Full text of Federal Reserve Bank of New York Circulars : 10629. Community Reinvestment

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FEDERAL RESERVE BANK
OF NEW YORK
No. 10629 ~1
[ Circular
March 17, 1993

COMMUNITY REINVESTMENT
Revised Interagency Questions and Answers

To All Depository Institutions in the Second Federal
Reserve District, and Others Concerned:

The following is from the text of a statement issued by the Federal Financial Institutions
Examination Council announcing revisions to its Interagency Questions and Answers Regarding
Community Reinvestment:
T h e C o n su m er C o m p lia n ce Task F orce o f th e F ed eral F in a n cia l In stitu tio n s E x a m in a tio n C o u n c il
(F F IE C ) h as ad op ted revised In teragen cy Q u e stio n s and A n sw e r s R egard in g C o m m u n ity R ein v estm en t.
To h elp fin a n c ia l in stitu tio n s m eet th eir r e sp o n sib ilitie s und er th e C o m m u n ity R e in v e stm e n t A c t (C R A )
and to in c r e a se p u b lic u nderstanding o f th e regu lation s and exa m in a tio n p ro ced u res, th e sta ffs o f th e
F ed eral R e se r v e B oard , the F ederal D e p o sit Insu ran ce C orporation , th e O ffic e o f T h rift S u p e r v isio n ,
and th e O ffic e o f th e C om ptroller o f th e C u rren cy h ave prepared an sw ers to th e m o st c o m m o n ly ask ed
q u e stio n s ab ou t c o m m u n ity rein vestm en t. T h e Q u e stio n s and A n sw e r s sh ou ld n ot b e regard ed as o ffic ia l
interpretations. T h eir p u rp ose is to p rovid e u se fu l g u id a n c e to a g e n c y p e r so n n e l, fin a n c ia l in stitu tio n s
and th e p u b lic. T h e d o cu m en t in c lu d e s four n ew q u estio n s, w h ich ad d ress th e follow in g:
•

T h e a g e n c ie s’ em p h a sis on len d in g and in v estm en t rather than d o cu m en ta tio n ( 2 3 );

•

State C R A p erform an ce evalu ation s and th e p ublic file (1 3 );

•

O u tsid e a c tiv itie s and C R A p erfo rm a n ce (2 2 ); and

•

In stitu tion s’ targetin g sp e c ific eth n ic grou p s and C R A c o n sid era tio n s (5 ).
T h e Q u e stio n s and A n sw ers are n o w o rg a n ized b y su b ject m atter w ith th e p r e v io u sly a ssig n e d

n u m b ers ap p earin g in paren th eses. Q u e stio n s and an sw ers p r ev io u sly n u m b ered 4 and 5 w ere d eleted
b e c a u se th ey w ere b a sica lly a reiteration o f th e regu lation , and th o se p r e v io u sly n u m b ered 11 and 1 9
w ere d e le te d b e c a u se oth er q u estio n s and an sw ers ad d ress th e sa m e issu e s. O th er m in o r m o d ific a tio n s
w ere m a d e as n e c e ss a r y to im p rove clarity.

Printed on the following pages is a revised set of questions and answers on community
reinvestment, reprinted from the F ederal R e g iste r of February 19, 1993; the previous set was sent
to you with our Circular No. 10530, dated April 16, 1992. Questions on community reinvestment
may be directed to our community affairs staff (Tel. No. 212-720-5921), or to one of the agencies
listed on the next page.







Board of Governors of the Federal Reserve System

— Division of Consumer and Community Affairs
Tel. No. (202) 452-2631
Federal Deposit Insurance C orporation

— Office of Consumer Affairs
Tel. No. (202) 898-3536
— Division of Special Supervision
Tel. No. (202) 898-7155
Office of T h rift Supervision

— Specialized Programs
Tel. No. (202) 906-6000

Office of the Com ptroller of the C urrency

— Compliance Management
Tel. No. (202) 874-4446

E.

G erald C orrigan,

President.

A Guide to
Regulation CC
Compliance




Determining Funds Availability
R e g u la tio n C C id e n tifie s w h e n v a rio u s d e p o sits
m u st b e m a d e a v a ila b le to y o u r c u sto m e r s, m ea su red

W h e n ite m s 1, 4 , 5 , 6 , or 7 are d e p o site d at o n e
o f y o u r A T M s rather than in p erson , y o u m u st m ak e
the fu n d s a v a ila b le b y th e s e c o n d b u s in e ss d ay. A ll
d e p o sits, c a sh or c h e c k , m a d e at an A T M that y o u

by b u s in e s s d a y s fo llo w in g th e b a n k in g d a y o n w h ic h

d o n o t o w n (a “n on p rop rietary” A T M ) m u st b e m a d e

the d e p o s it is m ad e. R e g u la tio n C C d e fin e s b u sin e ss

a v a ila b le b y th e fifth b u sin e ss day.

T h e six c a te g o r ie s o f d e p o sits e lig ib le to b e h e ld
fo r e x c e p tio n purp oses:
•

stitu tion m u st m a k e th e first $ 5 , 0 0 0 o f th e d e p o sit

F or d e p o site d c h e c k s that d o n ot r e c e iv e next-

the b ank's c u t- o ff h o u r) w h e n y o u r in stitu tio n is o p e n
for su b sta n tia lly all tra n sa ctio n s. W h e n th e n u m b er o f

m u st m ak e fu n d s a v a ila b le in a c c o r d a n c e w ith a

d a y s to fu n d s a v a ila b ility is in d ic a te d in th is b ro ­

s c h e d u le c o n ta in e d in R e g u la tio n C C . T h at sc h e d u le

chure, it is th e m a x im u m tim e lim it fo r m a k in g fu n d s

va ries d e p e n d in g on w h e th e r th e c h e c k is c o n sid e r e d

a v a ila b le. K e e p in m in d that y o u r in stitu tio n m a y p ro­

“local”

v id e earlier a v a ila b ility o f fu n d s i f it c h o o s e s .

•

d e p o sit

• Redeposited checks

m en t or b e c a u se it w a s p o std a ted , in w h ic h c a s e it

“local”

A c h e c k is c o n sid e r e d

fic ie n c y has b e e n corrected .

i f yo u r in stitu tio n
•

that are

o f d e p o sit.

Electronic payments

“nonlocal”

A c h e c k is c o n sid e r e d

in g r e g io n as the p a y in g in stitu tion . F u n d s m u st
b e m a d e a v a ila b le b y th e fifth b u sin e ss d ay f o l­

p o s ite d ) w h e n y o u r in stitu tio n h as r e c e iv e d b oth

lo w in g th e d ay o f d e p o sit.

or w o u ld h a v e had a n e g a tiv e b a la n c e if
c h e c k s and c h a r g e s had b e e n paid; or
2 . O n tw o or m o re b a n k in g d a y s in th e p r e v io u s

p a y m e n t in c o lle c te d fu n d s and in fo r m a tio n o n the

But remember — n o

a c c o u n t and th e a m o u n t to b e cred ited .
3.

