low - an d moderate-income
credit to th e public lor their own
geographies and individuals.
account.
(h) Loans or investm ents benefiting
(c) Insured State branches. This part
low- and m oderate-incom e geographies
dees apply to insured State branches,
or persons m eans loans or investments
w hich are branches of a foreign hank
where the proceeds are provided to,
established and operating und er <he
invested in, used by o r otherwise
laws of any State. References in th is part directly benefit—
to “m am office” m ean, in the case o f
fl) Parsons that reside in low- or
insured State branches, th e principal
moderate-income geographies or have
branch w ithin the U nited States. T he
low or moderate incomes;
(2) B usinesses located in low - nr
"service area” of a n insured.State
moderate-income geographies or
branch fefars-tothe com m unity -or
em ploying m ostly persons residing in
com m unities .located w ithin the U nited
States served b y th e branch as described such geographies;
t3 ) Non-profit organizations located in
in § 345.12. Similarly, the phrase "office
low- or moderate-income.geographie8 or
or group offafffioes” refers to insured
providing services mainly to persons
branches located w ith in th e U nited
residing in -such geographies; or
States.
(4) Construction o r renovation of
§345.5 Definitions.
facilities located in low- o r moderateincome geographies err providing
For purposes of this part, the
following definitions apply:
services mainly to persons residing in
(at) Rem ote Service Facilities (RSF)
such geographies.
(i) Low- and m oderate-incom e
means an automated teller machine,
cash dispensing m achine, point-of-sale
geographies means geographies where
term jnal, or other remote electronic
the m edian fam ily income is less than
80% of the m edian family incom e for
facility w here deposits are received,
the M etropolitan Statistical A rea (MSA)
checks paid, or money lent.
or (in the case of geographies ou tsid ea
(b) Branches means staffed banking
facilities (shared or unshared) w ith a
MSA) less than 80% of the nonfixed site at w hich deposits are received m etropolitan state-w ide m edian family
or checks p a id or m oney tent, including income for the state in w hich the
m ini-branches in grocery stores « r
geography is located.
f l j Low-incom e geographies m eans
branches operated in conjunction w ith
any other local businesses, ch u rc h e s,o r geographies where the m edian family
income is less than 50% of the median
other non-profit organizations.
(c) Consum er loans m ean s closed-end family income for the MSA or (in (he
case of geographies outside a MSA) less
loans extended to a natural person
than 50% of th e non-metropolitan state
prim arily for personal, fam ily, or
wide m edian family incom e for fhe state
household purposes, but does not
include hom e mortgage -loans as defined in which th e geography is located.
(2) M oderate-incom e geographies
in paragraph >(e) of th is section, credit
means geographies where the median
card loans, or motor vehicle loans.
family incom e is at least 50% and less
(d) Geographies m eans census tracts
than 80% o f the median fam ily income
or block num bering aeeas.
for the MSA a t (in the case of
(ef) H om e m ortgage loans-means
closed-end loans th a t* i» mortgage loans geographies outside a'MSA) at least
as d efin ed in section 30307 o f th e H a m e 50% and less than 80% of the nonMortgage Disclosure A ct XtlMDAj H Z
m etropolitan state w ide m edian family
income for fhe-Stste in "which the
geography is located.
(j) Reportable loans means hom e
mortgage loans,-consumer loans, and
loans to small businesses and sm all
farms.
(k) R etail banks m eans insured State
nonm em ber h an k s‘that-are in the
business of extending credit to th e
public and that make a significant
am ount of reportable loans.
<9 S m a ll banksm eans—
(1) Independent insured State
nonm em ber bartks'with total assets of
less than $250 m illion; or
(2) Insured State nonmember banks
with totall assets o f less than $250
million th a t are subsidiaries of a holding
company with total banking and thrift
assets of less th an $250 m illion.
(m) Sm all businesses means private
for-profit -organizations th at had for'the
calendar-or fiscal year-preceding the
making Of th e loan—
(1) Average annual gross receipts e f
less th an $10 m illion for a-concern
providing services-, or
(2) Up -to 500 em ployees for a
manufacturing concern.
-in) S m a ll farm s means private
organizations engaged in farming
operations w ith average amrual gross
receipts of less than $500,000 for the
calendar or fiscal year preceding th e
making o f th e loan.
(o) W holesale a n d lim ited-purpose
banks m eans insured State nonm em ber
banks that are in the business of
extending credit to the public b u t make
no significant am ount tii reportable
loans.
§345.6 Ae*ee»ment standards—summary.
(a) Except fa r banks assessed under
the special standards of § 345.11, the
FDIC assesses a hank's CRA
performance as described in th is
section. The FDIC reviews, among other
things, the bank's CRA public file and
any signed, written com m ents about the
barikVCRA performance subm itted to
the bank or the FDIC. h i assessing a
bank's-CRA performance, th e FDIC
considers w hether the bank is helping to
meet the credit needs of hs entire
community. In exam inations, however,
the FDIC pays particular attention to the
bank’s record of helping to m eet the
credit needs in low- an d moderateincome geographies. That record is
primarily -evaluated using three
measures: th e Lending Test (described
in §345.7), the Investm ent T est
(described in 5 345.®) and die 'Service
Test (described in § 345.9). Based on
these separate assessments, th e FDIC
assigns the bank one-of four overall
composite ratings as described in
§ 345.10."The four com posite ratings are
Federal Register / VoL 58, No. 243 1 Tuesday, December 21. 1993 1 Proposed Rule*
Outstanding, Satisfactory, N eeds to
Improve, an d Substantial
Noncompliance.
(b) The com posite T a t in g s reflect the
extent of com pliance or noncom pliance
with th e com m unity reinvestm ent
obligations described in %345.2. A bank
that receives a com posite rating of
Substantial Noncompliance shall be
subject to enforcem ent actions pursuant
to 12 U.S.C. 1818.
(c) This part and the CRA do not
require any bank to make loans or
investm ents that are expected to result
in losses or are otherw ise inconsistent
with safe and sound operations.
However, banks are perm itted and
encouraged to develop and apply
flexible underw riting standards (that are
consistent w ith safe and sound
operations) for loans that benefit Iow
an d moderate-income geographies or
individuals.
share of reportable loans in the
rem ainder of its service area; and
(ii) Either:
(A) It has made a significant amount
of reportable loans in most of the lowand moderate-income geographies in its
service area; or
(B) Its reportable loans to low- and
moderate-income geographies in its
service area represent a very significant
percentage of its reportable loans in its
service area (provided that the bank
does not unreasonably exclude low- and
moderate-income geographies from its
lending).
(3) Low satisfactory.£ub)e<A to
rebuttal, the FDIC presumes a bank is
lending in a low satisfactory fashion if—
(i) The bank’s market share of
reportable loans in low- and moderateincome geographies in its service area 16
at least roughly comparable to its market
share of reportable loans in the
rem ainder of its service area; and
§ 345.7 Landing test
(ii) E ith er
(A) It has made a significant am ount
(a) Sum m ary. The Lending Test
of reportable loans in m any of the lowevaluates prim arily w hether a Tetail
and moderate-income geographies in its
bank is making loans in low- and
moderate-income geographies as w ell as service area; or
(B) Its reportable loans to low- and
to w ealthier geographies. The test
moderate-income geographies in its
examines direct lending by the bank
service area represent a significant
itself and, if the bank elects, indirect
percentage of its reportable loans in its
lending to th e extent perm itted by th is
service area {provided that the bank
part.
(b) Standards. The FDIC rates a bank's does not unreasonably exclude low- and
moderate-income geographies from its
lending performance in a service area
lending).
under the following rebuttable
(4) Needs to improve.—Subject to
presum ptions.
rebuttal, the FDIC presum es a bank
(1) Outstanding. Subject to rebuttal,
needs to improve its record under the
the FDIC presum es a bank is lending in
Lending Test if—
an outstanding fashion if—
(i) The bank's market share of
(1) The bank's market shard of
reportable loans in low- and moderatereportable loans in low- and moderateincome geographies in its service area is
income geographies in its service area
less than, and not roughly comparable
significantly exceeds its market share of to, its market share of reportable loans
reportable loans in the rem ainder of its
in the rem ainder of its service area; or
service area; and
(ii) It has m ade reportable loans in
(ii) Either:
only a few of th e low- and moderate(A) It h as made^a significant am ount
income geographies in its service area,
of reportable loans in the vast majority
and reportable loans to low- and
of the low- an d moderate-income
moderate-income geographies in its
geographies in its service area; or
service area represent an insignificant
(B) Its reportable loans to low- and
percentage of its reportable loans in its
moderate-income geographies in its
service area.
service area represent a substantial
(5) Substantial noncom pliance.
percentage of its reportable loans in its
Subject to rebuttal, the FDIC presum es
service area (provided that th e bank
a bank is in substantial noncom pliance
does not unreasonably exclude low- and w ith the Lending Test if—
moderate-income geographies from its
(i) The bank’s market share of
lending).
reportable loans in low- and moderate(2) High satisfactory. Subject to
income geographies in its service area is
rebuttal, the FDIC presumes an
significantly less than its m arket share
institution is lending in a high
of reportable loans in the rem ainder of
satisfactory fashion if—
its service area; and
(i) The bank's market share of
(ii) It has m ade very few, if any,
reportable loans in low- and moderatereportable loans in the low- a n d
income geographies in its service area is m oderate-income geographies in its
at least roughly comparable to its market service area.
674*5
(c) M ethod o f com putation—{1)
General. For purposes o f the Lending
Test, the FDIC, rather than the bank, is
responsible for making the
computations. The FDIC bases such
com putations upon th e bank’s reported
loan data required under §345.13 and
the aggregate reported loan data
supplied by the Federal financial
supervisory agencies. In making lending
test com putations, the FDIC measures
market share, amount of loans, and
percentage using both volume of loans
and num ber of loans.
(2) M arket share. The FDIC com putes
market share for volume and num ber of
loans for each type of reportable loans:
home mortgage loans, consumer loans,
and sm all business and farm loans. The
FDIC aw ards an overall market share
performance rating after weighing each
lending category based on such factors
as the needs of th e com m unity being
served, the bank’ capabilities and
s
business plans, and the degree to w hich
the bank’s performance w ith respect to
one of the loan categories, in fact,
balances or compensates for its
performance under {mother category.
(d) A djustm ents. (1) The FDIC may
increase a bank’ lending rating if the
s
bank participates in a program forgiving
further reviews to loan applications that
would otherwise be denied. More o e d it
will be given for such a program if it is
done in conjunction w ith a com m unity
organization in such a way that the
organization either participates in the
review or offers applications from lowand moderate-income individuals that
the bank will consider for credit. The
FDIC may also increase the rating if the
bank has made a substantial am ount of
loans requiring creative or innovative
underwriting (while maintaining a safe
and sound quality) or loans for which
there is particular need, such as loans
for multi family housing construction
and rehabilitation, loans to start-ups,
very small businesses or com m unity
development organizations or facilities
and loans to very low-income ’
individuals and areas. The FDIC will
also consider favorably in reaching a
rating loans m ade to third parties, such
as community development
organizations and intermediaries, that
make loans or facilitate lending in lowand moderate-income geographies, even
if the loans by the bank are not
reportable under this part, are not m ade
to third parties in the bank’s service
area, or are made to third parties that
serve service areas other than the
bank’s.
(2) In exceptional cases, the FDIC may
reduce a rating achieved under this
section if i t concludes that the
quantitative m easures in this section fail
67496
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
to reflect the bank's actual record of
lending to low- or moderate-income
individuals or geographies.
(e) Indirect lending. (1) If the bank
elects, the FDIC will attribute to a bank
its reported attributable indirect loans.
(2) In the usual case, the indirect
loans attributable to a bank equal the
bank's percentage share (based on the
level of the bank’s investment or
participation) of each loan made
through the entity in which the bank
has invested or participated.
(3) At the option of all investing or
participating institutions, an alternative
m ethod of attributing loans among the
investing or participating institutions
may be established. In no case, however:
(i ) May the indirect loans attributed to
any bank exceed its percentage share of
the total loans (measured in both
num ber and volume) made directly by
the lending entity in w hich the
institutions invested or participated;
(ii) May the investors or participants
claim, in the aggregate, indirect loans
(measured in both num ber and volume)
in excess of the loans actually m ade in
any geography by the lending entity in
w hich they invested or participated; or
(iii) May any bank be assigned a
disproportionate share of all loans
(measured in both num ber and volume)
m ade in low- and moderate-income
geographies by a lending entity in
w hich the institutions invested or
participated.
(4) If a bank elects, indirect loans
attributed to a bank under this
paragraph (e) may be included in
“reportable loans” for purposes of the
Lending Test if a bank reports them
under § 345.13.
(f) A pplication to wholesale and
lim ited-purpose banks. The Lending
Test of this section does not apply to
wholesale or lim ited-purpose banks. In
evaluating the record of wholesale and
lim ited-purpose banks in satisfying their
com m unity reinvestment obligation, the
FDIC uses the Investment Test in § 345.8
instead of the standards of paragraph (b)
of this section. For purposes of
assigning a composite rating as
described in § 345.10, the FDIC
substitutes a wholesale or limitedpurpose bank’s rating under the
Investm ent Test for a rating under the
Lending Test.
(g) Rebutting presum ptions. A bank
can rebut a presum ptive rating under
this section by clearly establishing to
the satisfaction of the FDIC that the
quantitative m easures in this section do
not accurately present its lending
performance because, among other
reasons—
(1) The quantitative measures of this
section do not reflect the bank’s
demonstrably benefit low- and
moderate-income geographies or
persons in the bank’s service area.
Qualified investments may include
investments:
(1) In support of affordable housing,
small business, consumer, and other
economic development initiatives;
(2) In community development banks,
community development corporations,
com m unity development projects, small
business investment corporations,
minority small business investment
corporations and minority- and womenowned financial institutions and other
community development financial
interm ediaries;
(3) In consortia or other structures
serving low- and moderate-income
-individuals and neighborhoods and
poor rural areas;
(4) In state and local government
agency housing bonds or state and local
government revenue bonds specifically
aim ed at helping low- and moderate§ 345.8 Investment test
income communities and individuals.
(d) Capital. For purposes of the
(a) Sum m ary. The Investment Test
Investment Test, the FDIC will evaluate
evaluates banks on the am ount of their
the am ount of qualified investments
investm ents benefiting low- and
against the amount of the bank’s riskmoderate-income geographies or
based capital.
persons.
(e) Benefit to service area. In order to
(b) Standards. The FDIC rates a bank’s
be eligible as a qualified investment
investm ent performance under the
under paragraph (c) of this section, the
following rebuttable presum ptions:
activity or entity supported by an
(1) O utstanding. Subject to rebuttal,
investm ent need not solely benefit the
the FDIC presumes a bank is providing
qualified investments in an outstanding bank’s service area. However, the
activity or entity supported by the
fashion if the bank has made such
investment must significantly benefit
investm ents in an amount that is
low-and moderate-income geographies
substantial as compared to its capital.
or persons in the bank's service area.
(2) High satisfactory. Subject to
(f) Exclusion o f indirect loans.
rebuttal, the FDIC presumes a bank is
Investments that a bank has elected to
providing qualified investm ents in a
report as indirect lending under the
high satisfactory fashion if the bank has
Lending Test are not counted as
made such investments in an am ount
qualified investments under this Test.
that is very significant as compared to
(g) Grants. Grants that would
its capital.
constitute qualified investm ents were
(3) Low satisfactory. Subject to
they in the form of investments will be
rebuttal, the FDIC presumes a bank is
treated as qualified investments for
providing qualified investm ents in a
purposes of the Investment Test. A bank
low satisfactory fashion if the bank has
may also donate, sell on favorable terms,
made such investments in an amount
or make available on a rent-free basis
that is significant as compared to its
any branch which is located in a
capital.
predom inately minority neighborhood
(4) N eeds to Improve. Subject to
to a m inority depository institution or
rebuttal, the FDIC presumes a bank
needs to improve its record of providing w om en’s depository institution as
defined in 12 U.S.C. 2907.
qualified investments if the bank has
(h) A pplication to wholesale and
made such investments in an amount
lim ited purpose banks. For purposes of
that is insignificant as compared to its
determ ining qualified investments
capital.
under paragraph (c) of this section, the
(5) Substantial noncom pliance.
service area of wholesale and limited
Subject to rebuttal, the FDIC presum es
purpose banks is defined to include all
a bank is in substantial noncom pliance
w ith the Investment Test if the bank has low- and moderate-income geographies
or persons w ithin the United States and
devoted very little, if any, capital to
its territories. Loans by wholesale and
qualified investments.
lim ited purpose banks that would
(c) Q ualified investm ents. Qualified
investm ents are lawful investm ents that constitute qualified investments were
significant amount of loans benefiting
low- and moderate-income geographies
or persons;
(2) O ther quantitative measures of the
bank’s lending performance
dem onstrate a higher level than that
reflected by the measures under this
section;
-(3) Peculiarities in the demographics
of the bank’s service area exist that
significantly distort the quantitative
measures of this section;
(4) Economic or legal lim itations
peculiar to the bank or its service area
or unusual general economic conditions
have affected its performance and ought
to be considered; or
(5) The bank’s performance as
measured by the market share
com ponent of the Lending Test does not
reflect its overall lending performance
because of the extraordinarily high level
of performance, in the aggregate, by
lenders in the bank’s service area.
