Full text of Federal Reserve Bank of New York Circulars : 10753. Public Welfare Investments by State Member Banks and Bank Holding Companies

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FEDERAL RESERVE BANK
OF NEW YORK

C ircu la r N o.

[

10753 ~
1

D ecem b er 2 9 , 1994

J

PUBLIC W ELFARE IN V E ST M E N T S
BY STATE M E M B E R BANK S A N D BANK H OLDING CO M PA N IES
Amendments to Regulations H and Y
Effective January 9, 1995

To All State Member Banks and Bank Holding Companies
in the Second Federal Reserve District, and Others Concerned:

Following is the text o f a statement issued by the Board of Governors of the Federal Reserve
System:
The Federal Reserve Board has issued final amendments to Regulation H (Membership of State
Banking Institutions in the Federal Reserve System) regarding public welfare investments by state
member banks, and a corresponding Regulation Y (Bank Holding Companies and Change in Bank
Control) interpretation for bank holding companies.
The amendments are effective January 9, 1995.
The final amendments permit state member banks to make certain public welfare investments
without specific Board approval and other public welfare investments with specific approval. The
amendments also address the procedural aspects of these investments.
Enclosed — for state member banks, bank holding companies, and others who maintain sets
of the Board’s regulations — is the text of the amendments, effective January 9, 1995, as published
in the Federal Register. Additional copies are available at this Bank (33 Liberty Street) from the
Issues Division on the first floor, or by calling our Circulars Division (Tel. No. 212-720-5215 or
5216). The notices and requests for approval described in the amendments, and any questions on
this matter, may be directed to our Banking Applications Department (Tel. No. 212-720-5861).




W il l ia m J. M c D o n o u g h ,

President.

/0 70 3
Friday
December 9, 1994
Voi. 59, No. 236
Pp. 63706-63714

PUBLIC WELFARE INVESTMENTS
Amendments to Regulation H
Docket No. R-0838
Amendments to Regulation Y
Docket No. R-0860

[E n c. Cir. N o. 1 0 7 5 3 ]







Final rule.

12CFR Part 208

ACTION:

[Regulation H; D o cket No. R -0838]

SUMMARY: The Board is amending its
Regulation H to implement a provision
of the Depository .Institutions Disaster
Relief Act of 1992 that authorizes state
member banks to make investments
designed primarily to promote the
public welfare to the extent permissible
under state law and subject to regulation

Membership of State Banking
Institutions in the Federal Reserve
System
AGENCY: Board of Governors of the
Federal Reserve System.

I O'7 5 5
Federal Register / Vol. 59, No. 236 / Friday, December 9, 1994 / Rules and Regulations
by the Board. The amendment would
permit state member banks to make
certain public welfare investments
without prior approval and other public
welfare investments with specific Board
approval. The amendment also
addresses the procedural aspects of
these investments.
EFFECTIVE DATE: January 9,1995.