United States Treasury checks

six m o n th s th e a c c o u n t b a la n c e w a s n e g a tiv e

m atter w h e th e r th e c h e c k

in th e a m o u n t o f $ 5 , 0 0 0 or m ore, or w o u ld

is lo c a l or n o n lo c a l, th e first $ 1 0 0 o f the d e p o sit
d e p o site d in an

a c c o u n t h e ld b y a p a y e e o f th e c h e c k . U n lik e th e
r e m a in in g ite m s w h ic h req u ire d e p o sits to b e m a d e

h a v e b e e n h ad a ll c h e c k s and c h a r g e s b een

w h ic h is n ot alread y su b je c t to n ext-d ay a v a ila b ility

p aid.

m u st b e m a d e a v a ila b le on th e first b u sin e ss d ay f o l­
•

lo w in g th e d ay o f d e p o sit.

in p erso n , T reasu ry c h e c k s d e p o site d at an A T M
o w n e d b y y o u r in stitu tio n still r e c e iv e n ex t-d a y

4.

T h ere are tw o m in o r e x c e p tio n s to th e tw o- and

U.S. Postal Service money orders

p e r so n to o n e o f y o u r e m p lo y e e s and in to an a c ­
c o u n t h e ld b y a p a y e e o f th e ch e c k .

c h e c k s, c h e c k s d ated m o re than 6 m o n th s a g o ,

co n tin e n ta l U .S . and d e la y in g th e a v a ila b ility o f

and c h e c k s that th e p a y in g in stitu tio n h a s in d i­

fu n d s fo r c a sh w ith d r a w a ls b y o n e d ay. F urther

c a te d that it w ill n ot h on or. T h e g en era l rule for

ex p la n a tio n can b e fo u n d in se c tio n 2 2 9 . 1 2 o f

5. Federal Reserve Bank and Federal Home Loan
Bank checks d e p o site d in p erso n to o n e o f y o u r
e m p lo y e e s and in to an a c c o u n t h e ld b y a p a y e e o f
th e c h e c k .

6. State or local government checks

c o u ld d ou b t th e c o lle c tib ility in c lu d e p o std a ted

a v a ila b ility fo r certain c h e c k s d e p o site d o u ts id e the
d e p o site d in

d e p o site d in

p erso n to o n e o f y o u r e m p lo y e e s and in to an a c ­
c o u n t h e ld b y a p a y e e o f th e c h e c k i f y o u r in stitu ­
tio n is in th e sa m e state as th e p a y o r o f th e c h e c k .
(N o te: Y o u m a y req u ire u se o f a sp e c ia l d e p o sit
slip fo r n ext-d ay a v a ila b ility o f th e se c h e c k s .)

d o u b tin g c o lle c tib ility states that there is “th e e x ­

R e g u la tio n C C .

is te n c e o f fa c ts that w o u ld c a u se a w e ll- g r o u n d e d
b e lie f in the m in d o f a r e a so n a b le p e r so n ” that th e

Delaying Funds A vailability

c h e c k is u n c o lle c tib le . Y o u m u st in c lu d e th e rea ­

R e g u la tio n C C p erm its in stitu tio n s to d e la y fo r

in y o u r n o tic e to th e cu sto m er.

a “re a so n a b le p erio d o f tim e ,” the a v a ila b ility o f
fu n d s from certain d e p o sits. D e p o s its o f c a sh and

so n fo r y o u r b e lie f that the c h e c k is u n c o lle c tib le

•

Cashier’s, certified or teller’s checks

d e p o site d

e le c tr o n ic p a y m e n ts are n ot e lig ib le for e x c e p tio n

a v a ila b ility o f the c h e c k s. E x a m p le s o f e m e r ­

ad d ition al b u sin e ss d a y (to ta l o f 2 b u sin e ss d a y s) fo r

g e n c y c o n d itio n s in c lu d e a w ar, natural d isa sters,

c o u n t h e ld b y a p a y e e o f th e c h e c k . (N o te: Y o u

“h o ld ” fu n d s b e y o n d y o u r g en era l a v a ila b ility p e r i­

m a y req u ire u s e o f a s p e c ia l d e p o sit slip fo r next-

o d s, y o u m u st p r o v id e th e c u sto m e r w ith a n o tic e at

Hay a v a ila b ility o f th e se c h e c k s .)

T h e tiid g U H im U ^ g Tr ^ f f i m

8 . Checks drawn on an account held by your insti­
tution

(o n -u s c h e c k s ) i f th e branch or b ra n ch es in ­

v o lv e d are in th e sa m e state or c h e c k - p r o c e ssin g
re g io n .
9 . F or a d e p o sit that c o n ta in s s o m e c h e c k s oth er
than th o s e liste d a b o v e , the

first $100

(o r the

of the
non-“next-day” checks must receive next-day
availability.
a m o u n t o f th e d e p o s it i f it is le s s than $ 1 0 0 )

c o m m u n ic a tio n s m a lfu n c tio n s, and oth er situ a ­

for lo c a l c h e c k s, and 6 a d d itio n a l b u sin e ss d a y s (to ­
tal o f 1 1 ) for n o n lo c a l c h e c k s. I f y o u d e c id e to

g ^ y 5 u ar O a g T " “

emergency conditions

be h e ld until c o n d itio n s p erm it y o u to p r o v id e

h o ld s. “R e a so n a b le ” tim e p erio d s are d e fin e d as 1

in p erso n to o n e o f y o u r e m p lo y e e s and in to an a c ­

C h e c k s d e p o site d d u rin g

that are b e y o n d th e c o n tr o l o f y o u r in stitu tio n can

on-us c h e c k s, 5 a d d itio n a l b u sin e ss d a y s (to ta l o f 7 )
7.

I f y o u h a v e reasonable cause to doubt the
collectibility of a check y o u m a y h o ld th o se
fu n d s. S o m e e x a m p le s o f situ a tio n s w h e n y o u

fiv e - d a y a v a ila b ility ru les. T h e y c o v e r d e la y in g

a v a ila b ility .

A n a c c o u n t can

six m o n th s the a c c o u n t had a n e g a tiv e b a la n ce,

tio n is n ot lo c a te d w ith in the sa m e c h e c k p r o c e s s ­
r e c e iv e d b y y o u r in stitu tio n .

repeatedly overdrawn.

1. O n six or m ore b a n k in g d a y s in th e p r e v io u s

i f y o u r in stitu ­

A n e le c tr o n ic p a y m e n t is c o n sid e r e d r e c e iv e d (d e ­

H o ld s m a y a ls o b e p la c e d on d e p o sits to a c c o u n ts
be c o n sid e r e d re p e a te d ly o v erd ra w n if:

d e p o site d in p erso n to o n e o f y o u r
•

m a y be h e ld u n le s s the

c h e c k w a s returned b e c a u se o f a m is s in g e n d o r s e ­

a b le b y th e s e c o n d b u s in e s s d ay f o llo w in g the d ay

e m p lo y e e s .
2.

so n a b le ” tim e fra m es d is c u s s e d a b o v e.

m ay n ot be h e ld as a r e d e p o site d c h e c k i f th e d e ­

the p a y in g in stitu tio n . F u n d s m u st b e m a d e a v a il­

(“next-day availability”):

1. Cash

a b ility p o lic y and the rem ain d er und er th e “rea­

“nonlocal.”