Federal Register / yol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rales
they in the form of investm ents will be
treated as qualified investm ents Tor th e
purposes of the Investment Test.
{i} A djustm ents to investm ent test.
The FDIC may adjust a bank’s rating
under th e Investm ent Test. Adjustments
may increase or, in exceptional cases,
decrease th e rating. In making these
adjustm ents th e FDIC considers
whether:
(1) The bank’s qualified investm ents
are particularly innovative or meet a
special need, or if the bank’s activities
in connection w ith its qualified
investm ents have been particularly
complex, innovative or intensive for a
bank of its size, or involve innovative
partnerships w ith com m unity
organizations (examples include helping
to establish an entity to conduct
community development activities or
providing significant service or
assistance in support of a qualified
investment); or
(2) The bank has made a large am ount
of investm ents that w ould be qualified
investm ents but for the fact that they fail
to benefit the bank’s service area as
required by paragraph (e) of this section,
provided the bank has not neglected
investm ents that benefit its service area.
§345.9 Service test
{a) Sum m ary. The Service Test
evaluates th e accessibility of a retail
bank’s branches and th e extent to w hich
any bank provides other services that
enhance credit availability. The Service
Test does not require a bank to expand
the size of its branching network or to
operate facilities at a loss. Appropriate
consideration isgiven to the limitations
faced by banks-with a small num ber of
branches. T h e FDIC evaluates retail
banks w ith m ultiple branches u n d er the
Service Test prim arily on the extent to
which they offer branches. The FDIC
evaluates wholesale and limitedpurpose banks on the extent to which
they provide other services that enhance
credit availability.
(b )
Standards fo r retail banks. The
FDIC T a t e s a r e t a i l b a n k ’s s e r v i c e
p e r fo r m a n c e i n a s e r v ic e a r ea u n d e r th e
f o ll o w i n g r e b u tta b le p r e s u m p t io n s .
(1) Outstanding. Subject to rebuttal,
the FDIC presum es a bank is providing
service in an outstanding fashion if a
substantial percentage of the bank’s
branches are located in or readily
accessible to low- an d moderate-incom e
geographies in its service area.
<2) High satisfactory. Subject to
rebuttal, th e FDIC presum es a bank is
providing service m a high satisfactory
fashion if a very significant percentage
of the bank’s branch es aTe located in or
readily accessible to low- a n d moderateincome geographies in its -service area.
(3) Low satisfactory. Subject to
rebuttal, the FDIC presum es a bank is
providing service in a low satisfactory
fashion if a significant percentage of the
bank’s branches are located in or readily
accessible to low- and moderate-income
geographies in its service area.
(4) N eeds to im prove. Subject to
rebuttal, th e FDIC presum es a bank
needs to improve its record of providing
service if an insignificant percentage of
the bank’s branches are located in or
readily accessible to low- and moderateincome geographies in its service area.
(5) Substantial noncom pliance.
Subject to rebuttal, the FDIC presumes
a bank is in substantial noncom pliance
w ith the Service Test if very few, if any,
of th e bank’s branches are located in or
readily accessible to low- and moderateincome geographies in its service area.
(c) A djustm ents fo r retail banks. If
necessary, the FDIC adjusts a retail
bank’s rating to reflect more accurately
the service provided to low- and
moderate-income geographies and
individuals.
(1) A djustm ent to reflect more
accurately branch service. The FDIC
may adjust a bank’s record upw ard or
downward to T eflect more accurately its
branch service to low- or moderateincome geographies or individuals.
Downward adjustm ents will occur only
in exceptional cases. In determ ining the
appropriateness and degree of any
adjustment, the FDIC may consider the
bank’s record of opening and closing
branches. The FDIC may also consider
w hether branches in or readily
accessible to low- and moderate-income
geographies actually serve low- and
moderate-income individuals and
w hether branches not located in or
readily accessible to such geographies
are nonetheless serving low- and
moderate-income individuals. The FDIC
may also take into account significant
differences in the quantity, quality or
types of services offered to low- or
moderate-income individuals or
geographies and sim ilar considerations.
(2) A djustm ent to reflect other
services th a t prom ote credit availability.
The FDIC may adjust a bank’s rating
upw ard to reflect a strong record of
offering or supporting services that
promote credit availability for low- and
m oderate-income geographies or
individuals. These services include
credit counseling, low-cost check
cashing, “ lifeline” checking accounts,
financial planning, hom e ow nership
counseling, loan packaging assisting
small and m inority businesses,
partnerships w ith community-based
organizations to promote credit-related
services, extensive provision of RSFs or
other non-branch delivery systems that
£7497
are particularly accessible and
convenient to low- and moderateincome geographies or individuals, and
similar programs.
(d) A pplication to wholesale and
lim ited-purpose banks. The FDIC rates a
wholesale or limited-purpose bank’s
service performance under th e following
rebuttable presumptions:
(1) O utstanding. Subject to rebuttal,
the FDIC presum es a bank is providing
service in an outstanding fashion if it is
providing a substantial am ount of the
services described in paragraph (c)(2) of
this section or providing substantial
support for organizations that furnish
such services.
(2) High satisfactory. Subject to
rebuttal, th e FDIC presumes a bank is
providing service in a high satisfactory
fashion if it is p rovidings very
significant am ount of the services
described in paragraph (c)(2) of this
section or providing very significant
support for organizations that furnish
such services.
(3) Low satisfactory. Subject to
rebuttal, the FDIC presumes a bank is
providing service in a low satisfactory
fashion if it is providing a significant
am ount of th e services described in
paragraph (c)(2) of this section or
providing significant support for
organizations that furnish such services.
(4) N eeds to im prove. Subject to
rebuttal, the FDIC presum es a bank
needs to improve its record of providing
service if it is providing an insignificant
amount of the services described in
paragraph (c)(2) of this section or
providing insignificant support for
organizations that furnish such services.
(5) Substantial noncom pliance.
Subject to rebuttal, the FDIC presumes
a bank is in substantial noncompliance
with th e Service Test if it provides very
few, if any, services described in
paragraph (c)(2) of this section or very
little, if any, support for organizations
that furnish such services.
(e) Rebutting presum ptions. A Bank
can rebut a presum ptive rating under
this section by clearly establishing to
the satisfaction of the FDIC that the
quantitative measures in this section do
not accurately represent its service
performance because, among other
reasons—
(1) The quantitative measures of this
section do not reflect the bank’s
significant degree of services that
promote credit availability to low- and
moderate-income geographies or
persons;
(2) Peculiarities in the demographics
of the bank's service area exist that
significantly distort the quantitative
measures of this section; or
67498
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
(3) Limitations im posed by the bank’s
financial condition, econom ic or legal
lim itations on branch operation or
location, or sim ilar circum stances have
affected its performance and ought to be
considered.
(ii) Its record of providing branches,
RSFs, and other services that enhance
credit availability or in other ways meet
the convenience and needs of low- and
moderate-income persons in its service
area.
(3) A small bank that fails to meet or
§345.10 Composite ratings.
exceed all of the standards for a
(a) Composite rating standards. FDIC
satisfactory rating under this paragraph
assigns com posite ratings as follows:
is not presumed to be performing in a
(1) Base rating. For retail banks, the
less than satisfactory manner. Rather,
bank’s rating under the Lending Test
for those banks, the FDIC conducts a
forms the basis for its com posite rating.
more extensive exam ination of the
For wholesale or lim ited-purpose banks,
bank’s loan-to-deposit record, its record
the bank’s rating under the Investment
of lending to its local community, and
§ 345.11 Alternative assessment methods. its loan mix. The FDIC w ill also contact
Test serves as the basis for the
com posite rating. The base rating under
(a) Sm all bank assessm ent standards. members of the com m unity, particularly
this paragraph is adjusted as described
in response to com plaints about the
A small bank (as defined in § 345.5(1))
in paragraphs (a)(2) and (a)(3) of this
bank, and review the findings of its
may choose to have the FDIC assess its
section.
most recent fair lending examination. In
CRA performance under this section
(2) Effect o f investm ent rating. For
addition, at the option of the bank, the
rather than the general standards
retail banks, the base rating is increased
FDIC will assess:
described in §§ 345.6 through 345.10.
by two levels if the bank has an
(i) Its record of making qualified
(1) The FDIC presumes a small bank’s
outstanding rating in the Investment
investments (as described in § 345.8(c));
overall CRA performance is satisfactory
Test or by one level if the bank has a
and
if the bank:
(ii) Its record of providing branches,
(1) Has a reasonable loan-to-deposit
high satisfactory rating in the
RSFs, and other services that enhance
ratio (a ratio of 60 percent, adjusted for
Investment Test.
(3) Effect o f service rating. The base
credit availability or in other ways serve
seasonal variation, is presum ed to be
rating is increased by one level if the
the convenience and needs of low- and
reasonable) given its size, its financial
moderate-income persons in its service
bank has an outstanding rating in the
condition, and the credit needs in its
Service Test and is decreased by one
area.
service area;
(4) M ultiple service areas. If a small
level if the bank has a rating of
(ii) Makes the majority of its loans in
bank operates in more than one service
substantial non-com pliance in the
its service area;
area, the FDIC evaluates the bank’s
(iii) Has a good loan mix (i.e., makes,
Service Test.
performance in all of those service
(4) Final com posite rating. Subject to
to the extent perm itted by law and
paragraph (b) of this section, the FDIC
areas.
regulation, a variety of loans to
(b) Strategic plan assessm ent. (1) As
converts the rating resulting from
custom ers across economic levels);
an alternative to being rated after the
(iv) Has no legitimate, bona-fide
paragraphs (a)(1) through (a)(3) of this
fact under the lending, service and
com plaints from com m unity members;
section into a final com posite rating as
(v) Has not engaged in a pattern or
investment tests or the small bank
described in this paragraph. High
practice of illegal discrim ination that it
assessment m ethod, a bank may submit
satisfactory and low satisfactory ratings
to the FDIC for approval a strategic plan
has not corrected fully; and has not
are both scored as satisfactory in the
com m itted isolated acts of illegal
detailing how the bank proposes to meet
final composite rating. A bank that
discrim ination, of w hich it has
its CRA obligation.
would otherwise receive a composite
(i) The plan must be subm itted at least
knowledge, that it has not corrected
rating of needs to improve w ill receive
three months prior to the proposed
fully or is not in the process of
a final composite rating of substantial
effective date of the plan so that the
correcting fully; and
noncom pliance if the bank received no
FDIC has sufficient tim e to review the
(vi) In tne case of a bank already
better than a needs to im prove rating on
plan and to determ ine w hether to
subject to reporting home mortgage
both of its last two exam inations.
approve it.
lending data under HMDA, has a
(b) Effect o f discrim ination. Evidence
(ii) A bank submitting a proposed
reasonable geographic distribution of
that a bank has engaged in illegal
plan for approval m ust publish notice in
such loans.
discrim ination may affect the bank’s
a new spaper of general circulation in
(2) A small bank that m eets each of
CRA rating. N otw ithstanding paragraph
each of its service areas stating that a
(a) of this section and subject to rebuttal, the standards for a satisfactory rating
plan has been subm itted to the FDIC for
u nder this paragraph and exceeds some
the FDIC assigns a bank a final
review, that copies of the plan are
composite rating lower than satisfactory or all of those standards may warrant
available for review at offices of the
consideration for an overall rating of
if the bank has—
bank, and that comments on the
(1) Engaged in a pattern or practice of outstanding. In assessing w hether a
sm all bank’s CRA record is outstanding, proposed plan may be sent to the FDIC
illegal discrim ination that it has not
in accord with § 303.6 of this chapter.
the FDIC w ill consider the extent to
corrected fully; or
(iii) The FDIC assesses every plan
w hich the bank’s loan-to-deposit ratio,
(2) Committed an isolated act of
under the standards of this part and will
its lending to its service area, and its
illegal discrim ination of w hich it has
not approve a plan unless it provides
loan mix exceed the standards for a
knowledge and that it has not corrected
measurable goals against w hich
satisfactory rating. In addition, at the
fully or is not in the process of
subsequent performance can be
option of the bank, the FDIC will
correcting fully.
evaluated and the proposed
(c) M ultiple service areas. Where a
evaluate:
performance is at least overall
(i)
Its record of making qualified
bank operates in m ore than one service
investm ents (as described in § 345.8(c)); satisfactory under the standards of this
area, the FDIC conducts Lending,
part.
Investment and Service tests in a sample and
of all of the service areas in w hich a
bank operates. The FDIC assigns
separate composite CRA ratings to the
bank’s performance in each of the
service areas studied. A list of the
service areas in w hich the bank’s CRA
performance was examined, along with
the rating assigned to the bank’s CRA
record in each of the service areas, shall
be included in the bank's public
performance evaluation. The overall
rating for the bank reflects the
performance of the bank in the service
areas studied.
Federal Register / Vol. 58, No. 241 / Tuesday, December 21, 1993 / Proposed Rules
(iv) No plan may have a term that
exceeds two years. Further, during the
term of a plan, the bank may petition
the FDIC to approve an am endm ent to
the plan on grounds that a material
change in circum stances has made the
plan no longer appropriate.
(2) The FDIC will assess the
performance of a bank operating under
an approved plan to determ ine if the
bank has met or exceeded the plan
goals. However, if the bank fails to meet
or exceed the preponderance of the
m easurable goals set forth in the plan,
its performance will be evaluated under
the lending, service and investment
tests or the small bank assessment
m ethod, as applicable.
§ 345.12 Service area—delineation.
(a) The effective lending territory of a
retail bank defines the bank’s service
area. The effective lending territory is
that area around each office or group of
offices where the preponderance of
direct reportable loans made through
the office or offices are located.
(b) Subject to rebuttal, a bank’s service
area is presum ed to be acceptable if the
area is broad enough to include lowand m oderate-incom e geographies and
does not arbitrarily exclude low-and
moderate-income geographies.
(c) A bank can show that its service
area is acceptable despite its failure to
satisfy the criteria of paragraph (b) of
this section by clearly dem onstrating to
the satisfaction of the FDIC that the
criteria of paragraph (b) of this section
are inappropriate because, for example,
there are no low- or moderate-income
geographies w ithin any reasonable
distance given the size and financial
condition of the bank.
(d) The FDIC can reject as
unacceptable a service area meeting the
criteria of paragraph (b) of this section
if the FDIC finds that the service area
does not accurately reflect the true
effective lending territory of the bank or
reflects past redlining or illegal
discrim ination by the bank.
(e) A bank shall delineate more than
one service area w hen the geographies
it serves extend substantially across
state boundaries or extend substantially
across boundaries of a M etropolitan
Statistical Area.
(f) A bank whose business
predom inantly consists of serving
persons who are active du ty or retired
m ilitary personnel or their dependents
and who are located outside its local
comm unity or com m unities may
delineate a “ military com m unity” for
those customers as a service area.
(g) A wholesale or lim ited-purpose
bank need not delineate a service area.
(h) A bank shall com pile and
m aintain a list of all the geographies
w ithin its service area or areas and a
map of each service area showing the
geographies contained therein.
§ 345.13 Loan data—collection, reporting,
and disclosure.
(a) Every bank, except small banks
electing the small bank assessment
m ethod, shall collect and maintain the
following data on its government
insured and other reportable loans:
num ber of w ritten applications, number
of application denials, num ber and
am ount of approvals, num ber and
am ount of loans purchased, and num ber
and am ount of indirect loans the bank
elects to have evaluated using the
b n d in g test. All information is to be
provided by the geography where the
loan is located.
(1) A bank choosing to be rated under
the strategic plan assessment described
in § 345.11(b) is not relieved from its
obligation to report the data as required
by this section.
(2) The information required under
this section shall be collected:
(i) Beginning July 1,1994, for the
remaining six m onths of 1994. A
sum m ary of the bank’s data for the six
m onths shall be subm itted to FDIC by
January 31,1995.
(ii) Beginning January 1,1995, on an
annual basis, a summary of the bank’s
data collected under this section shall
be subm itted to FDIC by January 31 of
the following year. The summary data
shall be subm itted in the format
prescribed in appendix A of this part.