Summary of Final Rule

The final rule identifies classes of
public welfare investments that do not
require prior approval, leaving less
common investments and investments
of more than five percent of a bank’s
capital stock and surplus subject to
case-by-case review. Under the final
rule, a state member bank may make an
FOR FURTHER INFORMATION CONTACT:
investment, without prior approval, if
Stephanie Martin, Senior Attorney
the investment previously has been
(202-452-3198), Legal Division; Sandra
determined to be a public welfare
Braunstein, Manager for Community
investment by the Board or the
Affairs, (202-452-3378), Division of
Comptroller of the Currency or is an
Consumer and Community Affairs;
investment in a community
Larry Cunningham, Supervisory
development financial institution as
Financial Analyst, Division of Banking
defined in the Community Development
Supervision and Regulation (202-452Banking and Financial Institutions Act
2701); for users of the
of 1994.3 In addition, the rule allows
Telecommunications Device for the Deaf state member banks to invest without
(TDD) only, Dorothea Thompson (202prior approval in an entity established
452-3544); Board of Governors of the
solely to engage in one or more of the
Federal Reserve System, Washington,
following activities: low- and moderateDC 20551.
income housing; nonresidential realestate development in a low- or
SUPPLEMENTARY INFORMATION: The
moderate-income area that is targeted
Depository Institutions Disaster Relief
towards low- and moderate-income
Act of 1992 1amended the Federal
Reserve A ct2 to loosen the restriction on persons; small business development in
a low- or moderate-income area; job
the ability of state member banks to
training or placement for low- and
purchase, sell, underwrite, and hold
moderate-income persons; job creation
investment securities. The amendment
in a low- or moderate-income area for
allows state member banks to make
low- and moderate-income persons; and
investments that are designed primarily
technical assistance and credit
to promote the public welfare. "Hie
counseling to benefit community
investment must not violate state law or
expose the bank to unlimited liability.
development.
The final rule uses the Department of
The aggregate of the bank’s public
Housing and Urban Development’s
welfare investments must not exceed
(HUD's) Chapter 69 Community
the sum of five percent of the bank’s
Development definition of low- and
capital stock actually paid in and
moderate-income persons and the Small
unimpaired and five percent of its
Business Administration’s definition of
unimpaired surplus fund. The Board
may waive this limit by order, on a case- small business. Low- or moderateincome area is defined as an area m
by-case basis, and permit a bank to
which the median family income is less
make investments in an amount not
than eighty percent of the median
exceeding the sum of ten percent of the
family income of the Metropolitan
capital stock actually paid in and
Statistical Area, or, for non-metropolitan
unimpaired and ten percent of the
areas, the state.
unimpaired surplus fund of the bank.
Under the final rule, the investment
Finally, the Board must limit a bank’s
must not violate state law Or expose the
investments in any one project.
bank to unlimited liability. The rule
In the past, the Board nas dealt with
limits aggregate public welfare
requests by state member banks to make
public welfare investments on a case-by­ investments without prior approval to
up to five percent of the capital stock
case basis. To reflect the recent Federal
Reserve Act amendment and to facilitate and surplus of the state member bank
and limits any single investment
public welfare investments by state
without prior approval to not more than
member banks, the Board is amending
two percent of a bank’s capital stock and
Regulation H (12 CFR Fart 208) by
surplus. In addition, to make public
adding a new section entitled
welfare investments without prior
Community Development and Public
approval, a state member bank must be
Welfare Investments. This amendment
at least adequately capitalized and rated
will permit state member banks to make
a composite CAMEL “ 1” or “2” and at
certain public welfare investments
least “satisfactory” in its last consumer
without prior approval.
compliance examination. In addition,

1 L. 102— 106Stet. 2771.2774, section
Pub.
485.

6(b).

"'Section 9, paragraph 23(12 ILS.C. 338aj.




3 T itle I o f Pub. L. 1 0 3 -3 2 5 . 10H Sta1. 2160 ,
s e d k m 103(5).

63707

the bank must not be subject to any
written agreement, cease and desist
order, capital directive, or prompt
corrective action directive issued by the
Board or a Federal Reserve Bank acting
under delegated authority. A state
member bank must receive Board
approval before making an investment
that falls outside of the rule’s
parameters. In no event may aggregate
public welfare investments exceed ten
percent of the bank’s capital stock and
surplus.
Within 30 days after making a public
welfare investment without prior
approval, a state member bank must
advise its Reserve Bank of the amount
of the investment and the identity of the
entity in which the investment is made.
If a bank has a preexisting public
welfare investment on the rule’s
effective date that would not require
prior approval under the rule, the bank
must notify its Reserve Bank of the
investment within sixty days after the
effective date of the rule. For other
preexisting public welfare investments,
the bank must apply to the Board for
approval of the investment within one
year after the rule’s effective date.
If a public welfare investment ceases
to meet the statutory requirements or
any requirements established by the
Board in granting approval, the bank
must divest itself of the investment to
the extent that the investment ceases to
meet those requirements. This
divestiture is governed by the same
requirements as divestitures of interests
acquired by a lending subsidiary of a
bank holding company or a bank
holding company itself in satisfaction of
a debt previously contracted. (See 12
CFR § 225.140.) Divestiture is not
required if the investment ceases to
meet the non-statutory requirements
concerning capitaL examination ratings,
and enforcement actions.
Summary of Comments and Section-bySeclion Analysis
The Board proposed amendments to
Regulation H regarding public welfare
investments by state member banks in
May 1G94 (59 FR 27247, May 26,1994).
The Board received nine public
comments on the proposed rule: four
from trade associations, three from
community development organizations,
and two from bank holding companies.
The public comments and the Board's
responses to the comments'are
discussed in the section-by-section
analysis below.
S e c tio n 2 0 8 .2 1 (a ) ( 1 )
D e fin itio n o f lo w - a n d m o d e r a te i n c o m e a r e a . The Board proposed to

define “ low- and moderate-income

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Federal Register / Vol. 59, No. 236 / Friday, December 9, 1994 / Rules and Regulations

area” as an area in which the median
family income is less than eighty
percent of the median family income of
the Metropolitan Statistical Area, or, for
non-metropolitan areas, the state. One
commenter stated that “low- and
moderate-income area” should include
disadvantaged areas designated by
statute as requiring special government
assistance that might not qualify under
the proposed definition.
Tne Board has addressed the concern
that the proposed rule’s coverage was
too narrow by amending § 208.21(b)(1)
to broaden the universe of investments
that are permissible without prior
approval. (This amendment is discussed
below.) The Board has adopted the
definition as proposed.
S e c tio n 2 0 8 .2 1 (a )(2 )
D e fin itio n o f lo w - a n d m o d e r a te i n c o m e p e r s o n . The proposed rule’s

definition of “ low- and moderateincome person” incorporated the
definition in Chapter 69 of the HUD
statute on community development.