is lo c a te d in th e sa m e c h e c k p r o c e ss in g r e g io n as

T h e fo llo w in g d e p o sits m u st b e m a d e a v a ila b le
on th e first b u s in e s s d a y f o llo w in g th e b a n k in g d ay o f

(g rea ter than $ 5 , 0 0 0 ) , an y

a v a ila b le for w ith d ra w a l a c c o r d in g to y o u r a v a il­

d ay a v a ila b ility as d is c u s s e d a b o v e , y o u g e n e r a lly

or

large deposits

a m ou n t e x c e e d in g $ 5 , 0 0 0 m a y b e h eld . Y o u r in ­

d a y s as M o n d a y s th rou gh F rid a y s e x c e p t fo r fed e r a l
h o lid a y s. A b a n k in g d ay is a n y b u sin e ss d a y (u p to

F or

tio n s w h ic h p rev en t y o u r ban k fro m p r o c e ss in g
c h e c k s as it n o r m a lly d o e s. •
•

F or d e p o sits in to

new accounts

(le s s than 3 0 d a y s

o ld ) n ex t-d a y a v a ila b ility o n ly a p p lie s to ca sh ,

in g th e fu n d s and w h e n th e fu n d s w ill b e a v a ila b le .

e le c tr o n ic p a y m e n ts, and th e first $ 5 , 0 0 0 o f an y

If the d e p o sit is n o t m a d e in p erso n to an e m p lo y e e

o th er n ext-d ay item s. T h e r e m a in in g am o u n t

o f y o u r in stitu tio n or i f y o u d e c id e to e x te n d the

fro m n ex t-d a y ite m s m u st b e a v a ila b le b y th e 9 th

tim e w h e n d e p o site d fu n d s w ill b e m ad e a v a ila b le

b u sin e ss d ay. Y o u r in stitu tio n m a y c h o o s e a n y

after the tim e o f the d e p o sit, th en y o u m u st m a il or

a v a ila b ility sc h e d u le fo r d e p o sits o f lo c a l,

d e liv e r the n o tic e to th e c u sto m e r n ot later than the

n o n lo c a l, and on -u s c h e c k s in to n e w a c c o u n ts.

first b u s in e ss d ay f o llo w in g the b a n k in g d a y th e d e ­
p o sit is m ad e.

A vailability Rule Examples:
k
\

Note: If the ATM is
nonproprietary, the funds must be
available by the following Monday,
the fifth business day. Also, at
nonproprietary ATMs, the requirement to
make the first $100 available on the next
day does not apply.

Y o u r in stitu tio n is o p e n fo r all b u sin e ss fu n c tio n s
o n Satu rd ay. C u sto m e r J o n e s d e p o sits a
$ 4 , 0 0 0 U .S . T reasu ry c h e c k p a y a b le to h im
w ith a te lle r o n Satu rd ay. W h e n m u st th e
fu n d s b e m a d e a v a ila b le ?

A: Tuesday. Saturday is not a banking day
because it is not a business day, so the de­
posit is considered received on Monday—
the next banking day. Since the funds are
from a U.S. Treasury check, they must be
made available by the first business day
following the day of deposit.

3 . C u sto m e r J a ck so n d e p o sits a $ 4 0 0 lo c a l c h e c k
p a y a b le to h im w ith a te lle r at 1 0 : 0 0 a.m .
o n M o n d a y . W h e n m u st th e fu n d s b e m a d e a v a il­
a b le ?

A:

2 . C u sto m e r M a rtin ez d e p o sits a $ 4 , 0 0 0 c e r tifie d
c h e c k p a y a b le to h er w ith a te lle r at 1 0 : 0 0 a.m .
o n M o n d a y . W h e n m u st th e fu n d s b e m a d e a v a il­
a b le ? W h at i f th e d e p o sit w a s m ad e at a p rop ri­
etary A T M ?

A:

For the deposit made to the teller the
funds must be made available by Tuesday
The deposit is received on Monday, and
the funds must be made available by the
first business day following the day of de­
posit.
For the deposit made at the ATM, the first
$100 must be available by Tuesday, and
the remaining $3,900 must be made avail­
able by Wednesday. Certified checks—
and most other next-day checks;—are
considered “second day” items if the de­
posit is not made in person to one of your
employees.




The deposit is considered received on
Monday so the first $100 must be available
by Tuesday. Since it is a local check, the
remaining $300 must be available by
Wednesday, the second business day after
the day of deposit.

4 . C u sto m e r S m ith d e p o sits a $ 3 0 0 c h e c k fro m h er
state g o v e r n m e n t w ith a te lle r at 1 0 : 0 0 a.m . on
M o n d a y . T h e b a n k ’s a v a ila b ility d is c lo su r e g iv e n
to M s. S m ith sta tes that a c u sto m e r m u st u se a
sp e c ia l d e p o sit slip to r e c e iv e n ext-d ay a v a ila b il­
ity for state and lo c a l g o v e r n m e n t ch e c k s; h o w ­
e v er, M s. S m ith is in a hurry and c h o o s e s n o t to
u se th e sp e c ia l d e p o sit slip . W h e n m u st the fu n d s
b e a v a ila b le ?

A:

Since the special deposit slip was not used,
the bank may treat this item as a local
check (assuming the paying institution is in
the same state or check processing region
as Ms. Smith’s bank) rather than next-day.

Therefore, the first $100 must be available
by Tuesday and the remaining $200 should
be available by Wednesday.
5 . C u sto m e r P a lm er d e p o s its a $ 1 0 , 0 0 0 n o n lo c a l
c h e c k w ith a te lle r at 1 0 : 0 0 a.m . o n M o n d a y the
1st. W h e n m u st th e fu n d s b e m a d e a v a ila b le ?

A: The first $100 must be available by Tues­
day the 2nd. Since it is a nonlocal check
the remaining amount must be available
by the fifth business day, which is Monday
the 8th; however, the bank may choose to
hold the amount over $5,000 under the
large deposit exception. If the bank
chooses this option, it must give the cus­
tomer a hold notice when the deposit is re­
ceived (or within one business day after
someone other than the teller makes the
decision to hold the funds), and provide
$100 by Tuesday the 2nd, an additional
$4,900 by Monday the 8th, and the re­
maining $5,000 by Tuesday the 16th.
6 . C u sto m e r W a sh in g to n d e p o s its a $ 4 0 0 lo c a l c h e c k
at 3 : 0 0 p .m . o n M o n d a y . T h e b ank's c u t- o ff hour
fo r the d ay's tra n sa ctio n s is 2 : 0 0 p.m . W h en m u st
th e fu n d s b e a v a ila b le ?

A: Since the deposit was made after the
bank’s cut-off hour, the deposit is consid­
ered received on Tuesday and the first
$100 must be made available by Wednes­
day. The remaining $300 must be made
available by Thursday.

Availability Policy
Disclosure
Regulation CC requires
your institution to provide your
customers with disclosures describing when
their funds w ill be available for withdrawal.
Many institutions use the model disclosures
found in Regulation CC. However, a com­
mon error is providing customers with a
policy disclosure that does not reflect your
actual availability practices. Your institution
can monitor whether your disclosed policy
reflects your practices by checking different
examples o f deposit transactions and com­
paring your institution’s disclosure to its
funds availability practices to see if they are
the same. If not, your institution must
change the practice or change the disclosure
to reflect the practice. This verification
should be done each time your funds avail­
ability practices are changed. Remember,
while you are confirming that the practices
match your disclosure, you also should
verify that your practices conform to the
Regulation.