(3) Small business loan data shall be
collected, reported, and disclosed in the
sum m ary format described in paragraph
(a) of this section for the following
categories: small businesses with
average annual gross receipts of less
than $250,000, those w ith average
annual gross receipts of $250,000 or
more and less than $1 m illion; those
w ith average annual gross receipts of $1
m illion or more and less than $10
m illion; and manufacturing businesses
with average annual gross receipts of
$10 m illion or more and less than 500
employees.
(4) Home mortgage loan data shall be
collected, reported, and disclosed in the
sum m ary format described in paragraph
(a) of this section for the following
categories: 1-4 family home purchase,
1-4 family home im provement, 1-4
family refinancings, and multi-family
loans, (b) The FDIC will make summary
data collected pursuant to this section
available to the public and to the banks.
The data will be used by the FDIC to
apply the Lending Test under § 345.7.
67499
(c) For purposes of this section, a loan
is located in a geography as follows:
(1) Consumer loans are located in the
geography where the borrower resides.
(2) Loans secured by real estate are
located in the geography where the
relevant real estate is located.
(3) Small business loans are located in
the geography where the headquarters
or principal office of the business is
located.
(4) Small farm loans are located in the
geography where the farm property is
located.
(d) A bank is not required to report
under this section indirect loans unless
the bank elects to have the indirect
loans attributed to it as described in
§ 345.7(e) for purposes of the Lending
Test. If a bank elects to report its
indirect loans, it shall report all
attributable indirect loans outside lowor moderate-income geographies as well
as loans inside such geographies.
§345.14 Public file and disclosure.
(a) Banks shall m aintain files that are
readily available for public inspection
containing the information required by
this section.
(b) Each bank shall include in its
public file the following information—
(1) All signed, written comments
received from the public for the current
year and past two calendar years that
specifically relate to the bank’s
performance in helping to meet the
credit needs of its com m unity or
com m unities, and any response to the
com m ents by the bank;
(2) A copy of the public section of
bank’s most recent CRA Performance
Evaluation prepared by the FDIC. The
bank shall place this copy in the public
file w ithin 30 business days after its
receipt from the FDIC; and
(3) A list of the bank’s service areas
and the geographies w ithin each service
area and a map of each service area
showing the geographies contained
therein.
(c) A bank that is not a small bank
shall include in its public file the
lending data the bank has reported to
the FDIC under § 345.13 for the current
and past two calendar years.
(d) A small bank shall include in its
public file the bank’s Loan-to-Deposit
ratio com puted at the end of the most
recent calendar year.
(e) A bank that has been approved to
be assessed under a strategic plan as
described in § 345.11(b) shall include in
its public file a copy of that plan.
(f) Each bank that received a less than
satisfactory rating during its most recent
exam ination shall include in its public
file a description of its current efforts to
improve its performance in helping to
meet com m unity credit needs.
67500
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
(g) A bank shall m aintain its public
file or required portions of the file at the
following offices—
(1) Main offices shall have a copy of
the com plete public file; and
(2) Branches shall have copies of all
m aterials in th e public file relating to
the service area in w hich the branch is
located.
(h) A bank shall provide copies of the
information in the public file to
members of the public upon request. A
bank may charge a reasonable fee not to
exceed the cost of reproduction and
mailing (if applicable).
§345.16 Publication of planned
examination schedule.
The FDIC w ill publish at least 30 days
in advance of the beginning of each
calendar quarter a list of the banks that
are scheduled for CRA exam inations in
that quarter. Any m ember of the public
may submit comments to the FDIC
regarding the CRA performance of any
bank whose nam e appears on the list.
§ 345.17 Effect of ratings—corporate
applications.
(a) The FDIC takes into account a
bank’s record of performance in meeting
its community reinvestm ent obligation
in considering applications for approval
§ 345.15 Public notice by banks.
of—
A bank shall provide, in the public
(1) The establishm ent of a domestic
lobby of its m ain office and each branch, branch or other facility with the ability
the public notice set forth in this
to accept deposits;
section. Bracketed m aterial shall be
(2) The relocation of a bank’s main
used only by banks having more than
office, a branch office or other facility
one service area. The last tw o sentences w ith the ability to accept deposits;
shall be included only if the bank is a
(3) The merger, consolidation,
subsidiary of a holding com pany and
acquisition of assets, or assum ption of
the last sentence only if the com pany is
liabilities; and
not prevented by statute from acquiring
(4) Deposit insurance for an operating
additional banks.
non-insured financial institution.
(b) A new ly chartered State
Community Reinvestment Act Notice
nonm ember bank shall subm it a
U nder the Federal Community
description of its proposed CRA
Reinvestment Act (CRA), th e FDIC
performance w hen the application for
evaluates and enforces our com pliance
deposit insurance is made. In
w ith our obligation to h elp meet the
considering the application, the FDIC
credit needs of this com m unity
takes into account the bank’s proposed
consistent w ith safe and sound
CRA performance.
operations. The FDIC also takes our
(c) In considering the effect of CRA
CRA performance into account w hen
the FDIC decides on certain applications performance on a corporate application,
the FDIC w ill take into account any
subm itted by us. Your involvem ent is
views expressed by State or Federal
encouraged. You should know that:
financial supervisory agencies or other
You may look at and obtain in this office
interested parties, w hich are subm itted
information on our performance in this
in accordance w ith the FDIC’s
community. This inform ation includes a file
procedures set forth in § 345.16 or part
of all signed, w ritten com ments received by
303 of this chapter.
us, any response* we have made to the
(d) In the FDICs consideration of the
comments, evaluations by the FDIC of our
effect of a bank’s CRA record on a
CRA performance, and data on the loans we
have made in this com m unity during the past corporate application, the CRA rating
two years. (Current CRA inform ation on our
assigned to a bank is an im portant, and
performance in other com m unities served by
often controlling, factor. However, the
us is available at our main office, located at
rating is not conclusive evidence of
___________ :)
performance. Absent other evidence on
You may send signed, w ritten comments
performance, CRA ratings generally
about o ur CRA performance in helping to
affect corporate applications as follows:
meet com m unity credit needs to (title and
(1) An “outstanding” rating generally
address of bank official) and to the FDIC
will result in a finding that the CRA
Regional Director (address). Your letter,
aspect of the application is consistent
together w ith any response by us, m ay be
w ith approval of the application and
made public.
You may ask the FDIC to look at any
will receive extra weight in the FDICTs
com m ents received by the Regional Director.
review of the application.
You also m ay request from the Regional
(2) A “satisfactory” rating generally
Director an announcem ent o f our
will result in a finding that the bank’s
applications covered by the CRA filed with
CRA performance is consistent with
the FDIC We are a subsidiary of (name of
approval of the application.
holding com pany), a bank holding company.
(3) A “needs to im prove” rating
You m ay request from the Federal Reserve
generally will be an adverse factor in the
Bank of (city, address) an announcem ent of
CRA aspect of the application, and
applications covered by the CRA filed by
bank holding com panies.
absent dem onstrated improvement in
the bank’s CRA performance or other
countervailing factors, generally will
result in denial or conditional approval
of the application.
(4) A “substantial noncom pliance”
rating generally w ill be so adverse a
finding on the CRA aspect of the
application as to result in denial of the
application.
§345.18 Transition rules.
(a) Data collection. The data
collection and reporting requirem ents of
§ 345.13 will go into effect July 1, 1994.
Data collected from July 1,1994 to year
end must be reported to the FDIC no
later than January 31,1995. Thereafter
banks will collect data on an annual
basis and the data shall be reported no
later than January 31 of the following
year.
(b) A ssessm ent standards. Evaluation
under the new standards is m andatory
after July 1,1995, except that, until
April 1,1996, for good cause, an
institution may request the FDIC to
evaluate it under the standards in place
prior to [effective date of final
regulation]. During the time period from
April 1,1995 until July 1,1995, a bank
may, at its option, choose to be
evaluated u n der the new standards or
under the standards in place prior to
(effective date of final regulation].
(c) Strategic plan. If a bank elects to
be evaluated under an approved
strategic plan during the transition
period, a bank may submit a strategic
plan anytim e after [effective date of final
regulation],
(d) Corporate applications. If the first
rating a bank receives under the new
standards (whether that rating is given
during the transition period or after the
new standards become effective) is more
than one rating category below the last
rating the bank received prior to
[effective date of final regulation], the
FDIC will not disapprove any corporate
application or take any other
enforcement action against the bank
based on that lower rating if the FDIC
has determ ined that the drop in the
bank’s rating occurred despite the
bank’s good faith efforts to perform at
least satisfactorily under the new
standards.
6.
A ppendix A to part 345 is added
as set forth in the common preamble.
Appendix A to Part 345—CRA Loan
Data Format
By Order of the Board o f Directors, dated
at W ashington, DC, this 9th day of December
1993.
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
Federal Deposit Insurance Corporation.
Robert E. Feldm an,
§563e.3 Purposes.
The purposes of this port are to
im plem ent the community reinvestment
obligation of savings associations; to
explain how the Office of Thrift
Supervision (OTS) assesses the
performance of savings associations in
satisfying the com m unity reinvestm ent
obligation; and to describe how that
performance is taken into account in
certain corporate applications.
67501
(h) Loans or investm ents benefitting
low- a nd m oderate-incom e geographies
or persons means loans or investm ents
Deputy Executive Secretary.
where the proceeds are provided to.
invested in, used by or otherwise
directly benefit—
(1) Persons that reside in low- or
OFFICE OF THRIFT SUPERVISION
moderate-income geographies or have
12 CFR Chapter V
low or moderate incomes;
(2) Businesses located in low- or
For the reasons outlined in the
m oderate-income geographies or
preamble, the Office of Thrift
em ploying mostly persons residing in
§563e.4 Scope.
Supervision hereby proposes to amend
such geographies;
12 CFR chapter V as set forth below:
(3) Non-profit organizations located in
This part applies to all savings
low- or moderate-income geographies or
associations as defined in § 561.43 of
7. Part 563e is revised to read as
providing services mainly to persons
this subchapter.
follows:
residing in such geographies; or
§ 563e.5 Definitions.
(4) Construction or renovation of
PART 563e—COMMUNITY
For purposes of this part, the
facilities located in low- or moderateREINVESTMENT ACT
following definitions apply:
income geographies or providing
Sec.
(a) A utom ated Teller M achines
services mainly to persons residing in
563e.l Authority.
(ATMs) means immobile, autom ated,
such geographies.
563e.2 Community reinvestm ent obligation. unstaffed facilities at w hich deposits are
(i) Low- and m oderate-incom e
563e.3 Purposes.
received, checks paid, or money lent.
geographies means geographies where
563e.4 Scope.
(b) Branches means staffed facilities
the median family income is less than
563e.5 Definitions.
(shared or unshared) with a fixed site at 80% of the median family income for
563e.6 Assessment standards—summary.
w hich deposits are received or checks
the M etropolitan Statistical Area (MSA)
563e.7 Lending Test.
aid or money lent, including minior (in the case of geographies outside a
563e.8 Investm ent Test.
ranches in grocery stores or branches
563e.9 Service Test.
MSA) less than 80% of the nonoperated in conjunction w ith any other
563e.l0 Composite ratings.
m etropolitan state-wide m edian family
5 6 3 e .ll Alternative assessm ent methods.
local businesses, churches, or other non income for the state in w hich the
563e.l2 Service area—delineation.
profit organizations.
geography is located.
563e.l3 Loan data—collection, reporting
(c) Consum er loans m eans closed-end
(1) Low-incom e geographies means
and disclosure.
loans extended to a natural person
geographies where the m edian family
563e.l4 Public file and disclosure.
primarily for personal, family, or
income is less than 50% of the median
563e.l5 Public notice by savings
household purposes, but does not
family income for the Metropolitan
associations.
include home mortgage loans as defined Statistical Area (MSA) or (in the case of
563e.l6 Publication of planned
in paragraph (e) of this section, credit
geographies outside a MSA) less than
exam ination schedule.
card loans, or motor vehicle loans.
563e.l7 Effect of ratings—corporate
50% of the non-m etropolitan state-wide
(d) Geographies means census tracts
applications.
m edian family income for the state in
563e.l8 Transition rules.
or block numbering areas.
which the geography is located.
(e) H om e mortgage loans means
(2) M oderate-incom e geographies
Appendix A to Part 563e—CRA Loan
closed-end loans that are mortgage loans means geographies where the median
Data Format
as defined in section 303(1) of the Home family income is at least 50% and less
Authority: 12 U .S.C 1462a, 1463, 1464,
Mortgage Disclosure Act (12 U.S.C.
than 80% of the median family income
1467a, 1814,1816,1818, 1828(c), and 2901
2802(1), hereinafter referred to as
for the Metropolitan Statistical Area
through 2907.
HMDA) and implementing regulations.
(MSA) or (in the case of geographies
(f) Illegal discrim ination means
outside a MSA) at least 50% and less
§ 563e.1 Authority.
discrim ination on a prohibited basis as
than 80% of the non-m etropolitan state
The provisions of this part are issued
set forth in the Equal Credit
wide m edian family income for the state
under the Community Reinvestment Act O pportunity Act, 15 U.S.C. 1691
in w hich the geography is located.
of 1977 (CRA), as am ended (12 U.S.C.
through 1691 f, the Fair Housing Act, 42
(j) Reportable loans means home
2901 et seq.)\ section 5, as am ended, and U.S.C. 3601 through 3619, and OTS
mortgage loans, consum er loans, and
sections 3, 4, and 10, as added, of the
nondiscrim ination regulations (12 CFR
loans to small businesses and small
Home O w ners’ Loan Act of 1933 (12
part 528).
farms.
U.S.C. 1462a, 1463,1464, and 1467a);
(g) Indirect loans means loans made
(k) Sm all savings associations
and sections 4, 6, 8 and 18(c), as
indirectly by a savings association
means—
am ended of the Federal Deposit
through participation in a lending
(1) Independent savings associations
Insurance Act (12 U.S.C. 1814,1816,
consortium in w hich lenders pool their
with total assets of less than $250
18 1 8 ,1828(c)).
resources, by subsidiaries of the savings m illion; or
association, by non-chartered affiliates
(2) Savings associations w ith total
§ 563e.2 Community reinvestment
funded by the savings association, or by assets of less than $250 m illion that ark
obligation.
lawful investm ents in or w ith
subsidiaries of a holding com pany with
Savings associations have a
com m unity development and affordable total banking and thrift assets of less
continuing and affirmative obligation to housing lenders, women-owned or
than $250 million.
help meet the credit needs of their
(1) Sm all businesses means private
minority-owned financial institutions,
comm unities, including low- and
for-profit organizations that had for the
low-income credit unions, and others
moderate-income areas, consistent w ith
that lend to low- and moderate-income
calendar or fiscal year preceding the
safe and sound operations.
making of the loan—
geographies and individuals.
17502
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rotes
§563e.7 Lending test
(a) Sum m ary. The Lending Test
evaluates prim arily w hether a savings
association is making loans in low- and
moderate-income geographies as w ell as
to wealthier geographies. The test
examines direct lending by the savings
association itself and, if the savings
association elects, indirect lending to
the extent perm itted by this part.
(b) Standards. The OTS rates a
savings association’s lending
$ 563o.6 Assessment standard*—
performance in a service area under the
summary.
following rebuttable presum ptions.
(1) Outstanding. Subject to rebuttal,
(a) Except for savings associations
the OTS presumes a savings association
assessed under the special standards of
is lending in an outstanding fashion if—
§ 5 6 3 e .ll, th e OTS assesses a savings
(i) The savings association’s market
association’s CRA perform ance as
share of reportable loans in low- and
described in this section. T he OTS
reviews, among other things, the savings moderate-income geographies m its
service area significantly exceeds its
association’s CRA public file and any
market share of reportable loans in the
signed, w ritten com m ents about the
rem ainder of its service area; and
savings association’s CRA performance
(ii) E ither
subm itted to the savings association or
(A) ft has m ade a significant am oum
the OTS. In assessing a savings
association’s CRA performance, the OTS of reportable loans hi th e vast majority
of the low- and moderate-income
considers w hether the savings
association is helping to meet th e credit geographies in its service area; or
(B) Its reportable loans to low- and
needs o f its entire comm unity. In
moderate-income geographies in its
exam inations, however, the OTS pays
service area represent a substantial
particular attention to the savings
percentage of its reportable loans in its
association’s record of helping to meet
service area (provided that the savings
the credit needs in low- and moderateassociation does not unreasonably
income geographies. T hat record is
exclude low- and moderate-income
primarily evaluated using three
geographies from its lending).
measures: the Lending T est (described
(2/ High satisfactory. Subject to
in § 563e.7), the Investment Test
rebuttal, the OTS presum es a savings
(described in § 563e.8) and the Service
association is lending m a high
Test (described in § 563e.9J. Based cm
satisfactory fashion if—
these separate assessm ents, the OTS
(i) The savings association’s market
assigns the savings association one of
share of reportable loans in low- and
four overall com posite ratings as
moderate-income geographies in Its
iescribed in § 563e.lQ. The four
service area is at least roughly
composite ratings are O utstanding,
comparable to Its market share of
Satisfactory, N eeds to Improve, and
reportable loans in the rem ainder of its
Substantial Noncompliance.
service area; and
(b) The composite ratings reflect the
(ii) Either:
extent of compliance or noncom pliance
(A) It has made a significant amount
w ith the community reinvestment
of reportable loans in most of the lowobligation described in § 563e_2. A
and moderate-income geographies in its
savings association that receives a
service area; or
com posite rating of Substantial
(B) Its reportable loans to low- and
Noncompliance shall be subject to
moderate-income geographies in its
enforcement actions pursuant to 12
service area represent a very significant
U.S.C 1818.
percentage of its reportable loans in its
(c) This part and the CRA do not
service area (provided that the savings
require any savings association to make
association does not unreasonably
loans or investm ents that are expected
exclude low- and moderate-income
to result in losses or are otherw ise
geographies from its lending).
inconsistent w ith safe and sound
(3) Low satisfactory. Subject to
operations. However, savings
rebuttal, the OTS presum es a savings
associations are perm itted and
association is lending in a low
encouraged to develop and apply
satisfactory fashion if—
(i)
The savings association’s market
flexible underw riting standards (that are
consistent w ith safe and sound
share o f reportable loons in low- and
moderate-income geographies in its
operations) for loans that benefit lewand moderate-income geographies or
service area is at least roughly
individuals.
comparable to Its market share of
(1) Average animal gross receipts of
lew than $10 m illion for a concern
providing services; or
(2) Up to 500 em ployees for a
manufacturing concern.