One commenter supported use of the
HUD standard of 80% of median income
in defining the upper limit for
qualifying investments. The Board has
adopted the proposed definition, with a
minor citation correction.
S e c tio n 2 0 8 .2 1 (a )(3 )
D e f i n i t i o n o f s m a l l b u s i n e s s . The
Board proposed to incorporate the
definition of "small business” as it
applies to entities eligible for financial
or other assistance under the Small
Business Administration’s Small
Business Investment Company and
Development Company programs. The
Board received no public comments on
this definition and has adopted it as
proposed.
S e c tio n 2 0 8 .2 1 (b )( 1) ( i) -( iii)
I n v e s tm e n ts n o t r e q u ir in g p r io r
a p p r o v a l . The proposed rule provided

that state member banks could make an
investment without prior approval if the
Board has determined the investment is
a public welfare investment or if the
entity in which the bank invests engages
solely in one or more specified
community development activities.
One commenter stated that the
proposed standards were narrower than
the Federal Reserve Act’s requirements
and could exclude public-purpose
projects and mixed use projects where
low- and moderate-income residents are
only some of the project’s beneficiaries,
particularly in rural areas where lowand moderate-income families are not
concentrated.
In the final rule, the Board has
broadened the scope of investments that




are permissible without prior approval.
Specifically, a state member bank may
invest in an entity if the Comptroller of
the Currency (OCC) has determined, by
order or regulation, that investment in
that entity by a national bank is a public
welfare investment under section 5136
of the Revised Statutes (12 U.S.C. 24).
This provision w ill provide greater
consistency in investments that are
permissible for state member banks and
national banks and w ill eliminate the
need in many cases for determinations
by two regulatory agencies. In addition,
under the final rule a state member bank
may, without prior approval, invest in a
community development financial
institution as defined in section 103(5)
of the Community Development
Banking and Financial Institutions Act
of 1994. Congress has found that
community development financial
institutions play an important role in
promoting economic revitalization and
development in troubled communities
and has established a special fund to
invest in and assist these institutions.
Therefore, the Board believes that
investment in community development
financial institutions by state member
banks should be considered public
welfare investments.
Additionally, under § 208.21(d), the
Board could make a general
determination for investments in
entities engaged in a particular activity.
For example, if the Board determined
that an investment in an entity engaged
in development activities in a federallyspecified enterprise zone was a
permissible public welfare investment,
it might also determine that an
investment in any similar entity
engaged in similar activities would not
require prior approval.
Two commenters argued that the
proposed restrictions were too broad.
These commenters stated that the prior
approval exemption should be provided
only for those investments that address
the needs of low- and moderate-income
persons and communities in ways not
readily available through the private
market. These commenters suggested
that the Board add criteria similar to
those in the OCC’s rules on public
welfare investments. These commenters
also suggested that a qualifying public
welfare investment should be required
to include nonbank community
involvement to ensure that low- and
moderate-income community residents
will benefit from the investment.
Generally, the ability to obtain funds
in the private market is a matter of price
rather than access. The rate at which
funding in the private market would be
prohibitive would vary with each
project and would be difficult to specify

in a rule of general application. In
addition, the Board believes that the
community development projects
described by the rule will usually have
some form of community support. The
Board believes that any benefit in
requiring a showing of non-bank
community involvement in a project
would be outweighed by the additional
jegulatory burdendnvolved.
One commenter requested that the
Board clarify that investments may be
made in either non-profit or for-profit
community development projects
without prior approval. The final rule
does not distinguish between non-profit
and for-profit investments. Either type
of investment is permissible as long as
it meets the rule’s requirements.
S e c tio n 2 0 8 .2 1 (b ) ( l) ( iv )