Employee Training to Ensure
Compliance
Your institution is required to establish
procedures to ensure that the institution
complies with the requirements of




Regulation CC, and to provide a
copy of these procedures to any em­
ployee who performs duties affected
by the regulation. For example, em­
ployees who issue hold notices should
be instructed on when to hold funds and
how to notify the customer that funds are be­
ing held.
Your employees should also have in­
structions about providing availability
disclosures. Your institution must provide
disclosures to customers before a new ac­
count is opened. If the availability terms are
changed on an existing account, a new dis­
closure should be provided to non-business
customers 30 days before the change is
implemented; or if the change improves the
availability of funds to the customer, not
later than 30 days after the change becomes
effective.

Posting Availability Policy where
Employees Accept Deposits
Your institution must post, in each loca­
tion where its employees accept consumer
deposits, a notice of your availability policy
pertaining to consumer accounts. The notice
must specifically state the availability peri­
ods for the various deposits that may be
made to consumer accounts. You need not
post the notice at each teller window, but the

notice must be posted in a place where con
sumers seeking to make deposits are likely
to see it before making their deposits. For
example, the notice might be posted at the
point where the line forms for teller service
in the lobby. The notice is not required at
any drive-through teller windows nor is it
required at night depository locations.

Provide Deposit Availability Notice
on Preprinted Deposit Slips
Regulation CC states that institutions
must include a disclosure notice on all pre­
printed deposit slips. The notice on the froi
of the deposit slip need only state that de­
posits may not be available for immediate
withdrawal. The notice is required only on
preprinted deposit slips— those printed wit]
the customer’s account number and name
and furnished by your institution in respon:
to a customer’s order. Your institution nee(
not include the notice on deposit slips that
are not preprinted with the customer’ s nam
and account number— such as counter de­
posit slips— or on special deposit slips usee
to secure next-day availability for state and
local government checks, and cashier’ s, cei
tified, and teller’s checks. In addition, you
are not responsible for ensuring that the no
tice appear on deposit slips that the custom
does not obtain from or through you.

A Guide to Regulation CC
Compliance
This brochure is intended to help you in
your institution’ s compliance with Regula­
tion CC— Availability o f Funds and Collec­
tion of Checks. Many institutions— in fact,
27% of those examined in 1991— have been
cited for one or more violations of the regu­
lation. Here are the five requirements that
caused the most compliance problems:
• Providing a specific availability-policy
disclosure reflecting the policy followed
in most cases.
• Adequately training employees and estab­
lishing procedures to ensure compliance.
• Posting the availability policy at locations
where employees accept deposits.
• Providing the deposit availability notice
on preprinted deposit slips.
• Providing next-day availability when
required.
By highlighting the rules in these areas,
this guide may answer your questions
about Regulation CC. O f
course, if you have
more questions you
can contact your
federal supervi­
sory agency's re­
gional office.




B oard o f G o v ern o rs
o f the F ed eral R e se r v e S y ste m




Federal Register / Vol. 58, No. 32 / Friday, February 19, 1993 / Notices
FEDERAL FINANCIAL INSTITUTIONS
EXAMINATION COUNCIL
Community Reinvestment Act
Interagency Questions and Answers

Federal Financial Institutions
Examination Council.
ACTION: Adoption of the Interagency
Questions and Answers regarding
community reinvestment*•
AGENCY:

SUMMARY: The Consumer Compliance
Task Force of the Federal Financial
Institutions Examination Council
(FFIEC) today has adopted revised
Interagency Questions and Answers
Regarding Community Reinvestment. To
help financial institutions meet their
responsibilities under the Community
Reinvestment Act (CRA) and to increase
public understanding of the regulations
and examination procedures, the staffs
of the Federal Reserve Board, the
Federal Deposit Insurance Corporation,
the Office of Thrift Supervision, and the
Office of the Comptroller of the
Currency have prepared answers to the
most commonly asked questions about
community reinvestment. The
Questions and Answers should not be
regarded as official interpretations.
Their purpose is to provide useful
guidance to agency personnel, financial
institutions and the public.
The document includes four new
questions, which address the following:
• The agencies’ emphasis on lending
and investment rather than
documentation (23);
• State CRA performance evaluations
and the public file (13);
• Outside activities and CRA
performance (22); and
• Institutions’ targeting specific ethnic
groups and CRA considerations (5).
The Questions and Answers are now
organized by subject matter with the
previously assigned numbers appearing
in parentheses. Questions and answers
previously numbered 4 and 5 were
deleted because they were basically a
reiteration of the regulation, and those
previously numbered 11 and 19 were
deleted because other questions and
answers address the same issues. Other
minor modifications were made as
necessary to improve clarity.
ADDRESSES: Federal Financial
Institutions Examination Council, 2100
Pennsylvania Avenue, NW., suite 200,
Washington, DC 20037.
FOR FURTHER INFORMATION CONTACT:

Debra D. Clements, Compliance Analyst
Federal Financial Institutions
Examination Council, 2100
Pennsylvania Avenue, NW., suite 200.




Washington, DC 20037. Specific agency
related questions should be directed to
the following: Federal Reserve Board—
Divison of Consumer and Community
Affairs (202) 452-2631; Federal Deposit
Insurance Corporation—Office of
Consumer Affairs (202) 898-3536, or
Division of Special Supervision (202)
898-7155; Office of Thrift
Supervision—Specialized Programs
(202) 906-8000; Office of the
Comptroller of the Currency—
Compliance Management (202) 874—
4446.
EFFECTIVE DATE: February 17,1993.
SUPPLEMENTARY INFORMATION:

Interagency Questions and Answers
Regarding CRA Scope of the CRA’s
Coverage
1. (26) Are there any "regulated
financial institutions" that are
excluded from the scope of CRA?
In general, the CRA defines a
’’regulated financial institution” as one
that meets the definition of an insured
depository institution, under Section 3
of the Federal Deposit Insurance Act.
However, the banking agency CRA
“Interpretation 101” (12 CFR 25.101,12
CFR 228.100, and 12 CFR 345.101)
excludes from CRA requirements certain
institutions that serve solely as
correspondent banks, trust companies,
or clearing agents. The banking agencies
have also excluded from CRA certain
financial institutions whose activities
are limited to providing cash
management controlled disbursement
services. The rationale used in allowing
certain financial institutions to be
excluded from the scope of CRA is that
these institutions are only incidentally
involved, if at all, in granting credit to
the public. The financial supervisory
agencies periodically review the
applicability of CRA to other types of
financial institutions.
2. (1) What does the term "office” mean
as used in the regulation?
Office refers generally to a facility of
an institution that accepts deposits,
including an electronic deposit facility.
It does not include purely
administrative offices, agencies, loan
production offices or facilities used, for
example, only for the check collection
process. In delineating a local
community, an institution need not
consider shared electronic deposit
facilities, unless otherwise directed by
the appropriate financial supervisory
agency.
3. (24) How are bank and savings
association holding companies
affected by the CRA?