(m) Sm all farm s m eans private
organizations engaged m farming
operations w ith average annual gross
receipts of less than $500,000 tor the
calendar or fiscal year preceding the
making of the loan.
reportable loans in the rem ainder of its
service area; and
(ii) E ither
(A) It has made a significant amount
of reportable loans in many of the k»wand moderate-income geographies in its
service area; or
(B) Its reportable loans to low- and
moderate-income geographies in its
service area represent a significant
percentage of its reportable loans in its
service area (provided that the savings
association does not unreasonably
exclude low- and moderate-income
geographies from its lending).
(4) Needs to improve. Subject to
rebuttal, the OTS presumes a savings
association needs to improve its record
under the Lending Test if—
(i) The savings association’s market
share of reportable loans in low- and
moderate-income geographies in its
service area is less than, and not roughly
comparable to, its market share of
reportable loans in the rem ainder of its
service area; or
(ii) It has made reportable loans in
only a few of the low- and moderateincome geographies in its service area,
and reportable loans to low- and
moderate-income geographies in its
service area represent an insignificant
percentage of its reportable loans in its
service area.
(5) Substantial noncom pliance.
Subject to rebuttal, the OTS presumes a
savings association is in substantial
noncom pliance w ith the Lending Test
if—
(1) The savings association’s market
share of reportable loans in low- and
moderate-income geographies in Us
service area is significantly less than its
market share of reportable loans in the
rem ainder of its service area; and
(ii) It has made very few, if any,
reportable loans in the low- and
moderate-income geographies in its
service area.
(c) M ethod o f com putation—(1)
General. For purposes of the Lending
Test, the OTS, rather than th e savings
association, is responsible for making
the computations. The OTS bases such
com putations upon the savings
association’s reported loan data required
under § 563e.l3 and the aggregate
reported loan data supplied by the
Federal financial supervisory agencies.
In making lending test computations,
the OTS measures market share, amount
of loans, and percentage using both
volume of loans and num ber of loans.
(2) M arket share. T he OTS computes
market share for volum e and num ber of
loans far each type of reportable loans;
Home mortgage loans, consum er loans,
and small business and farm loans. The
OTS awards an overall m arket share
‘
Redecal JHegister J Itol. 5 a, Ala 24S 1 Tuesday, December 21, »S93 i fteopoaad Saties
*7563
lenders in tfh e sau n g sa n ec ia tieg i’
s
■li).A l& e® p iieB sif»ll investing ar
service aiea.
lending csfteem yfaaadnn suofaiBGtars
participating savings assKaatiaus, a>
as the needs Ofttbe community feeing
alternative method of attributing ioans
§563e.8 Investment test
seined, the sawings association's
among the investing or participating
(a) Sum m ary. The Investment Test
capabilities and business plans, anrdUhe savings associations may h e established.
euad nates savings associations «m the
degree to w hich the savings
In no case, h o w ev e r
'
association's performance with respect
afr)May fee indirect loans a ttributed to amount o f their investm ents benefiting
low- and moderate-iii come geographies
to oneof*he 4oa» categories, - nfeet,
i
an y -savings association exceed its
or persons.
balaRoes«r compensates for its
percentage share o f the total 'loans
(d) Standards. The OTS rates a
perform anoe wader another category.
(measured m both -namber and -volume)
savings association’ n n se stm o t
s
^d) A djustm ents. (11 T he O TS m ay
m ade d irectl y by fhe lending entity in
performance u n rte rth e following
m am ase a savings association’s lending
•which th e savings association invested
rebuttehle presum ptions:
rating if the -savings association
or participated;
(a) Outstanding. Subject to rebuttal,
participates in a program for .giving
'fii) Maty fhe investors or p articipants
th e O TS presum es a savings association
further reviews to loan applications th a t claim , in th e -aggregate, indirect loans
is providing qualified investm ents an an
wouM otherwise h e -denied. More credit (measured in h o th num ber an d volume)
outstanding fashion i f tfbe savings
will he-given for ■such a program if it is
in excess o f th e loans actually m ade in
association h a s m ade such investm ents
done tn conjunction w ith a -community
any geography by the lending -entity in
in a n am ount th a t is substantial as
organization In -such a “
way th a t th e
which th ey invested o r participated; or
compared to its capitaL
organization -either participates in th e
'(iii) M ay any savings association be
(2) High satisfactory. Subjeat Ho
review o r offers applications from lowassigned a disproportionate share nf all
rebuttal, th e OTS presum es a savings
and m oderate-income individuals "that
loans (measured in both num ber and
association as providing qualified
■the savings association -will consider for volume) m ade in low- and m oderateinvestments h i a high satisfactory
credit. The OTS may also increase th e
income geographies by a lending entity
fashion if the savings association has
rating if th e savings association has
in w hich fhe savings association
made such investm ents an a n am ount
m ade a substantial am ount Df loans
invested or participated.
that is very significant a s com pared to
requiring creative or innovative
14) Tf a savings association elects,
its capital.
underw riting (while -mainta ining a safe
indirect loans attributed to a savings
13) I n w satisfactory. Subject to
and sound quality) or loans for w hich
association under this paragraph te) may rebuttal, th e OTS presum es a savings
-there is particular need, such as loans
be included in “ reportable loans” for
association is providing<qualified
for multifamily housing construction
purposes o fth e ’ endingT est If a
L
investments in a low satisfactory
and rehabilitation, loans to start-ups,
savings association reports them under
(fashion i f th e savings association has
very small businesses or com m unity
'§563e.T3.
made su ch investm ents in a n am ount
development organizations or facilities
(f)
Rebutting presum ptions. A savings that is significant a s oompased to its
and loans to very low-income
association can rebut a presum ptive
capital.
individuals and areas."The OTS will
rating under this section b y clearly
<4) N eeds to im prove. Subject to
also consider favorably in reaching a
establishing to th e satisfaction of the
rebuttal, th e OTS presum es a savings
rating loans m ade to th ird parties, such
OTS that the quantitative measures in
association needs to improve its record
as community developm ent
this section do n o t accurately present its trf providing qualified investm ents if the
lending porTnrmAnrpt Iwrjnicn, among
organizations and interm ediaries, that
savings association h a s m ade such
make loans or facilitate lending in lowother reasons—
investm ents in a n am ount that is
•and moderate-income geographies, even
ID The quantitative measures o f this
insignificant as com pared to its-capitaL
if th e loans by th e savings association
section do not reflect th e savings
(5) Substantial naacom pliance.
are not reportable under th is part, are
association's significant am ount of loans Subject to rebuttal, the OTS presum es a
not m ade to th ird parties in th e savings
benefiting low- a n d m oderate-income
savings association is in substantial
association’s service area, or are made to geographies at persons;
noncom phanoe w ith th e Investment
third parties that serve service areas
(2) O ther quantitative m easures of the Test if the s a v in g association has
Other than the savings association’s.
savings association’ lending
s
devoted very little, if any, capital to
(2) In exceptional cases, th e OTS may performance dem onstrate a higher level qualified investments.
reduce a rating achieved u n d er this
than that reflected by th e m easures
(c) Q ualified investm ents. Qualified
section if it concludes that the
under this
investm ents are lawful investm ents that
quantitative m easures in this section fail
<3) Peculiarities in the dem ographics
demonstrably benefit lo w -and
to reflect the savings association’s -actual of the savings association’s service area
moderate-incom e geographies ar
record o f lending to low- o r m oderateexist that significantly distort the
persons in th e savings association's
incom e geographies.
quantitative measures o f (this section;
service area. Qualified investm ents may
(e) Indirect lending. (!) I f th e savings
-(4r) Economic or legal lim itations
include investments:
association elects, the OTS w ill attribute peculiar to th e savings association o r Its
(1) In support of affordable housing,
to a savings association its reported
service area -or unusual general
small business, consum er, a n d other
attributable in d irect loans.
-economic conditions have affected its
economic developm ent initiatives;
(2) In com m unity developm ent banks,
(2) in th e u su al case; th e indirect
performance a n d ought to he
community developm ent corporations,
considered; a r
loans attributable t e a savings
cam m uaity developm ent projects, sm all
(5) The savings association's
association equal .the savings
association’ percentage share ifbased on perform ance a s measured by the m arket business investment corporations,
«
minority snraU busk*ass investment
the level o l th e savings association’s
•share com ponent of the Landing Test
en rporatien s and m inority- and womeninvestment -or participation) o f each
does not reflect its overall landing
loan m ade through the entity in w hich
owned financial institutions and other
perfbiioanoe because n f th e
community developm ent financial
•extraordinarily high level of
the savings .association h as invested or
mtwrtnxrfiwTTO*;
participated.
performance, in .the aggregate, by
67504
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
(3) In consortia or other structures
serving low- and moderate-income
individuals and neighborhoods and
poor rural areas;
(4) In state and local government
agency housing bonds or state and local
government revenue bonds specifically
aim ed at helping low- and moderateincom e com m unities and individuals.
(d) Capital. For purposes of the
Investm ent Test, the OTS will evaluate
the am ount of qualified investments
against the am ount of the savings
association’s total risk-based capital.
(e) B enefit to service area. In order to
be eligible as a qualified investment
under paragraph (c) of this section, the
activity or entity supported by an
investm ent need not solely benefit the
savings association’s service area.
However, the activity or entity
supported by the investment must
significantly benefit low- and moderateincome geographies or persons in the
savings association’s service area.
(f) Exclusion o f indirect loans.
Investm ents that a savings association
has elected to report as indirect lending
under the Lending Test are not counted
as qualified investm ents under this Test.
(g) Grants. Grants that would
constitute qualified investm ents were
they in the form of investm ents will be
treated as qualified investments for
purposes of the Investm ent Test. A
savings association may also donate, sell
on favorable terms, or make available on
a rent-free basis any branch w hich is
located in a predom inately m inority
neighborhood to a m inority depository
institution or w om en’s depository
institution as defined in 12 U.S.C. 2907.
(h) A djustm ents to Investm ent Test.
The OTS may adjust a savings
association’s rating und er the
Investm ent Test. Adjustm ents may
increase or, in exceptional cases,
decrease the rating. In making these
adjustm ents the OTS considers whether:
(1) The savings association’s qualified
investm ents are particularly innovative
or meet a special need, or if the savings
association’s activities in connection
w ith its qualified investm ents have been
particularly complex, innovative or
intensive for a savings association of its
size, or involve innovative partnerships
w ith com munity organizations
(examples include helping to establish
an entity to conduct com munity
developm ent activities or providing
significant service or assistance in
support of a qualified investment); or
(2) The savings association has made
a large am ount of investm ents that
w ould be qualified investm ents but for
th e fact that they fail to benefit the
savings association’s service area as
required by paragraph (e) of this section,
provided to low- and moderate-income
geographies and individuals.
( lj A djustm ent to reflect more
accurately branch service. The OTS may
§ 563e.9 Service test
adjust a savings association’s record
(a) Sum m ary. The Service Test
upw ard or dow nw ard to reflect more
evaluates the accessibility of a savings
accurately its branch service to low- or
association’s branches and the extent to
moderate-income geographies or
w hich any savings association provides
individuals. Downward adjustments
other services that enhance credit
w ill occur only in exceptional cases. In
availability. The Service Test does not
determ ining the appropriateness and
require a savings association to expand
degree of any adjustment, the OTS may
the size of its branching network or to
consider the savings association’s record
operate facilities at a loss. Appropriate
of opening and closing branches. The
consideration is given to the limitations OTS may also consider whether
faced by savings associations w ith a
branches in or readily accessible to lowand moderate-income geographies
small num ber of branches. The OTS
actually serve low- and moderateevaluates savings associations with
income individuals and whether
m ultiple branches under the Service
branches not located in or readily
Test prim arily on the extent to which
accessible to such geographies are
they offer branches.
(d) Standards fo r savings associations. nonetheless serving low- and moderateincome individuals. The OTS may also
The OTS rates a savings association’s
take into account significant differences
service performance in a service area
in the quantity, quality or types of
und er the following rebuttable
services offered to low- or moderatepresum ptions.
(1) O utstanding. Subject to rebuttal,
income individuals or geographies and
the OTS presumes a savings association
sim ilar considerations.
(2) A djustm ent to reflect other
is providing service in an outstanding
fashion if a substantial percentage of the services that prom ote credit availability.
The OTS may adjust a savings
savings association’s branches are
association’s rating upw ard to reflect a
located in or readily accessible to lowand moderate-income geographies in its strong record of offering or supporting
services that promote credit availability
service area.
for low- and moderate-income
(2) High satisfactory. Subject to
geographies or individuals. These
rebuttal, the OTS presumes a savings
services include credit counseling, lowassociation is providing service in a
cost check cashing, “ lifeline” checking
high satisfactory fashion if a very
accounts, financial planning, home
significant percentage of the savings
ow nership counseling, loan packaging
association’s branches are located in or
readily accessible to low- and moderate- assisting small and minority businesses,
partnerships w ith community-based
incom e geographies in its service area.
(3) Low satisfactory. Subject to
organizations to promote credit-related
rebuttal, the OTS presumes a savings
services, extensive provision of ATMs
association is providing service in a low or other non-branch delivery systems
satisfactory fashion, if a significant
that are particularly accessible and
percentage of the savings association’s
convenient to low- and moderatebranches are located in or readily
income geographies or individuals, and
accessible to low- and moderate-income sim ilar programs.
(d) R ebutting presum ptions. A savings
geographies in its service area.
(4) Needs to im prove. Subject to
association can rebut a presumptive
rebuttal, the OTS presumes a savings
rating under this section by clearly
association needs to improve its record
establishing to the satisfaction of the
of providing service if an insignificant
OTS that the quantitative measures in
percentage of the savings association’s
this section do not accurately represent
branches are located in or readily
its service performance because, among
accessible to low- and moderate-income other reasons—
(1) The quantitative measures of this
geographies in its service area.
(5) Substantial noncom pliance.
section do not reflect the savings
Subject to rebuttal, the OTS presumes a
association’s significant degree of
savings association is in substantial
services that promote credit availability
noncom pliance w ith the Service Test if
to low- and moderate-income
very few, if any, of the savings
geographies or persons;
(2) Peculiarities in the demographics
association’s branches are located in or
readily accessible to low- and moderate- of the savings association’s service area
exist that significantly distort the
income geographies in its service area.
(c) A djustm ents. If necessary, the OTS quantitative measures of this section; or
(3) Limitations im posed by the
adjusts a savings association’s rating to
savings association’s financial
reflect more accurately the service
provided the savings association has not
neglected investm ents that benefit its
service area.
JFetieral R e g is te r J IAoL 5 8 , No. 2 4 8 1 Tuesday, Deceniber 2 1 , 13 9 3 7 Proposed R ales
condition, *c.onaH) in « r legallim itations
on branch operation or location, or
■sirnllar circum stances have affected its
perfDrHsanoe and aught t e be
considered.
which a savings association operates.
The O TS assigns separate composite
CRA eatings to the savings association's
performance in each -of th e service areas
studied. A fist o f th e service areas m
w hich fee savings association’s CRA
performance -was exam ined, along -with
the rating assigned <tofe e savings
association 's CRA record in each o f the
service areas, shall be included in the
savings association’s public
performance evaluation. T he overall
rating for fe e savings association reflects
the perform ance of fee-savings
association in theservice areas studied.