The proposed rule provided that a
state member bank could invest without
prior approval in an entity that engages
solely in one or more specified
community development activities.
E n g a g e d s o l e l y . Tw o commenters
stated that requiring an entity to engage
s o l e l y in one of the specified activities
is too restrictive. The commenters noted
that many companies invest in
community development but are diverse
and multi-functional. One commenter
suggested that the Board substitute
“ primarily” for “solely.” The Board
believes that the term “primarily,”
which could be interpreted to mean 51
percent or even lower, is not narrow
enough for purposes of investments
without prior approval. If a state
member bank wishes to invest in an
entity that does not engage solely in the
listed activities, it may ask for a Board
determination that the investment is a
public welfare investment. The Board
has retained the “solely” language in
the final rule.
Where the Board used the term
“ primarily” in the proposed rule, it
intended to cover those projects targeted
towards low- and moderate-income
persons. The Board has substituted the
phrase “targeted towards” for
“ primarily” in the final rule
(§ 208.21(b)(l)(iv) (B) and (D)).
I n d i r e c t l y e n g a g e d . One commenter
asked that the Board clarify whether the
rule covers investment in a firm that
engages in enumerated activities
through a wholly-owned subsidiary.
The Board believes that investment in
an entity that engaged solely in the
listed activities through one or more
subsidiaries would be permissible. The.
Board has revised the final rule
(§ 208.21(b)(l)(iv)) to clarify this point.
L e n d i n g a c t i v i t y . The Board has
revised the rule to allow investments
without prior approval in entities

iCT75^>
Federal Register / Vol. 59, No. 236 / Friday, December 9, 1994 / Rules and Regulations
engaged solely in public welfare lending
activities.

S ectio n 208.21(b)(l)(iv)(A )
In vestm en ts in low - a n d m o d era tein co m e housing. The Board proposed to
allow investment without prior
approval in entities that are engaged in
certain activities related to low- and
moderate-income housing. The Board
specifically requested comment on
whether low- and moderate-income
housing should be defined as housing
where a majority of the units are
occupied by low- and moderate-income
persons (as proposed) or whether the
definition should be based on other
federal programs, such as the lowincome housing credit in section 42 of
the Internal Revenue Code. The Board
received six public comments on this
issue.
Three commenters supported the test
proposed by the Board. One of these
commenters stated that section 42 of the
Internal Revenue Code should apply
only if a corporation makes an
investment in a housing project
specifically to benefit from a lowincome housing tax credit. Another of
these commenters suggested that the
rule’s definition of low- and moderateincome housing reflect the current HUD
definition, which stratifies the
definition further to include very low
income designations.
One commenter stated that requiring
a majority of residential units to be *
occupied by low- and moderate-income
persons would tend to segregate the
poor from people who could help them
prosper. This commenter suggested that
the test should be satisfied by any
housing “occupied by low- to moderateincome persons,” or if necessary,
including a low occupation threshold
amount such as 15 percent.
Two commenters suggested that a
qualifying investment should meet the
"majority of units” requirement as well
as a requirement that either (1) at least
20 percent of the units be occupied by
individuals whose incomes do not
exceed 50 percent of area median
income, or (2) at least 40 percent of the
units be occupied by individuals whose
incomes do not exceed 60 percent of the
area median income, adjusted for family
size. The commenters believed that the
additional restriction (which is based on
the definition of “low-income housing
project” in the Internal Revenue Code)
would insure that qualifying
investments would provide a minimum
level of benefit to low-income persons.
The Board believes that the additional
restrictions on the test for low- or
moderate-income housing would not
provide sufficient flexibility in the final




hile. However, the Board believes that
tax credits could provide a powerful
incentive for banks to invest in lowincome housing. Therefore, the Board
has adopted a revised version of the
low- and moderate-income housing
provision that would allow investment
in residential property in which a
majority of the units are occupied by
low- or moderate-income persons o r that
meets the definition of a qualified lowincome building under section 42 of the
Internal Revenue Code.

S ection 208.21 (b)( 1)(iv)(B)
In vestm en ts in n o n re sid e n tia l real
p ro p e rty. The Board proposed to allow
investment without prior approval in
entities that are engaged in certain
activities related to nonresidential real
property or other assets located in a
low- or moderate-income area and to be
used primarily by low- and moderateincome persons. Two commenters
strongly supported the inclusion of this
category. Other than the revision to the
term “primarily,” the Board has adopted
this provision as proposed.

S ection 208.21(b)(l)(iv)(C )
S m a ll b u sin esses in low - o r m oderatein co m e area. The Board proposed to
allow investment without prior
approval in entities that invest in small
businesses located in a low- or
moderate-income area to stimulate
economic development. Tw o
commenters suggested that the Board
add emphasis on minority small
businesses, which are an especially
underserved segment of the small
business community. The Board
believes it would be difficult to
determine what criteria to use to
identify disadvantaged small businesses
and has not adopted this suggestion.
One commenter stated that the Board
should permit investments in all small
businesses, as such investments would
stimulate economic development
regardless of whether the businesses are
located in low- or moderate-income
areas. The expansion of the types of
investment permissible without prior
approval (§ 208.21(b)(1) (ii) and (iii))
should help address the concerns raised
by this commenter. The Board has
adopted the provision as proposed.