1

The CRA applies to applications filed
by holding companies to merge or to
acquire banks and savings associations.
When decisions on such applications
are made, the Federal Reserve Board
and the Office of Thrift Supervision will
consider the CRA records of all the bank
or savings association subsidiaries of the
applicant holding company. The parent
holding company need not prepare a
CRA Statement or public notice, or
maintain public comment files; but are
encouraged to ensure that subsidiary
financial institutions have expanded
CRA statements that include a
description of the institution’s CRA
performance. The holding company
must conform to the requirements of the
applicable regulation for media notices
of corporate applications filed to acquire
a bank or savings association.
Delineation of the CRA Community
4. (2 ) What is meant by "local
community" and how detailed a
map should be used to portray it?
The term ’’local community” refers to
the contiguous area surrounding each
office or group of offices of an
institution. Although the geographic
areas served by an institution may vary
with the type of service, only one local
community is to be delineated for a
particular office or group of offices. Any
map which depicts an institution's local
community or communities with
reasonable clarity may be used. The
map need not show each street in the
community, nor be prepared
professionally by a cartographer. Lowand moderate-income neighborhoods
should not be specifically indicated on
the map. The community delineation,
however, must not unreasonably
exclude such neighborhoods. An
institution may delineate several local
communities on one map. However,
each local community, comprising the
entire community, must be delineated
with sufficient clarity so that the areas
included in those local communities are
obvious. If the entire community is
made up of more than a few local
communities, or the local communities
are separated by significant distances, it
may be easier and clearer to use a
separate map for each local community.
Furthermore, the locations of the
institution’s offices need not be shown
on the maps.
5. (new) Can a financial institution
identify a specific ethnic group,
rather than a geographic area, as its
delineated community; and can this
financial institution target a specific
ethnic group in designing and
marketing products and services?

Federal Register / Vol. 58, No. 32 / Friday, February 19, 1993 / Notices
As indicated in the answer to
Question four of this series, an
institution must geographically
delineate its local community(ies) on
the basis of the locations of its offices.
A delineation that does not have a
geographic basis would be inconsistent
with the CRA and implementing
regulation. (The only permissible
exception involves an institution’s
ability to delineate a “military
community” in addition to the
geographic communities surrounding its
offices.)
If an institution can maintain
compliance with the Fair Housing and
Equal Credit Opportunity Acts (and this
may not always be possible), it may
direct the marketing of its products and
services to one or more specific ethnic
groups. However, institutions that target
a single ethnic group, while having
offices located in multi-ethnic areas,
often exhibit significant lending
disparities and unsatisfactory CRA
performance.
6. (3 ) How should an institution deaf
with low- and moderate-income
neighborhoods in its local
community delineation?
The CRA regulation requires that lowand moderate-income neighborhoods
not be unreasonably excluded from a
delineation of the local community.
Institutions are expected to be generally
aware of low- and moderate-income
neighborhoods within their community,
without undertaking extensive research.
No attempt need be made to distinguish
between low-income neighborhoods and
moderate-income neighborhoods. If
institutions desire further information
about low- and moderate-income
neighborhoods, they should consult
such sources as state and local
community development and planning
agencies.
The CRA Statement
7. (6 ) If an institution is prepared to
offer particular types of credit only
at some of its offices in a local
community, should those types of
credit be listed on the CRA
Statements of all of its offices in
that community?
Yes. Because the institution is willing
to extend that type of credit to any
creditworthy borrower in the
community, the institution should list
the same types of credit on the CRA
Statement available at each office within
a particular local community even
though a prospective borrower at one
office may be referred to another when
seeking to make application. The
institution should recognize, however,
that public complaints may arise




because of such practices; and the
financial supervisory agencies will have
to decide whether the practice
significantly discourages applications
for such credit or otherwise adversely
affects the institution’s CRA
performance.
The CRA Public Notice
8 . (13) Are there any requirements
relating to the size and placement
of the Community Reinvestment Act
Notice?
The notice must be placed in the
public lobby of the financial institution
but the size and placement may vary.
For example, if the notice takes the form
cf a poster, the poster must be placed
within the lobby where it will be seen
by customers and be of sufficient size to
be easily read from a normal distance.
If the notice is provided in the form of
a brochure, a supply of such brochures
printed in easily read type and placed
where they will be noticed will suffice.
The CRA and Public Comment
9. (14) What information and avenues of
communication are available to
members of a community who are
concerned about the CRA
performance of financial
institutions in their community?
Financial institutions are encouraged
to communicate with members of their
community. The CRA regulations
require financial institutions to make
their CRA Statement and the public
CRA Performance Evaluation available
to the public. The statement contains a
copy of the Community Reinvestment
Act Notice which must be placed in the
offices of all financial institutions. The
n o tic e sta tes that the public may write
to the financial institution or the
appropriate supervisory agency about
the institution’s performance in helping
to meet community credit needs.
The public may also review letters
received by the financial institution
regarding its CRA performance and the
public CRA Performance Evaluation
prepared by the institution’s financial
supervisory agency. Announcements of
CRA-covered applications may be
obtained by writing to the institution’s
financial supervisory agency. Anyone
may comment on the filing of an
application by writing to the
appropriate financial supervisory
agency listed either in the applicant’s
newspaper notice or its CRA notice. The
financial supervisory agencies have
varying comment periods for
applications. Therefore, any questions
about the comment period should be
directed to the financial supervisory
agency. Comments received within the
appropriate period will be considered

2

by the financial supervisory agency in
the application process.
10. (9) Are all signed, written CRA
comment letters to be placed in the
public comment file?
The regulations state that the
institution must put into a public
comment file, all signed, written
comments relating to the CRA Statement
or to the institution’s performance in
helping to meet community credit
needs. The only exceptions are
comments that reflect adversely on the
reputation of any person, or which
would violate a law. The institution
must use its own judgment in deciding
which comments should be placed in
the public comment file. Signed, written
comments which might harm a person’s
reputation should be retained in a
confidential file for inspection by the
examiner.
Comments received by a financial
supervisory agency will be on file at that
agency. Those comments are also
available to the public unless the
Freedom of Information Act prohibits
their disclosure.
11. (10) If a letter is addressed in part
to an institution’s overall CRA
performance, but contains
information which is harmful to an
individual or violates a law, should
the institution withhold the entire
letter from the public file?
The institution may do so.
Alternatively, the statements which
reflect adversely on an individual or
violate a law may be deleted from the
letter and the balance included in the
public file. In any event, the entire
original letter should be retained in a
confidential file for inspection by the
examiner.
12. (21) In assessing an institution’s
CRA performance, does an
examiner consider and evaluate
information outside of the
institution being examined?
Yes, an examiner should seek and
consider any information that is
necessary to complete a fair and
accurate picture of the institution's CRA
performance. Contacts will be made, for
example, with persons who have
commented on an institution’s
performance, local officials, local
business owners, community residents,
real estate brokers, or others who may
be able to provide information
concerning local financial institutions
in helping to meet those needs. In
addition, if the examiner believes that
the institution’s description of its
community is unreasonable, the
examiner may review the delineations
of other, similar institutions in the
community.