T57505
addition, a t fee option-of fe e savings
association, fe e OTS-wifi evaluate:
U) Tts -record of m A in g qualified
investm ents'(as described in
§ 563e.8(c)); a n d
(ii) Its record of providing branches,
§5636.10 Composite eatings.
ATMs, and other services feat enhance
(a) Com posite sating standards. OTS
credit availability o r in other ways meet
assigns com posite ratings a s follows:
the convenience and needs o f low- an d
t l ) Base rating. For savings
moderate-income persons in its service
associations, the savings association -s
area.
rating u n d er the Lending Test form s th e
T3) A small savings association feat
basis for its composite rating. The base
fails to meet or exceed all of fee
rating u n d er .this paragraph is adjusted
Standards for a satisfactory fating under
as described in paragraphs (aM.2] and
this paragraph is not presumed to be
(a)(3) of this section.
performing i n a less than satisfactory
(2) E ffect n f in vestm en t rating. For
§563e.11 Alternative assessment
manner. Rather, for those .savings
methods.
savings associations, the base eating is
associations, the OTS conducts a m ore
increased b y tw o levels i f .the savings
(a) Sm all savings association
extensive examination o ffe e savings
association has .an outstanding sating in assessm ent standards. A sm all savings
association's loaa-Jto-dqposit record, its
the investm ent Test or by-one level if
association (as defined in'§7>63e.5fkD
record of lending to its local
the savings association h a s a high
may choose to have the OTS assess fts
community., and its Joan m ix. The OTS
satisfactory rating i s the Investment
CRA perform ance under this section
will also contact m em bers of fee
Test.
rather than the general standards
community, p a rtic u la r^ i n response to
13) E ffect o f service sating. The hase
described in §§ -563e.fi through 563e.lQ.
com plaints ahout fee savings
rating is increased b y one level if th e
(1) The OTS presum es a small savings
association, and review the findings o f
savings association has an outstanding
association 's overall CRA p e rformance
its most recent fair lending exam ination.
rating in th e Service Test and is
is satisfactory -if the savings association:
In addition, at fee option of the savings
decreased by o n e level i f the savings
(i) H as * reasonable loarnto-deposft
association, the OTS will assess:
association h a s a rating-of substantial
ratio (a rsfio Of 60 percent, adjusted for
(i)
Its record » f making qualified
non-com pliance in the Service Test.
seasonal variation, is presum ed to b e
investments (as-described in
(4) Final £ampo&ite noting. Subject to leasonaMe) given its size, its financial
§£&3e.£(c)); and
paragraph J(b) of this section, the OTS
co n d ition,and -the credit needs in its
Iii) its rooord ©f providing branches,
converts th e rating resulting from
service.area;
ATMs, and other services that enhance
paragraphs laji lj through (a)(3) of this
(ii) Makes the majority o f its loans in
credit .availability o r in o ther w ays serve
section into .a final .composite rating as
its service area;
the convenience and meeds o f low- and
described in this paragraph (a)(4). High
liii)H a s a good loan m ix li'je., makes,
moderate-income persons in its service
satisfactory a n d low satisfactory ratings
to the extent perm itted b y law e n d
area.
are both -scored as satisfactory in th e
regulation, a variety o f loans He
(4) M idtipieservice areas. If a small
final composite rating. A savings
custom ers across economic levels);
savings association npecates in mote
(iv) H as n o legitimate, bona-fide
association that would otherwise
th an one service area, th e OTS evaluates
com plaints from com m unity members;
receive a com posite rating -of n eed s to
th e savings association's -performance in
(v) Has not engaged in a pattern or
improve Trill receive a final com posite
all of those servioe areas.
practice o f illegal discrim ination fe at it
rating of substantial noncom pliance if
(b) Strategic p lan assessm ent,
As
has not corrected folly; and has not
the savings association isceiv ed no
an alternative to being rated after fee
better th m a neetfe to im prove rating on comm itted isolated acts of illegal
fact u n d er fee lending, service and
discrim ination, ctf which it has
both of its last tw o examinations.
investm ent tests or the small savings
ifb) E ffect o f discrim ination. Evidence
know ledge,that it has n e t corrected
association assessm ent m ethod, a
that a savings association has-engaged in fully or is not in th e process o f
savingsassociatian may subm it to fee
illegal ifindingdiscrim i nation m ay affect correcting fully; and
OTS (for a p p ro v a l« strategic plan
<vi) In fe e case-of a savings
the savings association's OKA rating.
detailing how fe e savings associat ion
association already subject to reporting
Notwithstanding paragraph (a) erfthis
proposes to m eet its CRA obligation.
home mortgage lending data under
section and subject to rebuttal, the OTS
(i) The p la n must b e subm itted at least
HMDA, 12 U.S.C 2801 -ef se q .,h a sa
assigns a -savings association a final
3 months prior to fee proposed-effective
com positetbting low er th an satisfactory reasonable geographic distribution o f
date of fee plan so th a t fee OTS has
such loans.
if the savings association has—
sufficient tim e ’ review fe e plan end “
to
to
12) A small savings association that
(1) Engaged in a pattern or praotice of
m eets each of fe e standards f e r e
determ ine w hether to approve it.
illegal discrim ination th a t it has not
satisfactory rating u n d erfe is paragraph
(ii) A savings association -submitting a
corrected tfiri ly; or
(2j -Committed a n isolated -ad of
and exceeds some or a ll e f those
proposed p la n fo r approval -must
standards m ay warrant consideration for publish notice in a new spaper trf general
illegal discrim ination of w hich i t h a s
an overall rafting of outstanding. In
knowledge and thal it h as n o t corrected
circulation in each of its service areas
fully o ris not in th e process of
assessing w hether a sm all savings
stating fe a t e pian has been stfbmitted
correcting fully.
association’s CRA record is outstanding, to the OTS Tor review, fe at copies of fe e
((c) M ultiple service Burns. iVfaeue a
fee OTS w ill consider fe e extent to
plan are avail dWe for review at -offices
savings .association operates h i m arc
w hich f e e savings associafioB’ foarptos
of fee savings association, a n d feat
than *ne ..servioe area, th e O TS conducts deposit rtttic, its lending te its service
comments on fee proposed plan may be
Lending, investm ent a n d Service teste in a lea, a n d its loan rvtx exceed fee
sent to the approp r iate Regional
a sample of all of the service areas in
standards fo r a salfisfeotory rating. In
Director.
67506
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
(iii) The OTS assesses every plan
under the standards of this part and will
not approve a plan unless it provides
m easurable goals against which
subsequent perform ance can be
evaluated, and the proposed
performance is at least overall
satisfactory u nder the standards of this
part.
(iv) No plan may have a term that
exceeds tw o years. Further, during the
term of a plan, the savings association
may petition the OTS to approve an
am endm ent to the plan on grounds that
a material change in circum stances has
made the plan no longer appropriate.
(2) The OTS will assess the
performance of a savings association
operating under an approved plan to
determ ine if the savings association has
met or exceeded the plan goals.
However, if the savings association fails
to meet or exceed the preponderance of
the measurable goals set forth in the
plan, its perform ance will be evaluated
und er the lending, service and
investm ent tests or the small savings
association assessm ent method as
applicable.
§ 563e.12 Service area—delineation.
(a) The effective lending territory of a
savings association defines the savings
association’s service area. The effective
lending territory is that area around
each office or group of offices where the
preponderance of direct reportable loans
made through the office or offices are
located.
(b) Subject to rebuttal, a savings
association’s service area is presum ed to
be acceptable if the area is broad enough
to include low- and m oderate-income
geographies and does not arbitrarily
exclude low- and moderate-income
geographies.
(cj A savings association can show
that its service area is acceptable despite
its failure to satisfy the criteria of
paragraph (b) of this section by clearly
dem onstrating to the satisfaction of the
OTS that the criteria of paragraph (b) of
this section are inappropriate because,
for example, there are no low- or
m oderate-incom e geographies w ithin
any reasonable distance given the size
and financial condition of the savings
association.
(d) The OTS can reject as
unacceptable a service area meeting the
criteria of paragraph (b) of this section
if the OTS finds that the service area
does not accurately reflect the true
effective lending territory of the savings
association or reflects past redlining or
illegal discrim ination by the savings
association.
(e) A savings association shall
delineate more than one service area
$10 million or more and less than 500
employees.
(4) Home mortgage loan data shall be
collected, reported, and disclosed in the
summary format described in this
paragraph (a) for the following
categories: 1— family home purchase,
4
1— family home improvement, 1—
4
4
family refinancings, and multi-family
loans.
(b) The OTS will make summary data
collected pursuant to this section
available to the public and to the
savings associations. The data will be
used by the OTS to apply the Lending
Test under § 563e.7.
(c) For purposes of this section, a loan
is located in a geography as follows:
(1) Consumer loans are located in the
§ 5636.13 Loan data—collection, reporting, geography where the borrower resides.
and disclosure.
(2) Loans secured by real estate are
(a) Every savings association, except located in the geography where the
small savings associations electing the
relevant real estate is located.
small savings association assessment
(3) Small business loans are located in
method, shall collect and m aintain the
the geography where the headquarters
following data on its government
or principal office of the business is
insured and other reportable loans:
located.
num ber of written applications, num ber
(4) Small farm loans are located in the
of application denials, num ber and
geography where the farm property is
am ount of approvals, num ber and
located, (d) A savings association is not
am ount of loans purchased, and num ber required to report under this section
and amount of indirect loans the savings indirect loans unless the savings
association elects to have evaluated
association elects to have the indirect
using the lending test. All information
loans attributed to it as described in
is to be provided by the geography
§ 563e.7(e) for purposes of the Lending
where the loan is located.
Test. If a savings association elects to
(1) A savings association choosing to
report its indirect loans, it shall report
be rated under the strategic plan
all attributable indirect loans outside
assessment described in § 563e.11(b) is
low- or m oderate-income geographies as
not relieved from its obligation to report well as loans inside such geographies.
the data as required by this section.
1563e.14 Public tile and disclosure.
(2) The inform ation required under
(a) Savings associations shall
this section shall be collected:
maintain files that are readily available
(i) Beginning July 1,1994, for the
for public inspection containing the
remaining six m onths of 1994. A
information required by this section.
summary of the savings association’s
(b) Each savings association shall
data for the six m onths shall be
include in its public file the following
subm itted to OTS by January 31,1995.
(ii) Beginning January 1,1995, on an
information—
(1) All signed, w ritten comments
annual basis, a summary of the savings
received from the public for the current
association’s data collected under this
year and past two calendar years that
section shall be subm itted to OTS by
specifically relate to the savings
January 31 of the following year. The
association’s performance in helping to
summary data shall be subm itted in the
meet the credit needs of its community
format prescribed in appendix A of this
or comm unities, and any response to the
part.
(3) Small business loan data shall be
comments by the savings association;
(2) A copy of the public section of the
collected, reported, and disclosed in the
savings association’s most recent CRA
summary format described in this
Performance Evaluation prepared by the
paragraph (a) for the following
OTS. The savings association shall place
categories: small businesses with
this copy in the public file w ithin 30
average annual gross receipts of less
business days after its receipt from the
than $250,000, those with average
annual gross receipts of $250,000 or
OTS; and
(3) A list of the savings association’s
more and less than $1 m illion; those
w ith average annual gross receipts of $1 service areas and the geographies w ithin
each service area and a map of each
m illion or more and less than $10
service area showing the geographies
million; and m anufacturing businesses
contained therein.
w ith average annual gross receipts of
w hen the geographies it serves extend
substantially across state boundaries, or
extend substantially across boundaries
of a M etropolitan Statistical Area.
(f) A savings association whose
business predom inantly consists of
serving persons w ho are active duty or
retired m ilitary personnel or their
dependents and w ho are located outside
its local com m unity or communities
may delineate a “m ilitary com m unity”
for those custom ers as a service area.
(g) A savings association shall
compile and m aintain a list of all the
geographies w ithin its service area or
areas and a map of each service area
showing the geographies contained
therein.
Federal Register / Vol. 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
(c) A savings association that is not a
small savings association shall include
in its public file the lending data the
savings association has reported to the
OTS under § 563e.l3 for the current and
past tw o calendar years.
(d) A small savings association shall
include in its public file the savings
association’s Loan-to-Deposit ratio
com puted at the end of the most recent
calendar year.
(e) A savings association that has been
approved to be assessed under a
strategic plan as described in
§ 563e.11(b) shall include in its public
file a copy of that plan.
(f) Each savings association that
received a less than satisfactory rating
during its most recent exam ination shall
include in its public file a description
of its current efforts to improve its
performance in helping to meet
com m unity credit needs.
(g) A savings association shall
m aintain its public file or required
portions of the file at the following
offices—
(1) Home offices shall have a copy of
the com plete public file; and
(2) Branches shall have copies of all
m aterials in the public file relating to
the service area in w hich the branch is
located.
(h) A savings association shall
provide copies of the information in the
public file to members of the public
upon request. A savings association may
charge a reasonable fee not to exceed the
cost of reproduction and m ailing (if
applicable).
§ 563a.15 Public notice by savings
associations.
A savings association shall provide, in
the public lobby of its home office and
each branch, the public notice set forth
in this section. Bracketed m aterial shall
be used only by savings associations
having more than one service area. The
last tw o sentences shall be included
only if the savings association is a
subsidiary of a holding com pany and
the last sentence only if the com pany is
not prevented by statute from acquiring
additional savings associations.
Community Reinvestment Act Notice
Under the Federal Community
Reinvestment Act (CRA), the Office of Thrift
Supervision (OTS) evaluates and enforces
our compliance with our obligation to help
meet the credit needs of this community
consistent with safe and sound operations.
The OTS also takes our CRA performance
into account when deciding on certain
applications submitted by us. Your
involvement is encouraged. You should
know that:
You may look at and obtain in this office
information on our performance in this
community. This Information includes a file
of all signed, written comments received by
us, any responses we have made to the
comments, evaluations by the OTS of our
CRA performance, and data on the loans we
have made in this com munity during the past
two years. (Current CRA inform ation on our
performance in other com m unities served by
us is available at our home office, located at
_________________ .)
You may send signed, written comments
about our CRA performance in helping to
meet com munity credit needs to (title and
address of savings association official) and to
the Regional Director (address). Your letter,
together w ith any response by us, may be
made public.
You may ask the Director of the OTS to
look at any comments received by the
Regional Director. You also may request from
the Regional Director an announcem ent of
our applications covered by the CRA filed
w ith the OTS. We are a subsidiary of (name
of holding company), a savings and loan
holding com pany. -
§ 563e.16 Publication of planned
examination schedule.
The OTS will publish at least 30 days
in advance of the beginning of each
calendar quarter a list of the savings
associations that are scheduled for CRA
exam inations in that quarter. Any
m ember of the public may submit
comm ents to the OTS regarding the CRA
performance of any savings association
whose name appears on the list.
§ 563e.17 Effect of ratings—corporate
applications.
(a) The OTS takes into account the
applicant’s record of performance in
considering applications for—
(1) Establishment of a domestic
branch or other facility w ith the ability
to accept deposits;
(2) Relocation of the home office or a
branch office;
(3) Merger or consolidation w ith or
the acquisition of assets or assum ption
of liabilities of a federally-insured
depository institution; and
(4) A Federal thrift charter.
(b) A n applicant for a Federal thrift
charter (other than a federally-insured
depository institution) shall subm it a
description of its proposed CRA
performance w hen the application is
made. In considering the application,
the OTS takes into account die savings
association’s proposed CRA
performance.
(c) In considering CRA performance
in a corporate application, the OTS w ill
take into account any views expressed
by State or other Federal financial
supervisory agencies or other interested
parties, w hich are subm itted in
accordance w ith the applicable public
com m ent procedures or § 563e.l6.
(d) In the OTS’s consideration of the
savings association’s CRA record in a
corporate application, the CRA rating
67507
assigned to a savings association is an
im portant, and often controlling, factor.
However, the rating is not conclusive
evidence of performance. Absent other
evidence on performance, CRA ratings
generally affect corporate applications
as follows:
(1) An "outstanding” rating generally
will result in a finding that the CRA
aspect of the application is consistent
with approval of the application and
will receive extra weight in reviewing
the application.
(2) A “satisfactory” rating generally
will result in a finding that the CRA
aspect of the application is consistent
with approval of the application.
(3) A "needs to im prove” rating
generally will be an adverse factor in the
CRA aspect of the application, and,
absent dem onstrated improvement in
the savings association’s CRA
performance or other countervailing
factors, generally will result in denial or
conditional approval of the application.
(4) A “substantial noncom pliance”
rating generally will be so adverse a
finding on the CRA aspect of the
application as to result in denial of the
application.
§563e.18 Transition rules.