S ectio n 2 0 8 .2 1 (b )(l)(iv) (D) a n d (E)
fo b training a n d e m p lo y m e n t
o p p o rtu n itie s. The Board proposed to

allow investment without prior
approval in an entity that (i) invests in,
develops, or otherwise assists job
training or placement facilities or
programs that will be used primarily by
low- and moderate-income persons or
(ii) invests in an entity iocated in a low-

63709

or moderate-income area if that entity
creates long-term employment
opportunities, a majority of which will
be held by low- and moderate-income
persons. The Board received no public
comments on these provisions. Other
than the revision to the term
“ primarily,” the Board has adopted
these provisions as proposed.

S ectio n 208.21(b)(l)(iv)(F )
In vestm en ts in c re d it cou n seling. The
Board proposed to allow investment
without prior approval in entities that
provide technical assistance, credit
counseling, research, and program
development to low- and moderateincome persons, small businesses, or
nonprofit corporations to help achieve
community development. Two
commenters strongly supported the
inclusion of this category. The Board
has adopted this provision as proposed.
S ection 208.21(b)(2)
P erm itte d b y sta te law . The Board
proposed to allow investments without
prior approval only if the investment is
permitted by state law. The Board
received no public comments on this
provision and has adopted it as
proposed.
S ectio n 208.21(b)(3)
L im ited liability. The Board proposed
to allow investments without prior
approval only if the investment w ill npt
expose the bank to liability beyond the
amount of the investment. The Board
received no public comments on this
provision and has adopted it as
proposed. This provision would
preclude a state member bank from
acting as a general partner. A general
partner is normally liable for all of the
debts of the partnership, which could be
greater than the partner’s investment.
S ectio n 208.21(b) (4) a n d (5)
P ercen tage o f ca p ita l lim ita tio n . The
Board proposed to allow investments
without prior approval only if the
investment does not exceed the sum of
two percent of the bank’s capital stock
and surplus and if the aggregate all such
investments of the bank does not exceed
the sum of five percent of its capital
stock and surplus. The Board received
no comments on this provision and has
adopted it as proposed.
D efin ition o f capital. The Board
proposed to define capital stock and
surplus as it is defined in a Board
interpretation on state member bank
undivided profits (12 CFR § 250.162).
One commenter suggested that the
Board define capital and surplus as total
Tier 1 and Tier 2 capital, plus that
balance of a bank’s allowance for loans

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Federal Register / Vol. 59, No. 236 / Friday, December 9, 1994 / Rules and Regulations

and lease lo sses not in clu d ed in Tier 1
and Tier 2 capital. T he com m enter
stated that this inform ation can be easily
gleaned from call report, w o u ld ease
com pliance, and w o u ld be consistent
w ith the OCC’s proposed definition of
capital and surplus for p urposes of
lending lim its. The Board b eliev es that
the capital d efinition suggested by the
com m enter is broader than anticipated
by the “capital and su rp lu s” language of
the statute. For m any years, rules
establishing lim itations on the activities
o f state m em ber banks in terms of a
bank’s capital structure have u sed a
w ell-established d efin itio n o f capital
stock and surplus that in clu d es
u nd ivid ed profits p lu s allo w a n ce for
loan and lease losses. A s th ese item s are
readily ascertained from the S ch ed ule
RC Balance Sheet report (total equity
capital (lin e 28); a llo w a n ce for loan and
lease lo sses (lin e 4b), the Board has
adopted the definition o f capital and
surplus as proposed.
S e c tio n 2 0 8 .2 1 (b ) (6 )-(8 )
R e q u ir e m e n ts re g a r d in g b a n k
c o n d itio n . The Board prop osed to allow

investm ents w ithou t prior approval only
if the bank is w ell cap italized or
adequately cap italized , received a
com p osite CAMEL rating o f “ 1 ” or “2 ”
as o f its m ost recent exam in ation, and
is not subject to any w ritten agreement,
cease and d esist order, capital directive,
or prom pt corrective action directive
issixed by the Board or a Federal Reserve
Bank.
One com m enter stated that CAMEL 3rated in stitu tions do not p ose the same
risks to safety and so u n d n e ss as 4- and
5-rated institutions. T he com m enter
suggested that an im provin g 3-rated
institution w ith adequate capital should
be able to request a w aiver from the
Board to forego the ap p lication process
for future public w elfare projects
(consistent w ith the OCC’s public
welfare investm ent rule). T he Board
believes, how ever, that it w o u ld need to
review a 3-rated bank’s status upon each
public w elfare investm en t request to
determ ine w hether the bank w as
im proving and that a blanket
application w aiver for im proving 3rated banks w ou ld not be appropriate.