Federal Register / Voi. 5a, No. 32 / Friday, February 19, 1993 / Notices
.13. (new) May a State-chartered
financial institution place a copy of
a community reinvestment
performance evaluation prepared
by a State regulatory agency in the
comment filefs) maintained for
public inspection pursuant to
Federal rules?
A signed written comment, that
addresses an institution's CRA
Statement or performance in helping to
meet the credit needs of its community,
received from the public during the past
two years should be placed in the public
comment file. For the purposes of the
Federal financial supervisory agencies'
CRA implementing rules, any comment
not prepared by the institution itsslf or
its Federal financial supervisory agency
may be considered to be from "the
public." Institutions should consider
the answers to Questions 10 and 11 of
this series if they are concerned that the
disclosure of information received from
a State regulatory agency or other source
would violate Federal rules. Institutions
are also advised to consult with their
State regulatory agencies if they are
unsure of what material received from
the State is intended for public
availability.
14. (12) Must the institution respond to
any or all comments received from
the public?
There is no requirement that the
institution respond. However, the
institution may find it helpful to
respond to certain comments to foster a
dialogue with members of the
community or to present relevant
information to a financial supervisory
agency. If any institution responds to a
letter in the public comment file, the
response must also be placed in that
file, unless it reflects adversely on any
person or violates a law.
15. (8 ) How should past and current
CRA Statements and public
comment files be made available to
the public in each office of an
institution, particularly an
institution that has offices in more
than one local community?
An institution that has offices in more
than one local community should
maintain current CRA Statements for all
its local communities at its head office
and current CRA Statements for each
local community in each office of the
institution in that local community,
except off-premises electronic deposit
facilities. Any CRA Statements that
were in effect during the past two years
should be retained with the public
comment letters in the public comment
file. A comment file for the entire
institution must be maintained at the
head office, and a comment file




pertaining to a particular local
community must be retained at a
designated office in that community. A
copy of the most recent public CRA
Performance Evaluation prepared by the
institution's Federal financial
supervisory agency must be maintained
in each of the public comment files.
Assessing the Record of Performance
Under the CRA
16. (17) Will an institution's
performance in helping to meet
community credit needs be assessed
even if an institution does not
intend to make an application
covered by the CRAf
Yes. While Congress directed that the
approval or rejection of applications be
used to encourage community
reinvestment by banks and savings
associations on a safe and soundbasis,
it also sought to have each financial
supervisory agency use its examination
process "to encourage" institutions to
be sensitive to their responsibilities to
help meet local credit needs.
17. (16) Will activities in addition to
lending be considered in the CRA
assessment?
Yes. Although the principal focus is
on lending, the financial supervisory
agencies recognize that other activities
and efforts contribute toward the CRA's
goals. The financial supervisory
agencies will consider the extent to
which an institution's activities foster
local community revitalization. For
example, the agencies will consider the
institution’s purchase of state or
municipal bonds or involvement
through investment or other
contributions in a local community
development project. The agencies also
will consider activities such as:
• Efforts to establish meaningful
dialogue with community members
concerning credit needs of the
community:
• The institution’s record of opening
and dosing branched and offering
services (including non credit
services);
• Marketing and spedal credit-related
urograms to make community
members aware of credit services
offered at its offices;
• The extent of participation by the
institution's board of directors in
formulating polities and reviewing its
CRA performance.
18. (29) In addition to traditional direct
lending activities, what activities
can financial institutions consider
in meeting obligations and
responsibilities under the
Community Reinvestment Act?

3

The answer to this question is
primarily designed to provide guidance
to regulated financial institutions that
are not "full service" providers. The
guidanco herein can also be utilized by
full service institutions as a means of
augmenting their traditional lending
activities as part of a comprehensive
CRA program. Some of these activities
may require prior financial supervisory
agency approval.
The following are some nontraditional
activities that financial institutions may
consider to help meet their
responsibilities under the Community
Reinvestment Act.
Debt Investments and Related Securities
• Purchase of mortg8ge-backed
securities or collateral trust notes from
lenders or other community
development finance intermediaries
serving primarily low- end moderateincome areas or persons.
• Purchase of nousing, community
and economic development loans, or
parti cipation34n4oan8orioan pools
from other financial institutions, stale
and local government agencies,
nonprofit community-based
development corporations, community
loan funds, or other community
development intermediaries originating
loans to help meet the needs of low- and
moderate-income persons or small
businesses.
• Purchase of government guaranteed
loans (or participations in pools
representing such loans) made to lowand moderate-income persons, or to
small farm and small business owners,
such as:
—SBA guaranteed loans or loan pools;
—FmHA guaranteed farm, business or
housing loans;
—FHA insured loans;
—EDA (U.S. Economic Development
Administration) guaranteed loans;
—State housing or economic
development agency guaranteed
loans.
• Purchase of state and local
government agency housing mortgage
revenue bonds or industrial revenue
bonds.
Equity Investments
Some activities to serve community
credit needs may be carried out through
certain federal and state supervisory
agencies’ programs to promote
community development investments.
Such investments are required to serve
predominantly a public or community
purpose. Activities that might be carried
out directly by an institution under
these programs indude:
Purchase of limited partnership
shares to provide the equity financing

Federal Register / Vol. 58, No. 32 / Friday, February 19, 1993 / Notices
for public purpose projects such as
construction of low- and moderateincome housing or provision of small
business seed capital. General partners
could be quasi-public or private, forprofit or nonprofit organizations;
• Investment in the stock of a public
purpose corporation, either for-profit or
nonprofit, chartered to carry out
activities to benefit low- and moderateincome areas and residents or small
businesses.
For certain banks and holding
companies, the formation of, or
investment in, a community
development corporation may, in
accordance with applicable laws and
restrictions, be a viable way to address
certain credit needs in the communities
of banks or holding company subsidiary
banks.
Limited service or specialized banks
in a holding company that owns a
community development corporation
operating in the bank’s community
could take advantage of the CDC’s
activities in planning and executing its
own CRA responsibilities. Activities
that could be carried out through a
community development corporation
subsidiary include, for example:
• Acting as a general partner, joint
venture partner and/or equity investor
in projects that have a clear public
purpose, particularly projects focused
on assisting low- and moderate-income
housing or small business, and on the
redevelopment of deteriorating or
blighted areas where private developers
are not interested in the opportunities;
• Carrying out a program to provide
needed technical assistance on financial
matters to small businesses or publicpurpose organizations;
• Financing and managing a publicpurpose revolving loan fund to provide
financing that cannot normally be
provided through the private market. An
example is a fund to lend monies for
pre-development costs involved in
evalueting and peckaging projects for
financing by financial institutions and/
or public sector investors.
An activity that could be carried out
by the institution, directly or through
establishment of a separate corporation,
is an investment in a wholly-owned or
multi-bank/multi-investor Small
Business Investment Company (SBIC) or
Minority Enterprise Small Business
Investment Company (MES3IC) licensed
by the U.S. Small Business
Administration.
Other.Services and Activities
• Letters/iines of credit to
community-based organizations, private
developers, nonprofit development
corporations or other community