(a) Data collection. The data
collection and reporting requirem ents of
§ 563e.l3 w ill go into effect July 1,1994.
Data collected from July 1,1994 to year
end m ust be reported to the OTS no
later than January 31,1995. Thereafter
savings associations will collect data on
an annual basis and the data shall be
reported no later than January 31 of the
following year.
(b) A ssessm ent standards. Evaluation
under the new standards is mandatory
after July 1,1995, except that until A pril
1,1996, for good cause, a savings
association may request the OTS to
evaluate it under the standards in place
prior to (effective date of final
regulation). During the tim e period from
April 1,1995 until July 1,1995, a
savings association may, at its option,
choose to be evaluated under the new
standards or under the standards in
place prior to (effective date of final
regulation).
(c) Strategic plan. If a savings
association elects to be evaluated under
an approved strategic plan during the
transition period, a savings association
may subm it a strategic plan anytime
after (effective date of final regulation).
(d) Corporate applications. If the first
rating a savings association receives
under the new standards (whether that
rating is given during the transition
period or after the new standards
become effective) is more than one
rating category below the last rating the
457508
Federal Register / VoL 58, No. 243 / Tuesday, December 21, 1993 / Proposed Rules
savings association received prior to
(effective date of final regulation), the
OTS w ill n o t disapprove any corporate
application or take any other
enforcem ent action against the savings
.association based on that low er rating if
the OTS has determ ined that the drop
in the savings association’s rating
occurred despite the savings
association’s good faith efforts to
perform at least satisfactorily under the
new standards.
8. A ppendix A to part 563e is added
as set forth in the common preamble.
Appendix A to Part 563e—CRA Loan
Data Format
Dated: December 6,1993.
By the Office of Thrift Supervision.
John F. Downey,
Deputy Director for Regional Operations.
[FR Doc. 93-30921 Filed 12-15-93; 4:22 pm)
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B oard
of
G overnors
of t h e
F ed eral R eser v e S ystem
MEMO
D ate :
December
7, 1993
To:
Board of
Governors
F rom :
Staffj
■ m
Community Reinvestment Act Reform Project: Proposed
Amendments to Regulation BB
S ubject :
ACTION REQUESTED: Approval to publish for comment a proposal to
adopt a new Regulation BB, which implements
the Community Reinvestment Act.
SUMMARY
The Community Reinvestment Act (CRA) requires the
federal financial supervisory agencies to encourage depository
institutions to help meet the credit needs of their entire
community,
including low- and moderate-income areas.
The
agencies must assess this performance during examinations of the
institutions they supervise, and consider those institutions'
CRA records when processing applications for expansion.
does not, however,
The law
specify how institutions are to satisfy their
responsibilities.
In 1978 the Board and the other agencies adopted common
regulations to implement the Act.
To avoid directly allocating
credit, these regulations focused in significant measure on
factors which tended to be directed at the process (outreach,
*
G. L. Garwood, G. Loney, G. Canner, S. Alvarez, J. Hodgetts
2
marketing, etc.) used by institutions to assess community credit
needs and to respond to those needs with appropriate services.
Over the years, concerns have been raised that too much
emphasis is being placed on paperwork and procedure (as opposed
to results), that agency supervision is inconsistent, and that
the burdens of compliance are excessive.
In July 1993, the
President asked the agencies to develop new CRA regulations and
examination procedures to provide more objective, performancebased assessment standards that minimize compliance burden while
improving performance.
In accordance with the President's
request, the agencies held public hearings across the country to
gather information on the CRA and its enforcement to help them
develop a revised approach.
As a result, the agencies have jointly prepared a
proposed regulation designed to implement the CRA in a manner
consistent with the President's request.
The draft regulation
would provide more direct guidance to banks on the nature and
extent of their CRA responsibilities, and the means by which
their obligations will be assessed and enforced.
The proposed
regulation seeks to emphasize performance, rather than process;
provide greater predictability and promote consistency in
examinations; and reduce the compliance burden on some insti
tutions.
Specifically, the proposal would (1) create a new
numbers driven system for assessing CRA performance, which would
include measurements for lending, services, and investments;
(2) require institutions to collect additional data for small
3
businesses, small farm and certain consumer loans;
(3) set out
different evaluation standards and methods for small insti
tutions to try to minimize burden; and (4) establish a new
approach to enforcement that would subject institutions to full
enforcement action based solely on the institution's CRA rating.
Although supporting the idea of publishing this
proposal for public comment, the staff has a number of concerns
and reservations about its elements.
It will involve very
extensive new data collection that will be costly for many
institutions and the agencies.
The quantitative evaluation
system that is designed to substitute for the current judgmental,
evaluation is extremely complicated and seems likely to produce
some anomalous results.
The agencies' examiners will probably
find it necessary to consider subjective factors to correct
inequities in arriving at a rating.
To avoid credit allocation
and recognize local conditions, the quantitative measures are
descriptive in nature (e.g., "substantial") rather than specific
numerical amounts or ratios.
Examiners will have to apply
judgment as to the meaning of the terms, thus raising many of
the same issues that prompted this review of CRA in the first
place.
The proposed small institution provision will relieve a
high percent of banks from the more rigorous enforcement
afforded larger institutions, and is very far reaching and
perhaps excessive.
However, the agencies are committed to exploring the
feasibility of a new approach and having a proposal out for
4
public comment will sharpen the debate over how best to proceed.
Given the extent of the concerns about the current system and
the commitment of the other agencies to airing this proposal for
more formal comment, we recommend that the Board publish for
comment conforming changes to its Regulation BB.
A common agency draft Federal register notice is found
on page 45.
A draft Federal Reserve Regulation is found on
page 89.
DISCUSSION
I.
Background
The Community Reinvestment Act was enacted into law in
1977, primarily to encourage depository institutions to lend in
all areas of their communities,
income areas.
including low- and moderate-
The purpose of the law is to require the
financial supervisory agencies to use their supervisory
authority to encourage institutions to help meet the credit
.needs of the local communities, consistent with safe and sound
practices, but provides no guidance on how this is to be done.
It does not explain how a financial institution's community is
determined, how to measure credit needs, how to define low- and
moderate-income communities, or what constitutes satisfactory
compliance.
The joint regulations adopted by the four agencies in
1978 reflected several principles that thus far have guided the
administration of the CRA— that the agencies should try to avoid
the possibility of credit allocation, that institutions in
5
different communities can approach the CRA in a variety of ways,
and, thus, that it is important to maintain maximum flexibility.
To deal with the lack of standards in the law, the regulation
set out 12 CRA performance factors the agencies would use to
assess financial institutions' CRA records.
(Attachment A)
The agencies regularly assess a bank's record of
helping to meet local credit needs through examinations.
This
covers technical compliance with the regulation and a
qualitative evaluation of an institution's performance.1
The
agencies have measured performance by using several factors
including activities to ascertain the credit needs of the
community; marketing activities to make the community aware of
the credit services offered; the geographic distribution of
credit; evidence of illegal credit practices; and the
participation in community development programs.
Increased focus on CRA
In recent years CRA has gained considerable attention.
Cutbacks in federal, state, and local government programs to
promote economic development have shifted the focus to
public/private partnerships as a source of funding.
The
potential of banks to play a bigger role in lending to low- and
moderate-income areas has gained greater recognition as a result
1
The present regulation imposes a few specific technical requirements.
Institutions must formulate and adopt a public "CRA statement" delineating the
communities they serve and setting out certain other information. Institutions
must maintain a file of public written comments about the institution's CRA
performance, and publicly display a CRA notice indicating the availability of
the institution's CRA statement.
6
of the shift.
In 1989 the Congress mandated that CRA
evaluations be made public, thus highlighting the activities (or
lack of them) by institutions.
Over the years, community groups
have learned to use the protest process to good advantage, and
have been aggressive in raising CRA issues in times of
substantial applications activity.
The publication of more
detailed HMDA data beginning in 1991 has raised questions about
the evenhandedness of lending decisions and the service to
poorer communities.
This increased interest in CRA has been accompanied by
considerable criticism of the agencies' approach to its
administration.
The industry complains of too much emphasis on
paperwork in a process-oriented evaluation system, and about the
lack of clear standards.
Small banks object to the burden of
compliance, and argue that CRA is unnecessary given the natural
orientation of community banks.
Community groups allege that
enforcement has been weak, citing the few applications denied on
CRA grounds and the fact that about 90 percent of institutions
receive a "satisfactory" or better examination rating.
Over the years the agencies have sought to deal with
these issues by providing increasing guidance about compliance
standards; downplaying paperwork requirements to clarify that
results, not process, determine an institution's evaluation;
instructing examiners to be sensitive to the special burdens on
small institutions and improving enforcement techniques.
Nevertheless, both institutions and community groups have
7
remained very vocal about their concerns, and the agencies have
repeatedly been questioned on their records before congressional
hearings.
President's request
Reacting to these concerns, in July 1993, President
Clinton called for reform by the agencies.
He asked them to
develop more objective, performance-based assessment standards
that minimize compliance burden while improving performance.
He
wanted these changes carried out through regulatory means, with
a target date of January 1, 1994.
To assist in the drafting of a new CRA regulation, the
agencies first held two private meetings, one with industry
groups and the other with community groups, to provide
participants an opportunity for a frank discussion of the
problems.
Next, they held a series of public meetings around
the country to gather further information on how best to rework
the regulation.2
More than 250 witnesses
(including bankers,
local government officials, community and consumer groups, small
business owners, and individuals) provided oral or written
statements at the hearings.
While numerous issues were raised,
some common themes emerged.
Most commenters urged the agencies to adopt a CRA
evaluation system that is more performance-based.
Financial
2 Public meetings were held in Washington, D.C., San Antonio, Los Angeles,
Albuquerque, New York, Henderson (North Carolina), and Chicago between August
10 and September 22.
»
8
institutions expressed great frustration that it is impossible
to know,
in advance, what types and amounts of performance will
produce a particular rating.
Institutions and community
representatives faulted the agencies for lack of consistency in
• , e Cj
»h
^A reviews.
Many witnesses, however, rejected the idea
that a strict formula should be used on a national basis.
Witnesses believed that such an approach could lead to the
establishment of "ceilings" on lending activities aimed at lowand moderate-income areas, or could result in credit allocation.
Witnesses also noted that institutions may not be
receiving enough credit for investment activities, such as
investments in other community development lenders.
Wholesale
banks have suggested that such activities by them should be
given great weight because of their unique business strategy and
product offerings and their difficulty of complying with CRA
through more traditional local retail lending.
Most community organizations and many local government
officials pointed to a need to collect more data from insti
tutions,
similar to that collected for home mortgage-related
loans under the Home Mortgage Disclosure Act.
Witnesses noted
that lack of data makes it extremely difficult for the public
(and the agencies) objectively to evaluate an institution's
entire performance.
Community group witnesses urged the
collection of data from institutions on their small business
loans, in particular arguing the need to show geographic
distribution.
«
Some also wanted information about the race or
9
ethnicity of the borrower.
Some witnesses believed that data
should be collected on all consumer loans, including automobile,
credit card, and personal loans.
Other witnesses, particularly
those representing small institutions, expressed concern about
the burden of any new data collection requirements, and
questioned whether the benefit of collecting the data would
outweigh the costs.
In general, small institutions criticized
the costs imposed by the current law, and urged the agencies to
reduce the documentation requirements.
Several witnesses, particularly from the industry,
stated that the regulators needed to provide incentives for
outstanding performance.
Witnesses outside the industry,
however, were generally opposed to the creation of a "safe
harbor" from CRA protests based on ratings assigned by the
regulatory agencies.
Other witnesses urged the agencies to
permit more public input into the evaluation process.
A number of witnesses believed that institutions should
be able to develop "strategic plans" listing specific goals to
meet CRA objectives.
Under this approach, agencies would review
plans of institutions and, if approved, the institution's CRA
performance would later be measured against how well it achieved
the goals set out in the plan.
Overall, almost all the witnesses called for change,
although there were many differences regarding the specifics.
I
10
Consumer Advisory Council
In October, the Board's Consumer Advisory Council (CAC)
discussed the CRA reform project.
The Council identified
thirteen points that it encouraged the Board to consider in
evaluating changes to the CRA.
Among other items, the Council
recommended that institutions develop a CRA business plan
against which the institution's performance could be measured,
that a five-tiered rating system (rather than the current four
tiered system mandated by the statute) be developed, and that
significant statistical imbalances in an institution's lending
pattern should result in a less-than-satisfactory rating.
(A
complete list of the Council's recommendations is Attachment B.)
II.
Proposed Regulation
Performance Standards
The agencies have long been concerned that any greater
degree of specificity than is currently contained in the CRA
regulations and policy statements would result in credit
allocation, which the Act's legislative history clearly
indicates was not contemplated by the law.
But as indicated,
both lenders and community advocates contend that the assessment
efforts of the agencies has been too driven by concerns about
process and documentation rather than results.
Balancing these
competing concerns has been the chief challenge of this reform
effort.
11
This proposal attempts to address these concerns, and
strike this balance, by focusing the agencies' assessment
efforts on three critical elements of lenders' efforts to serve
low- and moderate-income communities.
lending, services, and investments.
Those elements are
However, in line with the
CRA's primary focus, the base element of the assessment would bethe lending factor.
The service and investment tests would
serve only to modify the assessment a retail lender received
under the lending test.
Furthermore, the rating levels achieved by application
of the three tests could be adjusted by the examiner to take
account of certain other factors, such as the lender's loans to
community development organizations that were not otherwise
reflected in the data used to make the basic calculation.
And
the results of applying this test would only be presumptive,
subject to rebuttal by the lender if it could show, for example,
that the results obtained by application of the standard test
was not truly reflective of its lending or did not adequately
take into account particular demographic or economic factors in
its market.
Consequently, although this formulation seeks to
move the CRA assessment system toward a more concrete standard,
a great deal of examiner judgment would remain.
Lending test
Under this proposal, for the first time, the regulation
would stipulate a lending performance standard as a baseline for
the ultimate CRA rating.
That standard would be the degree to
12
which the lender's share of reported loans made in low- and
moderate-income areas of its service area compares, favorably or
unfavorably, to its share of reported loans in the other parts
of its service area.
In other words, the agencies will expect a
lender to achieve lending results in low- and moderate-income
areas (measured by dollar volume or number of loans), when
compared to its competitors, that equal or exceed the results it
attains competitively in the other parts of its service area.3
Words, not numbers are used to define the various levels of
performance— e.g. lending in low- and moderate-income areas that
"significantly exceeds" the lender's share in the other parts of
its service area qualifies for an "outstanding" rating.
In addition, the lender's overall pattern of lending
will be reviewed to evaluate the distribution of its loans
throughout the low- and moderate-income areas of its service
area, or to evaluate the percentage of its loans that go to such
areas.
If, for example, the lender attains an outstanding level
of performance on the first leg of the assessment (meaning it is
lending significantly more, on a percentage basis, in the lowand moderate-income areas than it is in the other parts of its
service areas) but fails to achieve a "good" distribution of its
loans throughout the low- and moderate-income areas of its
The measurement of "market share" is actually a measurement of the
comparative share of loans by those who must report under the scheme.
Consequently, those who are not subject to CRA (e.g. consumer finance companies)
or are below the threshold of reporting (e.g. independent banks under $250
million assets) are not counted in the calculation except to the extent they
already file HMDA data.
This may mean that in some localities much of the
"market" for some types of lending will not be counted.
13
community, or fails to make a significant percentage of its own
loans in those parts of its service areas, its rating will be
lowered to the appropriate level.
The lending test will be run separately for the major
categories of reportable loans— small business, consumer and
home mortgage.
In addition, the tests will be made separately
for the dollar volume and numbers of loans.
A composite rating
will be determined taking into account all these calculations.
At the institution's option, credit will also be given on a
proportionate basis for loans made by third parties in whom the
lender invests.
(See Attachment C for a visual representation
of the scheme.)
Service test
Once a conclusion is reached under the lending test,
the examiner will look at the service test.
The service test
focuses primarily on the degree to which the lender's branches
are located in, or are "easily accessible" to, low- and
moderate-income portions of the service areas.
The proposal
singles out branch location as a critical element because
branches are an important gateway to the lender's credit and
other services.
The proposal contains a fairly simple, but undefined,
test for achieving a presumptive rating under the service test.
A lender who has a "substantial percentage" of its branches in,
or easily accessible to, low- and moderate-income areas will be
given an "outstanding" rating, whereas a lender which has "very
14
few, if any" branches so located would receive a "substantial
noncompliance" rating.
There would be three levels of ratings,
variously described, in between.
Once a conclusion about the
rating is reached by applying these descriptive terms to the
lender's branch system, necessary adjustments can be made.
For
example, an adjustment may be made to reflect a conclusion that
the branches, no matter where situated, do not truly serve lowand moderate-income areas, or to reflect the fact that the
lender offers other services, such as low cost checking accounts
or government check cashing.