The Board has made two revisions to
the proposed provision. F irst the Board
has expanded this provision to preclude
investment without prior approval by
banks operating under a memorandum
of understanding. Second, the final rule
will require a bank to have overall
ratings of at least “satisfactory" from its
most recent consumer compliance
examination in order to make a public
welfare investment without prior
approval.




S e c tio n 2 0 8 .2 1 (c )

S ectio n 2 0 8 .2 1 (f)

Notice to Reserve Bank - The Board
proposed to require a bank that m ade an
investm ent w ithou t prior approval to
notify its Federal Reserve Bank w ithin
30 days o f m aking the investm ent. The
proposed n o tice w o u ld in clu d e the
am ount o f the in vestm en t and the
identity o f th e en tity in w h ich the
investm ent is m ade. The Board received
no p u b lic com m en ts on th is provision
and has adopted it as proposed.

Preexisting investments. Under the
Board proposal, if a state m em ber bank
has an on going p u b lic w elfare
in vestm en t that w o u ld not require prior
approval under th e regulation and was
m ade prior to the ru le’s effective date,
the bank m ust n otify its Federal Reserve
Bank o f the in vestm en t w ith in 60 days
after the effective date. For other
on going in vestm en ts m ade prior to the
ru le’s effective date, the bank m ust
request Board approval w ith in on e year
o f the effective date. T he Board received
no p u b lic com m en ts on th ese p rovisions
and h as adopted them as proposed.

Section 208.21(d)
The Board proposed that a state
m em ber bank w o u ld be able.to make
p u b lic w elfare in vestm en ts other than
those sp ecified in the regulation w ith
prior Board approval.

Scope o f public welfare investments.
One com m enter suggested that the
Board provide further gu idan ce as to the
boundaries o f p ublic w elfare
in vestm en ts that are not directly related
to low - and m oderate-incom e
com m u n ities or fam ilies. T h e Board’s
exp an sion o f in vestm en ts perm issible
w ithou t prior approval sh o u ld address
this com m en ter’s concerns.
A p p lic a tio n p r o c e d u r e s . Three
com m enters su ggested that the rule
sh ou ld address ap p lication procedures
and tim e lim its for pub lic w elfare
in vestm en ts. The Board has added
provisions to § 208.21(d) to describe the
m inim u m inform ation that a public
w elfare in vestm en t request sh ould
contain in order to enable the Board to
determ ine w heth er the investm ent
w ou ld m eet the Federal R eserve A ct’s
requirem ents. The final rule also
p rovides that the Board w ill norm ally
act on requests w ith in 60 days, unless
the Board n otifies the bank that a longer
period is necessary. A ccord ingly, a bank
sh ou ld request Board approval o f a
p ub lic w elfare in vestm en t at least 60
days prior to the day the bank w ish es
to make the investm ent.
S e c tio n 2 0 8 .2 1 (e )
D iv e stitu re . T he Board proposed that

a bank m ust d ivest itself o f an
investm ent m ade in accordance w ith the
regulation to the extent that the
investm ent ex ceed s the sco p e of, or
ceases to m eet, the requirem ents of the
regulation. The Board proposed that the
divestiture be m ade in the manner
sp ecified in Regulation Y for interests
acquired by a len d in g subsidiary of a
bank h old in g com pany or the bank
holding com pany itse lf in satisfaction of
a debt p reviously contracted. The Board
received no p ub lic com m en ts on this
provision and has adopted it as
proposed.

Other Comments
Community Reinvestment Act
Three com m enters requested that the
Board address the relation ship betw een
the proposed rule and b ank s’ obligations
under the C om m unity R einvestm ent Act
(CRA). One com m enter w as concerned
that th e n ew in vestm en t le v e ls w ould be
interpreted as m andatory for state
m em ber banks by som e com m unity
groups and requested that the Board
clarify the role su ch in vestm en ts sh ould
play in bank’s overall CRA program.
A nother com m enter b elie v ed that public
w elfare in vestm en ts sh o u ld be
con sid ered in assessm en t o f a bank’s
CRA com p lian ce in order to encourage
bank participation in len d in g consortia
ou tsid e the bank’s d elin ea ted service
area. A third com m enter stated that the
typ es o f in vestm en ts en v isio n e d in this
rule sh o u ld not su p p lan t the bank’s
resp o n sib ilities under th e CRA.
T h e Board has determ ined not to refer
to th e CRA in th is regulation. The
requirem ents o f the CRA w ill continue
to ap p ly to state m em ber banks. Public
w elfare in vestm en ts that are authorized
under th is regulation m ay or m ay not
qualify for CRA “cred it,” d ep en d in g on
the nature o f the in vestm en t and the
requirem ents o f the CRA.