finance intermediaries to support
financing of low- and moderate-income
housing or small business development.
• Highly targeted corporate
contributions (monetary and in-kind) to
support the personnel, facilities,
marketing and finance activities of
community-based nonprofit
organizations or other financial
intermediaries that explicitly focus on
helping meet credit needs of low- and
moderate-income persons or small
businesses. Such organizations might
include:
—Nonprofit, neighborhood
development corporations;
—Housing and other credit counseling
organizations;
—Community foundations and loan
funds;
—Neighborhood Housing Services
organizations;
—SBA 504 Certified Development
Companies.
• Technical assistance to communitybased nonprofit groups, state and local
government agencies and community
development finance and secondary
market intermediaries which focus on
helping to meet the credit needs of lowand moderate-income persons or areas,
or small businesses. Examples of such
technical assistance activities might
include:
—Serving on the board of directors or
loan review committee;
—Development of loan application and
underwriting standards;
—Development of loan processing
systems;
—Development of secondary market
vehicles or programs;
—Marketing assistance, including
development of advertising and
promotions, publications, workshops
and conferences;
—Training for staff and management;
—Accounting/bookkeeping services;
—Fund-raising, including soliciting or
arranging investments;
—Consumer education to broaden
knowledge and use of credit and
deposit services.
• Assistance to community
development credit unions in the
institution’s local community through,
for example, provision of technical
assistance or stable deposits to fund the
credit union’s lending.
19. (15) Must an institution document
that is actually extending the types
of credit listed in its CRA statement
as being offered in the local
community?
The CRA regulations do not require
the maintenance of any documentation
other than the public comment files,

4

CRA Statements and CRA Notices.
However, an institution’s level of CRA
performance depends far more on its
credit activities than it does on strict
regulatory compliance. In assessing CRA
performance, examiners will review:
• Any analyses of the geographic
distribution of the institution’s credit
extensions, applications, and denials
prepared by the institution;
• Disclosure statements, aggregation
tables and Loan Application Registers, if
the institution is subject to the Home
Mortgage Disclosure Act;
• Periodic financial reports filed by
the institution with its supervisory
agency;
• Records such as credit files required
to be maintained under Federal Reserve
Regulation B implementing the Equal
Credit Opportunity Act;
• Other loan documentation that may
be required under agency regulations
and other information that the
institution may have compiled for
internal reporting and monitoring
purposes;
• Marketing materials such as
advertising copy.
The documentation that the agencies
expect to be maintained is primarily
that which is useful to the institution’s
own management in administering a
successful CRA program.
20. (30) When assessing CRA
performance, do the financial
supervisory agencies consider a
financial institutions’ lending,
investment, development and
general support activities outside of
the institution's delineated
community?
In general, the assessment of an
institution’s performance under CRA
focuses on its record in helping to meet
o-edit needs within its delineated
community. The agencies are aware,
however, that financial institutions may
organize, support, or use a wide variety
of programs, organizational mechanisms
or intermediaries that help finance such
things as low- and moderate-income
housing, small and minority businesses
and other community projects on a
statewide, regional or even national
basis. Although these programs or
mechanisms may be available to support
loans and investments within an
institution’s delineated community,
they often provide the bulk of their
financial support in other geographical
areas.
Under certain circumstances, the
agencies will give positive consideration
in assessing CRA performance for active
participation by a financial institution
in such programs and mechanisms, even
where most of all of the financing

Federal Register / Vol. 58, No. 32 / Friday, February 19, 1993 / Notices
provided may ultimately benefit low*
and moderate-income borrowers or
neighborhoods located outside of the
institution’s delineated community. In
determining whether and to what extent
positive consideration will be given, the
agencies assess the activities undertaken
in the context of an institution’s overall
CRA program. Where such participation
augments or complements an overall
CRA program that is directly responsive
to the credit needs in an institution’s
delineated community, it will be
considered favorably in reaching an
overall CRA conclusion. However, such
activities and involvements will be
insufficient to compensate for an
otherwise deficient record of addressing
the credit needs of an institution’s
delineated community.
Examples of such programs or
intermediary organizations (other than
traditional direct lending) are:
• Lending consortia or loan pools that
provide community development
financing and technical assistance for
low- and moderate-income housing,
small and minority business
development, or other neighborhood
revitalization projects;
• Multi-investor community
development corporations;
• Limited partnerships that invest in
low- and moderate-income housing;
• Secondary market corporations and
programs which explicitly target loans
for low- and moderate-income housing,
small and minority businesses, or small
farms;
• Quasi-public housing, community
development or economic development
finance corporations in which state or
local government agencies participate,
often with financial institutions or other
contributors;
• State bond programs for housing,
community and economic development,
or public infrastructure projects;
• Public or private intermediaries
which provide loan guarantees or other
credit enhancements used by financial
institutions to support community
development lending and investment;
• Capital investment, loan
participation and other co-ventures
undertaken with minority and womenowned financial institutions.
These and similar vehicles help
institutionalize and support community
development lending and investment. In
general, they enhance the capacity of
financial institutions to help meet
community credit needs, including
those of low- and moderate-income
neighborhoods.
21. (20) M ayan institution use a policy
of making certain loans only to
existing customers, *<ithout




adversely affecting its CRA
performance?
In examining an institution, the
financial supervisory agencies will pay
particular attention to any restrictions
placed on the availability of those types
of credit that an institution has
indicated on its CRA Statement that it
would extend in its local community.
Examiners will focus on whether any
such restrictions have or would have a
significantly greater impact on low- and
moderate-income neighborhoods. In
every case, examiners will consider.
• The business rationale for adopting
a particular policy;
• Whether other policies would serve
the same business purpose with less
adverse impact;
• The relative ease of becoming a
customer eligible for credit under the
restriction;
• Whether the institution has adopted
a policy of limiting certain loans to
customers as a temporary response to
tight money conditions or as a
permanent policy.
Loans available on any restrictive
basis should be listed on the CRA
Statement with the restrictions noted.
However, the agencies recognize that
institutions occasionally make certain
specialized loans to ’’good” customers.
This type of spot lending activity need
not be listed on the CRA Statement.
Any restrictive lending policies or
practices found to be discriminatory on
a prohibited basis will have a
substantial adverse impact on an
institution’s CRA performance.
22. (new) What criteria do examiners
use to determine whether a
director’s, officer’s or employee’s
outside activities contribute to an
institution’s CRA nerformance?
What criteria do the examiners use
to determine whether an
institution’s charitable donations
contribute to its CRA performance?
To contribute to an institution’s CRA
performance, an activity or charitable
donation should fall into one of the
following categories:
« It resulted in the sharing of
information about the institution's
lending services;
• Information was obtained regarding
the community’s credit needs;
• Community members were
informed about how to get or use credit;
• The activity or chantable donation
assisted in providing credit services or
information to the community;
• The activity or donation assisted a
community development or
redevelopment effort
23. (new) Some parties have commented
that the financial supervisory