The examiner would make a judgment
whether these factors are such as to warrant adjusting the
service test rating either downward or upward, respectively.
An "outstanding" rating for the service test will
justify an increase of one level in the base rating achieved by
a retail lender under the lending test (or a wholesale or
special purpose lender under the investment test), and a
"substantial noncompliance" rating on the service test will
justify a decrease in the base rating by one level.
Any rating
on the service test between "outstanding" and "substantial
noncompliance" will have no effect on the overall rating.
The
system was constructed in this manner in order to assure that
the lending rating maintains its primacy, but to allow for an
adjustment of the overall rating to reflect particularly good or
bad performance in the service area.
As is the case with the lending test, the various
rating levels are defined descriptively, and not through the use
15
of hard and fast quantitative criteria.
presumptive and subject to rebuttal.
The rating is
Once again, this leaves
room for flexibility and the ability to make adjustments.
(See Attachment D for more detail on the scheme.)
Investment test
The third major leg of the assessment system is the
investment test.
Many lenders' primary business is not the type
of retail lending that is the mainstay of CRA, yet they have
been able to address their CRA responsibilities through
investments in entities that do that sort of lending or that
facilitate it by others.
These third parties range from a
wholly-owned community development corporation subsidiary of a
bank to a multi-lender low-income housing lending consortium.
These parties would include the mortgage or consumer finance
subsidiary of a bank or a bank holding company if the financial
institution chooses to organize itself to make mortgage or
consumer loans in low- or moderate-income neighborhoods through
such an entity.
The purpose of this leg of the assessment
system is to clearly indicate that activities of this type will
be evaluated favorably in the examination process and can help
raise the lender's overall rating.
In fact, for wholesale and special purpose banks
(such
as credit card banks) this test, rather than the lending test,
will be the baseline rating for the organization.
The rating
was structured in this fashion to take account of the fact that
these types of entities do not typically compete for local
16
business in the types of loans.
Furthermore, for purposes of
calculating this part of the rating, investments by wholesale
and special purpose banks anywhere in the country would be
considered favorably.
This provision reflects the notion that
such lenders typically have a larger geographic cast to their
business and, therefore, cannot be said to have a local
community in the usual sense.
To get investment credit, retail banks, however, must
make at least some of their investments in entities that serve
their local communities.
Retail banks can also choose to have
the loans made by the third parties in which they have made an
investment counted toward the lending portion of their
assessment,
instead of toward a separate investment rating.
The
proposal contains provisions to avoid double counting of the
loans in such cases, and for allocating the loans among various
investors.
The rating for this leg of the assessment is based on a
comparison of the amount of such investments to the lender's
risk-based capital.
For example, an "outstanding" rating will
be given for a lender who has made such investments in an amount
that is "substantial" when compared to its risk-based capital.
A "substantial noncompliance" rating will be given if the lender
has "devoted very little, if any, capital" to such investments.
A retail lender that achieves an "outstanding" rating on the
investment test will be given a two level increase in the rating
it obtained under the lending test.
A lender that achieves a
17
"high satisfactory" rating for its investments would be given a
one level increase of the rating it achieved on the lending
test.
(See Attachment E.)
Composite rating
The overall rating for an institution will depend on a
combination of many factors— performance on the lending test for
each category of reportable loans, adjustments possible under
the service and investment tests, and the possibility of
judgmental overrides to any of the factors to take into account
special aspects of the institution or its market.
Moreover,
this rating will be determined on a service area by service area
basis for each locality visited by examiners as they sample the
institution's performance.4
Each service area will be given a
separate rating, and the examiners will also produce a composite
rating for the institution as a whole.
One public evaluation
document will be produced for the entire institution reflecting
each of the service areas the examination encompasses.
(See
Attachment F for a visual representation of this process.)
Data Collection
Perhaps the most significant new feature of this
proposal is the requirement that lenders with more than $250
million in assets (or that are subsidiaries of holding companies
with more than $250 million in bank or thrift assets) must
A
A "service area" is the effective lending territory where the
preponderance of loans are made. It is expected to be broad enough to include
low- and moderate-income areas and to not arbitrarily exclude low- and moderate
areas. Many institutions will have multiple service areas.
18
collect, and report to their supervisory agency, summary data
concerning the number and amount of mortgage, small business,
and consumer loans (excluding motor vehicle, credit card and
other types of open-end credit) and applications for such loans.
The data would indicate the geographic location of the loans and
applications (e.g., by census tract), the number of such loans
made, and the dollar volume of the loans in each geographic
area.
The summary data would have to be reported to the
supervisory agency by January 31 of the year following the year
for which it is collected.
The data thus collected would be
used to compute the "market share" calculations for purposes of
the lending test, discussed above.
The data would also be
disclosed to the public.
The data will include a number of features.
For each
category of loans (i.e., mortgages, small business, and consumer
loans) the location of the loan or application must be
specified.
Small business loans will be divided into four
levels— those to businesses with under $250,000 in gross
revenues, those with between $250,000 and $1 million, those with
over $1 million and under $10 million, and,with respect to
manufacturing concerns with fewer than 500 employees, at all
levels of revenue including in excess of $10 million.
For each
category of loans, the lender would be required to report, in
addition to the location of the loan, the number and amount of
loans made, the number and amount of loans purchased, the number
of applications, and the number of denials.
Unlike HMDA, no
19
data on the race, income or gender of individual applicants
would be required.
Small lenders
This proposal would not exempt small lenders from a
CRA assessment but will provide a streamlined review process.
Banks and thrifts under $250 million in assets (or that are
subsidiaries of holding companies that have less than $250
million of bank and thrift assets) would undergo a more limited
review, and, perhaps most significantly, would not have to
collect the lending data discussed in the preceding section.
This proposal would call for a presumptive rating of
"satisfactory" for a small lender that (a) has a reasonable loan
to deposit ratio (60 percent, taking into account seasonal
variations,
is presumed to be reasonable) given its size, its
financial condition, and the credit needs of its community;
makes the majority of its loans in its service area;
(b)
(c) has a
"good" loan mix (i.e., makes loans of all types to customers
across economic lines); (d) has no bona fide complaints from
community members; and (e) since its last examination has not
been involved in discriminatory lending conduct.
Applying the
60 percent loan to deposit test, the $250 million cut off would
mean that approximately 52 percent of banks (about 4,430
institutions) would have the benefit of the small bank
provisions.
The small institution may elect to try for a higher
rating under the proposal, and would be given a closer review
20
for that purpose. In addition, small banks or thrifts that fail
the basic test will be given a closer look, similar to the type
of review given to larger banks, but less intrusive and without
the data collection, to determine their rating.
(See
Attachment G.)
Under the proposal many smaller lenders will not be
subjected to a full-scope CRA examination (although examiners
will still have to conduct a review to determine whether some of
the criteria are m e t ) , which should reduce their burden of
addressing their responsibilities
under
this law.
At the same
time, the proposal is designed to assure that sufficient
supervisory incentive remains for
small
lenders to continue to
make the kinds of loans needed in
their
communities.
CRA plan
As an alternative to receiving a review of its
performance under the general tests for lending, services, and
investments, the proposal would allow the lender to opt to have
its CRA program reviewed in advance by submitting it to its
regulator for approval.
public comment.
The plan must have been offered for
In order to receive approval, the plan must
contain measurable performance factors that, if met, would
garner at least a satisfactory rating if judged under the
general tests for lending, services, and investments.
Performance under a plan would not relieve a lender from its
responsibility to collect and report data on its lending.
If
the lender failed to meet the preponderance of measurable goals
21
in its plan, it would be evaluated under the general tests in
the regulation.
(See Attachment H.)
Enforcement
Currently, insured depository institutions that do not
anticipate being involved in the expansion proposals may have
felt some safety in providing limited attention to CRA
performance because of uncertainties about whether poor ratings
have any supervisory consequence outside of the regulatory
application process.
The proposal seeks to address this by
defining a legal obligation that insured depository institutions
must help meet the credit needs of the community and by
establishing that low CRA performance ratings are a violation of
the regulation.
The proposal would, by regulation, deem
institutions that receive a substantial noncompliance rating to
be in violation of the law, and, therefore, subject to the full
enforcement process.
The proposal also would authorize
enforcement agencies to subject institutions with a "needs to
improve" rating to enforcement action.5
This new approach is based on the admonition in the
Community Reinvestment Act that the agencies encourage all
insured depository institutions to help meet the credit needs of
the community.
The new proposal would achieve this result by,
in effect, requiring all insured depository institutions to
achieve at least a satisfactory CRA performance rating.
Two ratings of "needs to improve" will trigger the enforcement
mechanisms applicable to the "substantial noncompliance" category.
22
The proposal also stipulates with more specificity than
current regulations how CRA ratings will be considered in the
applications process.
In particular, absent other information
regarding CRA performance, the proposal states that an
"outstanding" rating would be given extra weight in reviewing
applications; a "satisfactory" rating would generally be
consistent with approval of the proposal; a "needs to improve"
rating would generally be an adverse factor and, absent
demonstrated improvement in the bank's CRA performance or other
countervailing factors, would result in denial or conditional
approval of the application; and a "substantial noncompliance"
rating generally would be so adverse a finding on the CRA aspect
of the application as to result in denial of the application.
Ill.
Major Issues
The proposed regulation,
if implemented, would move the
industry and the agencies in the direction of a more objective
and data-based CRA evaluation in important ways.
However, given
the ground it attempts to cover, the proposal inevitably raises
a number of important problems, the most critical of which are
discussed below.
Assessment criteria
The structure of the assessment criteria causes a
number of concerns.
First, the market test, comparing the
bank's market share in low- and moderate-income areas with its
share in the other parts of its service area, though
23
conceptually straight-forward, causes a number of practical
problems.
For example, the so-called "market share" can be
calculated only in reference to the loans made in the service
area by other lenders that are required to report their loans.
This will not include loans by non-depositories (e.g., consumer
finance companies) or by small depositories (under $250 million
in assets) except to the extent they are already reporting HMDA
data.6
In many cities, the percentage of banks who will be
included in the comparison for other than home lending is low.7
This means that there is a considerable risk of anomalies
arising from the calculation.
For example, a large reporting bank that operates in a
town that otherwise only has small non-reporting banks and
thrifts, will never be able to exceed its "market share" in the
upper income areas in the low- and moderate-income areas
because, by definition,
its market share in the upper income
areas and the low- and moderate-income areas are both 100
percent.
Consequently, the only way this institution's efforts
under the lending test can go beyond the satisfactory level is
by the examiner overriding the scheme.
It seems very likely
that numerous such anomalies will arise in applying these tests,
6 Depository institutions with offices in MSAs that have more than §10
million in assets, and mortgage companies that make more than 100 loans, muBt
report HMDA data.
7
In a number of MSAs there will be four or fewer reporters— e.g. cities
like Albany, GA., Albuquerque, N.M., Cheyenne, WY., Gainesville, FL., Green Bay,
WI •, Las Cruces, N.M., Mansfield, OH., Midland, TX., Owensboro, KY., and
Rochester, MN.
24
requiring the examiners to adjust for them.
The result may be
heavy data collection and complex calculations that are
sometimes misleading and may require the subjective judgment
that is the source of the current CRA complaints.
Second, the test relies on comparing one institution's
relative performance with others.
Since the activities of all
institutions are constantly changing, the test will have a fluid
quality.
If the goal is to allow institutions to know with some
certainty how they will be evaluated, the "after the fact"
nature of the scheme may not satisfy this objective very well.
Moreover, the competitive evaluation approach may encourage
attempts to "game" the system, for example, by large banks
underpricing products to capture market share.
Third, as indicated by the attached diagrams of the
rating process,
it is extremely complicated.
It seems highly
likely that administering the system will require heavy staffing
both within institutions and the agencies.
Many interpretative
issues will undoubtedly arise raising the prospect of the need
for significant amounts of regulatory material.
Fourth, the calculations are entirely driven by
geographic considerations, except to the extent they are
overridden by examiner judgment,
(for example, if the bank
wishes to provide data on loans to low- and moderate-income
individuals who do not reside in these areas.)
Thus, loans to
very well off borrowers in lower income census tracts (for
example, to purchase luxury condominiums) will receive credit,
25
while lending to low-income individuals in higher income tracts
will not be recognized in the basic scheme.
Fifth, the scheme will analyze each institution's
performance within what may, in many cases, be its own unique
"service area."
This will require calculations of "market"
percentages for various types of loans made by others whose
service areas partially, but do not completely, overlap the
service area.
The scheme requires two calculations of market
share (one for low/moderate areas and one for other areas) for
comparison but may involve several independent markets that do
not match.
At the extreme, this means that the calculations
either cannot be run or may produce a very unfair result.8
Sixth, the descriptions used to attempt to quantify the
various levels of the rating system also require the examiner to
use judgment in their application, since they are based on
words.9
To avoid allocating credit, no specific numbers or
other criteria have been used to describe the various rating
levels.
Consequently, this proposal may not adequately address
the need for certainty and objectivity that caused this review
to be undertaken in the first place.
It is possible that the
problem of trying to insure consistency will be even more
Q
Assume, for example, that Bank A has 60 percent of the market share in
its non-low/moderate area. Bank B likewise has a 60 percent share of a separate
non-low/moderate area, but A and B share the same low/moderate income area.
Obviously, both cannot even maintain their relative 60 percent share of this
market and one must be downgraded.
9
Examples of key terms of measurement include "significantly exceeds,"
"vast majority," "substantial percentage," "roughly comparable," "significant
amount," "very significant percentage," "insignificant amount," "significantly
less," "very few," "readily accessible to low- and moderate-income geographic."
26
difficult under the new scheme.
If this regulation retains a
great deal of subjectivity and examiner judgment, a fair
question could be raised whether the costs and burdens of
putting the new data collection system in place are justified.
Finally, there are a host of other technical problems
raised by the proposal.
For example, since the investment test
is measured against capital, well capitalized institutions may
be penalized.
Institutions that are less than satisfactory in
lending may be able to "purchase" a satisfactory rating through
investments.
The service test may give accidental credit, for
example, for branches in downtown commercial areas that happen
to be in close proximity to low-income areas.
It is not clear
how a bank under $250 million (or examiners) can know it "makes
a majority of its loans in its service area...to customers
across economic levels" without collecting data.
These and many
other problems are likely to surface in the comment process.
Costs and burdens of data collection
The large data collection effort is probably the
necessary result of any attempt to make the CRA evaluation
process more quantifiable.
Absent data, it is difficult to
envision an evaluation system that would deal directly with the
concerns over lack of specificity and objectivity.
However,
this data collection effort will come at a very large cost, both
to the lenders that have to report it, and to the agencies which
will have to create a system for collecting and reporting the
27
data.
The agencies will need to tabulate the lending done by
each lender in its own particular service area, as well as the
lending in overlapping service areas by those of its competitors
that must also report.
Collecting the data called for by this
proposal will require covered lenders to put in place processes
to collect and accurately report data on a huge volume of
additional data.
Larger institutions (and small firms in larger
organizations) must make available to the supervisory agencies
and the public additional data on the geographic distribution of
their residential, small business and consumer loan applecations, denials, originations and purchases.
To facilitate
compliance, the supervisory agencies would collect the new data
and prepare reports for each institution showing their record
of lending in their community relative to a subset of their
competitors.10
Nearly 3,4 00 institutions would be covered by the new
requirements.
This includes 1,409 large commercial banks, and
1,465 small commercial banks that are part of large
organizations, and about 500 savings and loan associations.
While the regulation seeks to eliminate "unnecessary"
paperwork burdens, much of the present documentation effort may
be an integral part of the effective management of CRA
Covered institutions will have to disclose and report the specific
census tracts, block number areas or counties that comprise their delineated
community.
Data for all reporting lenders who provide credit in these census
tracts would be tabulated in order to calculate the institution's "market
share."
28
compliance, even under the present regulation.
To a significant
extent, then, the new reporting may be a net addition for many
institutions.
With regard to home lending, most large lenders are
already required to collect such data under HMDA; however, many
small institutions that would be covered by the data collection
requirements are not now subject to HMDA.
Among large
independent commercial banks, 1,232 of the 1,409 covered lenders
currently are subject to HMDA.
Thus, 177 large independent
banks would need to begin collecting home lending information.
Among small commercial banks in large holding companies, 671
currently are covered by HMDA, 803 additional small firms would
have to begin collecting data.
Although most covered lenders already collect the
required data through their HMDA reporting efforts, all of them
will have to incur costs to prepare new summary disclosure
reports to convey this information to the public and the
regulatory agencies in the prescribed manner.
To prepare the
new disclosure reports, lenders will have to develop computer
software programs or buy such programs from third parties.
With regard to small business data, currently financial
institutions make publicly available aggregate information on
the number and dollar volume of their outstanding small business
loans by size of loan on the Call Report.