5

agencies emphasize assessment
criteria relating to the CRA process
over results such as lending. What
is the current emphasis of the
agencies in their supervisory
efforts?
The principal focus of the financial
supervisory agencies and the activity
most encouraged through an
examination continues to be lending
and other activities within the
community that result in extensions of
credit that help meet identified credit
needs. The answers to Questions 20 and
30 in this series also address this issue.
A conclusion that performance is
satisfactory or better generally requires
that the community delineation is
reasonable; that credit extensions are
consistent with the capacity of the
institution and the identified needs of
the community; and that lending
activity reflects a reasonable penetration
of all segments of the community,
including its low- and moderate-income
neighborhoods.
When the above characteristics are
not found to be present in an
institution’s reinvestment record, the
underlying causes identified by the
financial supervisory agencies’
examiners are likely related to
deficiencies in the institution’s
community reinvestment process.
Agency recommendations for improving
the institution’s CRA performance
usually involve:
• Oversight by the board of directors
and management;
• The establishment of goals and
objectives;
• Community outreach, product
development and marketing;
• Management and employee
training;
• Regular monitoring of the
institution’s progress and performance.
Process-oriented corrective measures
should be implemented to make the
institution more responsive to local
credit needs on a regular, ongoing basis.
However, no level of emphasis by an
institution on the CRA process can
make upon for a seriously deficient
record of lending and investment in the
community.
24. (7 ) What is a “small” business or
form?
For CRA purposes, the term “small”
refers to the absolute size of the
business and farm rather than the
relative size in their industries. Because
a major concern of CRA is that all
creditworthy borrowers have reasonable
access to loans from banks, and savings
associations, small businesses and farms
generally are viewed as those which do
not have access to regional and national

Federal Register / Vol. 58, No. 32 / Friday, February 19, 1993 / Notices
credit markets and must rely on their
An institution's board of directors
local lending institutions for credit.
should assure that CRA performance is
an integral part of the institution’s
25. (31J What effect would an
business strategy. Expected activities
institution’s selling loans it has
will include, at minimum, meeting the
originated within its delineated
community have on the institution's basic obligations to define a local
community, to ascertain the credit
CRA performance?
The agencies have found that the sale needs within that Community, and to
demonstrate responsiveness, directly or
of loans in the secondary market
enhances CRA performance where such indirectly, to the needs identified.
27. (28) What do the financial
sales enable an institution to recycle
supervisory agencies expect from
funds for origination of additional loans
institutions that have voluntarily
within its delineated community.
limited or specialized their services
Where loans are part of a
to target particular markets?
comprehensive CRA program designed
to ascertain and help meet credit needs
Such an institution has the same
within the institution's delineated
continuing and affirmative obligation as
community, such loans clearly help
a "foil service" institution to help meet
demonstrate CRA performance, whether the credit needs of its entire local
or not they are ultimately sold on the
community, consistent with safe and
secondary market. To ensure that
sound operations. An institution’s selfappropriate consideration under CRA is imposed service or market limitations
given for loans sold, however,
may not be used as justification for a
institutions should consider retaining
failure to define its local community or
information concerning when and
to help, directly or indirectly, meet the
where the loans were originated.
credit needs within that community,
26. (27) To what extent will a "regulated including low- and moderate-income
neighborhoods.
financial institution” which is
Whether or not an institution operates
subject to statutory and/or
as a "foil service” entity is not a
regulatory constraints that prevent
it from ODerating as a "full service” determining factor in evaluating its CRA
financial institution be expected to performance. Every institution should
be able to demonstrate that it is
meet CRA performance
fulfilling its CRA responsibilities, either
requirements?
within the context of its chosen service
The institution has an affirmative
specialties or in other ways. The final
obligation to seek out ways consistent
measure of CRA performance is in the
with its permitted activities to assist,
directly or indirectly, in helping to meet credit benefits accruing to the
institution’s local community as a result
the credit needs identified in its local
of that institution's activities,
community, with appropriate attention
irrespective of the vehicle by which
to low- and moderate-income
those credit benefits are provided.
neighborhoods. As indicated in the
28. (18) How will the agencies
answers to Questions 20 and 21 of this
"encourage” institutions to help
series, many services other than direct
meet the credit needs of their local
credit services can be developed to
communities?
benefit the local community in a
manner consistent with the intent of the
Encouragement will be provided in
CRA. Currently the financial
four ways. First, within the limits of the
supervisory agencies are reviewing the
agencies’ resources, their staffs will
applicability of CRA to financial
provide information and technical
institutions that have statutory
assistance and will meet with
restrictions placed on their loan cr
representatives of industry and the
deposit activities.
management of individual institutions
The CRA implementing regulations of to explain the CRA, regulations, and
the Federal financial supervisory
examination procedures. This exchange
agencies include twelve factors to be
of information will help institutions
considered in assessing CRA
understand the purposes of the CRA and
performance. Every institution's overall how the financial supervisory agencies
CRA performance record should
implement the act Second, as part of
compare favorably, consistent with its
each CRA examination, financial
resources and capabilities, with the
supervisory agency staff will discuss
issues expressed through these twelve
with management their findings about
factors. A financial institution's
the institution’s CRA performance.
inability to provide specific credit
Where appropriate, the financial
products or services because of statutory supervisory agency staff may suggest
or regulatory limitations does not
ways in which the institution can
preclude a positive CRA performance
improve its performance. Third, in
evaluation.
decisions on applications, where CRA is




6

a material factor, the agencies will
publicly comment on an institution’s
record of performance. Fourth, the
financial supervisory agencies believe
that the availability the public CRA
Performance Evaluations serve as an
additional encouragement for
institutions to help meet local credit
needs on an ongoing basis.
The Effect of an Institution's CRA
Performance on Applications
29. (22) What sanctions are available to
the financial supervisory agencies
under the CRA?
A poor CRA performance record may
result in denial of corporate application.
The financial supervisory agencies may
also use the full range of their
enforcement powers to ensure
compliance with the requirements of the
CRA regulation, including preparing a
CRA Statement, maintaining public
comment files and making them
available, and providing the CRA
Notice. In addition, widespread, repeat/
uncorrected, or otherwise substantive
violations of anti-discrimination laws
and regulations are significant adverse
factors in an institution’s CRA
performance record, and they will
prompt enforcement actions under the
Equal Credit Opportunity Act, Fair
Housing Act, or other applicable fair
lending rules.
30. (23) Are applications for electronic
deposit facilities covered by the
CRA?
Generally, such applications are
covered. The financial supervisory
agencies have different rules regarding
the processing of applications for
electronic deposit facilities, and
institutions should, therefore, consult
their financial supervisory agency
before filing.
31. (25) How does the CRA affect
applications by banks and savings
associations that are subsidiaries of
holding companies?
Applications by a bank or savings
association that is a subsidiary of a
holding company will be treated by the
financial supervisory agencies in the
same manner as those filed by any bank
or savings association. Only the CRA
record of the applying bank or savings
association and the activities of their
subsidiaries will be taken into account.
The bank or savings association may
request, however, that the financial
supervisory agency consider the
contribution of any of the bank’s or
savings association’s non-depository
affiliates in helping to meet me credit
needs of the community or communities
of the applicant bank or savings
association. For example, if the

Federal Register / Vol. 58, No. 32 / Friday, February 19, 1993 / Notices

applicant bank or savings association
has an affiliate community development
corporation operating in the same
community as the applicant, the
applicant may ask that the contributions
of that corporation in helping to meet
the credit needs of the particular
community be considered by the
financial supervisory agency in
assessing the overall CRA record of the
applicant.
Dated: February 12,1993.

Joe M. Cleaver,
Executive Secretary, Federal Financial
Institutions Examination Council.
[FR Doc. 93-3856 Filed 2-18-93; 8:45 am)
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