They do not disclose
information about the geographic distribution or disposition of
applications for such loans.
They also do not report their
29
business loans by the characteristics of the small business
(that is, by the size of the business measured in sales revenue
and, for manufacturing firms, by both sales revenue and by
number of employees.)11
The proposed regulation will require
larger organizations (including small banks and thrifts in
larger holding companies) to collect and disclose all of this
information.
The Survey of Terms of Bank Lending indicates that
commercial banks in the aggregate extended 10.53 million small
business loans (including small farm loans) during the period
September 1992 through September 1993.12
As noted, however, not
all commercial banks are covered by the data collection
provisions of the proposed regulation.
If it is assumed that
commercial banks who must report under the proposal extend
roughly the same proportion of small business loans annually as
they currently have outstanding, 6.1 million small business
loans will be covered.13
Small business reporting iB required for four levels of businesses
measured in gross sales, with the highest level taking into account numbers of
employees of manufacturing concerns to whom loans are made.
12
Because of the way commercial and industrial loan information are
collected on the Survey of Terms of Bank Lending, individual draws under an
existing line of credit are counted as separate loans.
13
Data from the Call Reports for commercial banks on outstanding
business loans by size of loan indicates that larger institutions account for
a significant share of all the small business lending done by banks. As of June
30, 1993, large commercial banks (including small banks and thrifts in large
holding companies) had outstanding 69 percent of all the commercial and
industrial loans and
59 percent of all the loans secured by nonfarm
nonresidential properties under $1 million in size. These larger institutions
also accounted for about one-quarter of the farm loans under $1 million.
30
The data collection provisions of the proposed
regulation extend beyond loans and include data on applications,
as well.
No comprehensive information is available to determine
the number of small business loan applications received by
covered banks.
However, a study of small business lending in
the late 1980s found that 86 percent of all applications
submitted by small businesses for commercial and industrial
loans were approved.14
If this is representative, commercial
banks would have to report information on a total of about 7.1
million small business loans annually.
The proposed regulation would require larger
organizations to disclose information about the applications
they receive and the loans they make, for some types of consumer
loans.15
This requirement is new and will impose significant
costs on covered lenders.
The number of consumer loans that
will be disclosed annually is unknown, but may be in the
millions.
As with other aspects of the proposal, an opportunity
for "playing the system" is presented by the selection of some,
but not all, consumer loans for use in the calculations.16
14 "Credit, Banks and Small Business: The United States" by William J.
Dennis and William C. Dunkelberg, July 14, 1988, pp. 21-22.
15 For data collection purposes, consumer loans are those extended to
individuals primarily for personal, family or household purposes other than home
mortgages. Credit card loans, other unsecured open-end credit and motor vehicle
loans are exempt from the disclosure requirements.
16 For example, the lending test includes closed-end personal loans but
not open-end lines of credit even though these products may be close
substitutes.
Under the proposal, a lender would have an incentive to promote
closed-end loans to consumers residing in low- and moderate-income neighborhoods
and open-end lines of credit to consumers from higher income areas. In this way
a lender could get a relatively high market share of closed-end loans in the
lower income areas of its community compared to its overall share of these loans
31
It is very difficult to estimate the cost of the entire
data reporting system.
There is some indication that it could
cost as much as three dollars per loan application to comply
with the data collection requirements of the proposed
regulation.17
Using this figure, it is estimated that in the
aggregate annual compliance costs for covered commercial banks
would be roughly $21 million for the small business portion of
the data collection alone.
The per-item cost for all the data does not take
account of the one-time costs to develop the computer systems to
collect and report the required information.
does not include the agency costs.
And, of course, it^
They currently run about $4
million annually for HMDA and would probably be some multiple of
this for the entire system.
The data collection is to go into effect on July 1,
1994.
Given that the regulation is unlikely to be finalized
until Spring, and institutions will need to set up appropriate
collection and reporting procedures, this may be an unrealistic
date and more lead time may be necessary.
in all other areas of its community and receive a high rating under this portion
of the lending test.
17
This estimate is based on a study of the costs of compliance with HMDA
adjusted for changes in consumer prices since that study was conducted.
The
data collection requirements of the proposed regulation are similar to the data
reporting requirements of HMDA at the time the study was conducted. The study
is old, however, and may not account for developments in automation.
See:
"Analysis of the Home Mortgage Disclosure Act Data from Three Standard
Metropolitan Statistical Areas," JRB Associates, McLean, Virginia, November
1979.
32
Treatment of Small Lenders
This proposal does not exempt small lenders from CRA,
but it seeks to reduce the compliance burdens for small
commercial banks and savings institutions.
Those that meet the
tests (generally, those under $250 million in assets with a 60
percent loan-to-deposit ratio) would be presumed to have a
satisfactory rating.
This would potentially cover about 52
percent of banks and a somewhat larger number of thrifts.
Thus
it removes a very high percentage of institutions from close
supervision.
The sheer numbers of banks and thrifts given this
special, small bank, treatment may make this proposal
unpalatable in a number of quarters, particularly to community
groups.
On the other hand, given the extensive data collection
burden, some rather high cut off may be desirable.
(See
Attachment I for data for various possible small institution
cuts for banks).
Conclusion
As indicated, the proposed system is very far reaching
and represents a dramatic change in approach to CRA.
The staff
foresees many problems with its implementation but believes the
Board should support its airing for public comment.
33
ATTACHMENT A
TWELVE CRA PERFORMANCE FACTORS
The federal supervisory agencies consider the following factors
in assessing an institution's record of performance under the
Community Reinvestment Act:
• Activities conducted by the institution to ascertain the
credit needs of its community, including the extent of the
institution's efforts to communicate with members, of its
community regarding the credit services being provided by the
institution
• The extent of the institution's marketing and special creditrelated programs to make members of the community aware of
the credit services offered by the institution
• The extent of participation by the institution's board of
directors in formulating the institution's policies and
reviewing its performance with respect to the purposes of the
Community Reinvestment Act
• Any practices intended to discourage applications for types
of credit set forth in the institution's CRA statement
• The geographic distribution of the institution's credit
extensions, credit applications, and credit denials
•
Evidence of prohibited discriminatory credit practices or
other illegal credit practices
• The institution's record of opening and closing offices and
providing services at offices
• The institution's participation, including investment, in
local community development and redevelopment projects or
programs
• The institution's origination of residential mortgage loans,
housing rehabilitation loans, home improvement loans, and
small business or small farm loans within its community, or
the purchase of such loans originated in the community
• The institution's participation in government insured,
guaranteed, or subsidized loan programs for housing, small
businesses, or small farms
• The institution's ability to meet various community credit
needs based on its financial condition and size, legal
impediments, local economic conditions, and other factors
• Other factors that, in the supervisory agency's judgment,
reasonably bear upon the extent to which an institution is
helping to meet the credit needs of its entire community.
ATTACHMENT B
Consumer Advisory Council Recommendations
on CRA Reform
•
Evidence of willful discrimination should result in an
automatic "substantial noncompliance" CRA rating.
•
Significant statistical imbalances in institutional lending
patterns should result in a less-than-satisfactory CRA rating.
•
Banks should develop a CRA business plan with quantifiable
performance measures against which their performance is measured
by the regulators.
•
Regulators will determine the value of the CRA plan, based
in part on the amount of community outreach by the bank.
•
CRA performance for specialty or wholesale banks should be
based on the value of their targeted initiatives in low- and
moderate-income and minority communities.
•
CRA performance should be based on the "depth and breadth"
of performance (on market share and variety of services offered.
•
Regulators should meet regularly with community groups.
•
Regulatory should provide advance public notice of CRA
examinations.
•
Regulators should provide feedback from community groups to
the institutions.
•
CRA public evaluations should be available at central data
depositories, where Home Mortgage Disclosure Act data are
currently available.
•
Examiners from all four agencies should have common traininc
and basic experience in all aspects of the examination process.
•
Regulators should create a tiered structure for CRA
examinations that contains more cost-effective requirements for
small community banks.
A five-tiered system of CRA ratings should be created.
RETAIL BANKS:
(go to next page)
ATTACHMENT C
Lending Test
Note: The marfcet Is determ ined by the total amount of lending
In that a r e a by th o se who m ust report u nder CRA regulations
to the Federal financial regulatory ag encie s.
U
J
Ln
RATING SYSTEM
•o*
= O utstanding
LEGEND
= Ratings
"HS" - High Satisfactory
•LS’ -
Low Satisfactory
•Nl" -
N e e d s to Improve
"SN" - Substantial Noncompliance
] * Decisions
ATTACHMENT C(2)
RETAIL BANKS: Lending Test (continued)
ATTACHMENT D
RETAIL BANKS: Service Test
D eterm ine what p e r c e n t a g e ol the b a n k 's b r a n c h e s are
l o cated In (or a r e readily a c c e s s ib l e lo) low-to-m oderale
Income tracts In Its service a r e a .
Is this a
‘substantial"
percentage
of the b a n k 's
branches?
Nn
--,
Is this a
"very significant"
percentage?
Mi
--- y
Is this a
’significant"
percentage?
to
----- ►
Is this an
"Insignificant"
percentage?
No
— H
Very lew,
If any, of the
branches
a r e In t h e s e
tracts.
I
Is th e re o th e r Information that accurately reflects the
b a n k 's service provision to low-to-m oderate Income a r e a s ?
• Bank's reco rd of o pening/closing b r a n c h e s
• O ther b r a n c h e s serving target community
• O ther se rv ic e s promoting credit availability
y
Yes
Provision to rebut
Adjust presu m p tiv e service
rating If applicable
Adjust p resu m ptiv e service rating
RATING SYSTEM
"O"
LEGEND
- O u tsta n d in g
* R a ting s
"HS" « High S atisfactory
•LS" - Low S atisfactory
* D ecisio n s
•Nl" = N e e d s to Improve
"SN" = Substan tial N oncom pliance
o
« C alc ulations
ATTACHMENT D(2)
WHOLESALE/LIMITED PURPOSE: Service Test.
RATING SYSTEM
■O ’
LEGEND
- Outstandin g
= Ratings
"HS" * High Satisfactory
■LS" -
Low Satlslactory
|______3 = Decisions
■Nl" - N e e d s to Improve
CD
■SN" - S ubstantial Noncompliance
Is this a
"substantial"
am o u n t of
the b ank's
se rv ices ?
Is this a
"very significant"
am o u nt?
Nn
.
.
.
Is this a
■significant"
am ount?
Nh
------►
Is this an
‘Insignificant’
am ount?
------ ♦
= Calculations
Very few,
if any,
services.
LJ
co
Do th o se quantitative m e a s u r e s redact the b ank's ■significant" d e g r e e of s e r
vices?
Yes
Yes
■ ...—
...........-
-
— - ..... - •
--r
Provision to rebut
N
o
Yes
Were there financial, economic, or legal limitations im posed on the bank?
Adjust presumptive service
rating if applicable
ATTACHMENT E
INVESTMENT TEST: Wholesale/Limited Purpose (mandatory)
Retail Banks (optional)
Calculate am o un t ol Investm ents In U.S. in:
• Affordable housing, small b u sin e ss, other economic developm ent initiatives
• Community Developm ent Financial Intermediaries
• Loan Consortia affecting poor rural an d low/mod nreas/lndivlduals
• S tate a n d Local Governm ent rev en u e b o n d s aim ed at low-mod community.
Note: The entity or activity supported by the investment
m ust significantly benefit low-and m o d erate Income a r e a s
or p e r s o n s In the retail b an k's se rvice a r e a in order to be
eligible a s a qualified Investment.
Calculate am ou n t of grants In U.S. projects In:
• Affordable housing, small b u sin e ss, other economic developm ent initiatives
• Community Development Financial Intermediaries
• Loan Consortia Impacting poor rural a n d urban a r e a s
• S tate a n d Local Governm ent rev en u e b o n d s aim ed at low-mod community.
ui
Are Investm ents especially creative or
m eeting special n e e d s ?
Calculate Total qualified Investm ents a n d grants
No
Divide by total risk-based capital to determ ine p e rcen tag e
Is ratio a
"substantial"
Investment?
-
O utstand in g
Is ratio a
"very significant"
Investment?
LEGEND
RATING SYSTEM
•0 *
Nto
(M )
- Ratings
■HS" « High Satisfactory
*LS" - Low Satisfactory
•N r
^
m Decisions
^
> Calculations
- N e e d s to Improve
‘SN* * Substantial Noncompliance
Nto
Is ratio a
"significant"
Investm ent?
No
Is ratio a
"insignificant"
Investment?
%
Little, If any,
Investments.
ATTACHMENT F
RETAIL BANK: Composite Rating
If Investment Test w as con d ucted
w a s rating « Outstanding?
No
No
"r
If Investment Test was conducted
w a s rating = Highly Satisfactory?
Yes
evei^)
^ nIncrease B ase Rating by one level
cree
No
Does ban k p a s s
discrimination criteria
a s estab lish ed In
Regulation?
No
W as Service Rating = "SN"
O
Yes
jeveT)
D ecre
(^Decreia s e B a se Rating by one level
Is rating now « ‘NT?
Yes
Did bank receive "N f or less
In last two ex am s ?
LEGEND
RATING SYSTEM
0*
■
O utstanding
» Ratings
HS’ m High Satisfactory
LS' - Low Satisfactory
Nr
» Decisions
- N e e d s to Improve
SN’ m Substantial Noncompliance
<
o
• Calculations
Note: "HS" an d -LS" b eco m e
"S" In final com posite rating.
Yes
((
C om posite'
•>(( Rating
= "SN"
ATTACHMENT F(2)
WHOLESALE/LIMITED PURPOSE: Composite Rating
LEGEND
RATING SYSTEM
* 0’
> O utstanding
(())
■ Ratings
•H S ' - High Satisfactory
*LS* « Low Satisfactory
]
» Decisions
*NP - N e e d s to Improve
•S fT - Sub stan tial Noncompliance
* Calculations
Nolo: "HS" an d "LS" b eco m e
■S" In linal com posite rating.
ATTACHMENT G
SMALL BANKS: Independent Banks with less than $250 million and subsidiaries
of holding companies with assets less than $250.
LEGEND
I
C
| = Decisions
D
= Calculations
CRA PLAN
ATTACHMENT H
Wholesale/Limited p u r p o s e b an k
Investment and Service Tests
Retail Bank
Lending and Service Tests
Small Bank
Streamlined Test
RATING SYSTEM
'O '
LEGEND
= O u tsta n d ing
= Ratin g s
’HS" = High Satisfactory
"LS" = Low S atisfactory
|
| = D ecision s
'N l“ = N e e d s lo Improve
‘SN “ = Substnntinl Noncom plianco
= Cnlciilolions
ATTACHMENT I
S m a l l H a n k s T h a t W o u l d He S u b j e c t to S t r e a m l i n e d C R A R e v i e w at V a r i o u s L o a n to D e p o s i t R a t i o s
L o a n - t o - D e p o s i t R ati o (L D R )
Mure than 4 0 % I.DR
No.
or
b an ks
Perc ent
or
b an k s
P ercen t o r
assets o r
gro u p
M o r e tha n 7 0 % L D R
No.
or
ban k s
Percent
or
b an k s
P e rc e n t o f
assets o r
g ro u p
No.
or
banks
Percen t
or
banks
Perc ent o r
assets o r
g ro u p
Number
o f B anks
No.
of
b an k s
Percent
or
banks
U nd e r $ 5 0 million:
4940
4167
84.4
85.4
3431
69.5
70 .6
2395
48.5
50.1
1251
25.3
26.5
U nd e r S I 0 0 million:
7235
6169
85.3
86.5
5133
70.9
72.7
3659
50.6
52.9
1984
27.4
29.5
U nd e r $ 1 5 0 million:
8050
6871
85.4
86.4
5747
71.4
73.5
4 1 10
51.1
5 3.6
2246
27.9
30.3
U n d e r $ 2 0 0 million:
8404
7177
85.4
86.5
6016
7 1 .6
73 .8
43 24
51.5
54.5
2384
28.4
31.4
U n d e r $ 2 5 0 million:
8580
7333
85.5
86.6
6153
71.7
74 .2
4430
51.6
55 .0
2440
28.4
31.5
Size o f Bank
(Assets)
Pcrceni u f
ass ets o r
g ro u p
M o re than 6 0 % L D R
M ore than 5 0 % L D R
So ur ce : R e p o r t o f I n c o m e and C o n d i ti o n , J u n e 1993. D o m e s t i c da t a fo r in sured c o m m e r c i a l banks. T h i s table i n c l u d e s o n l y i n d e p e n d e n t b a n k s
with assets u n d e r $ 2 5 0 m i ll io n e x c e p t t h o s e in h o l d i n g c o m p a n i e s with as se ts o v e r $ 2 5 0 mi llion.
@FedFRASER