Regulation Y
T w o com m enters urged the Board to
adopt a corresponding interpretation to
R egulation Y (12 CFR Part 225) so that
the treatm ent o f bank h old in g
com p an ies and state m em ber banks w ill
be con sisten t. The Board has adopted an
interpretation to R egulation Y,
p u b lish ed elsew h ere in to d a y ’s Federal
Register.

C apital Treatment
O ne com m enter requested that the
Board address the capital effects o f this
proposal. The Board b elie v es that public
w elfare in vestm en ts sh o u ld not receive
sp ecial accounting, capital, or
exam ination treatment.

•

(O 7 b 3

Federal Register / Vol.-59, No. 236 / Friday, December 9, 1994 / Rules and Regulations
Regulatory Flexibility Act Certification
Pursuant to section 605(b) o f the
Regulatory F lexibility A ct (5 U.S.C.
605(b)), the Board certifies that the
am endm ents to R egulation H w ill not
have a significant eco n o m ic im pact on
a substantial num ber o f sm all entities,
and that any im pact on th ose en tities
sh ou ld be p ositive. The am endm ents
w ill reduce the regulatory burden for
m any state m em ber banks by perm itting
them to make certain in vestm en ts that
had previously required Board approval,
and w ill have no effect in other cases.

Paperwork Reduction Act
In accordance w ith section 3507 of
the Paperwork R eduction A ct o f 1980
(44 U.S.C. 3507)) the inform ation
co llection has b een review ed by the
Board under the authority delegated to
the Board by the O ffice o f M anagement
and Budget (5 CFR Part 1320, A pp en dix
A) after consideration o f the com m ents
received during the p u b lic com m ent
period.
The collection s o f inform ation in this
regulation are in 12 CFR 208.21. T his
inform ation is required to a llow
oversight o f state m em ber banks w h ile
perm itting them to m ake certain public
welfare investm ents. T h is information
w ill be u sed to track p u b lic w elfare
investm ents and approve or deny
certain n ew investm en ts.
The estim ated annual burden per
respondent varies from 2 to 10 hours,
d ep ending on in d ivid u a l circum stances,
w ith an estim ated average o f 2.3 hours.
There w ill be an estim ated thirty-five
respondents filing investm ent
notifications, averaging 2 hours, an
estim ated fifteen respondents filing
applications, averaging 2.5 hours, and
an estim ated tw o resp ond en ts filing
divestiture notifications, averaging 5
hours.
List o f Subjects in 12 CFR Part 208
A ccounting, A griculture, Banks,
Banking, C onfidential b u sin ess
inform ation, Crime, Currency, Federal
Reserve System , Mortgages, Reporting
and recordkeeping requirem ents,
Securities.
For the reasons set forth in the
preamble, the Board is am ending 12
CFR Part 208 as set forth below:

PART 208—MEMBERSHIP OF STATE
BANKING INSTITUTIONS IN THE
FEDERAL RESERVE SYSTEM
(REGULATION H)
1. The authority citation for Part 208
con tinu es to read as follow s:
Authority: 12 U.S.C. 36, 248(a), 248(c),
321-338a, 371d, 461, 481-486,601, 611,
1814,1823(j), 1828(o), 1831o. 1831p-l, 3105,




3310, 3331-3351, and 3906-3909; 15 U.S.C
78b, 781(b), 781(g), 78l(i), 78o-^(c)(5), 78q,
78q -l, and 78w; 31 U.S.C 5318.
2. A n ew § 208.21 is added to Subpart
A to read as follows:

§208.21 Community development and
public welfare investments.
(a) Definitions— (1) Low- or moderateincome area means:
(1) O ne or more cen su s tracts in a
M etropolitan Statistical Area w here the
m ed ian fam ily in com e adjusted for
fam ily siz e in each cen su s tract is le ss
than eighty percent o f the m edian
fam ily in com e adjusted for fam ily size
o f the M etropolitan Statistical Area; or
(ii) If not in a M etropolitan Statistical
Area, one or more cen su s tracts or
block-num bered areas w here the m edian
fam ily in com e adjusted for fam ily siz e
in each cen su s tract or block-num bered
area is le ss than eighty percent o f the
m edian fam ily incom e adjusted for
fam ily siz e o f the State.
(2) Low- and moderate-income
persons has the sam e m eaning as low and m oderate-incom e p ersons as
d efined in 42 U.S.C. 5302(a)(20)(A).
(3) Small business m ean s a b u sin ess
that m eets the size eligib ility standards
o f 13 CFR 121.802(a)(2).
(b) Investments that do not require
prior Board approval. N otw ithstanding
the p rovisions o f section 5136 o f the
R evised Statutes (12 U.S.C. 24
(Seventh)) m ade applicable to State
m em ber banks by paragraph 20 of
section 9 of the Federal Reserve Act (12
U.S.C. 335), a State m em ber bank m ay
m ake an investm ent, w ithou t prior
Board approval, if the follow in g
co n d itio n s are met:
(1) The investm ent is in a corporation,
lim ited partnership, or other entity:
(i) W here the Board has determ ined
that an investm ent in that entity or cla ss
o f en tities is a public w elfare investm ent
under paragraph 23 o f section 9 o f the
Federal Reserve Act (12 U.S.C. 338a), or
a com m un ity d evelopm ent investm ent
under Regulation Y (12 CFR
225.25(b)(6));
(ii) W here the Comptroller o f the
Currency has determ ined, by order or
regulation, that an investm ent in that
entity by a national bank is a public
w elfare investm ent under section 5136
o f the R evised Statutes (12 U.S.C. 24
(Eleventh));
(iii) W here that entity is a com m unity
d evelop m en t financial in stitution as
d efin ed in section 103(5) o f the
C om m unity D evelopm ent Banking and
Financial Institutions A ct o f 1994 (12
U.S.C. 4702(5)); or
(iv) W here that entity, directly or.
indirectly, engages so lely in or m akes
loans solely for the purposes o f one or

63711

more of the following community
development activities:
(A) Investing in, developin g,
rehabilitating, managing, sellin g, or
renting residential property if a majority
o f th e u n its w ill be o ccu p ied by low and m oderate-incom e persons or if the
property is a “qualified low -incom e
b u ild in g ” as d efined in section 42(c)(2)
o f th e Internal R evenue Code (26 U.S.C.
42(c)(2));
(B) Investing in, d evelopin g,
rehabilitating, managing, sellin g, or
renting n onresidential real property or
other assets located in a low - or
m oderate-incom e area and targeted
tow ards low - and m oderate-incom e
persons;
(C) Investing in one or more sm all
b u sin esses located in a low - or
m oderate-incom e area to stim ulate
ec o n o m icd ev elo p m en t;
(D) Investing in, d evelop in g, or
otherw ise assisting job training or
placem ent facilities or programs that
w ill be targeted towards low - and
m oderate-incom e persons;
(E) Investing in an entity located in a
low - or m oderate-incom e area if that
en tity creates long-term em ploym ent
op portunities, a majority o f w h ich
(based on full tim e equivalent positions)
w ill be h eld by low - and moderatein com e persons; and
(F) Providing techn ical assistance,
credit counseling, research, and
program developm ent assistance to lowand m oderate-incom e persons, sm all
b u sin esses, or nonprofit corporations to
h elp ach ieve com m unity developm ent;
(2) The investm ent is permitted by
State laW;
(3) The investm ent w ill not expose
the State member bank to liability
b eyon d the amount o f the investm ent ;
(4) The investm ent d oes not exceed
th e sum o f tw o percent o f the State
m em ber bank’s capital stock and
su rp lus as defined under 12 CFR
250.162;
(5) The aggregate o f all such
in vestm en ts o f the State m em ber bank
d o es not exceed the sum o f five percent
o f its capital stock and surplus as
d efin ed under 12 CFR 250.162;
(6) The State m em ber bank is w ell
cap italized or adequately capitalized
under §§ 208.33(b) (1) and (2);
(7) The State m em ber bank received a
com p osite CAMEL rating o f "1” or "2"
under the Uniform F inancial
Institutions Rating S ystem as o f its most
recent exam ination and an overall rating
o f at least “satisfactory” as o f its most
recent consum er com p lian ce
exam ination; and
(8) T he State m em ber bank is not
subject to any w ritten agreement, cease
and d esist order, capital directive,

63712

Federal Register / Vol. 59, No. 236 / Friday, December 9, 1994 / Rules and Regulations

prompt corrective action directive, or
memorandum of understanding issued
by the Board or a Federal Reserve Bank.
(c) Notice. Not more than 30 days after
making an investment under paragraph
(b) of this section, the State member
bank shall advise its Federal Reserve
Bank of the investment, including the
amount of the investment and the
identity of the entity in w hich the
investment is made.
(d) Investments requiring Board
approval. (1) With prior Board approval,
a State member bank may make public
welfare investments under paragraph 23
of section 9 of the Federal Reserve Act
(12 U.SJC. 338a), other than those
specified in paragraph (b) of this
section.
(2) Requests for approval under this
paragraph should include, at a
minimum, the amount of the proposed
investment, a description of th'e entity
in which the investment is to be made,
an explanation of why the investment is
a public welfare investment under
paragraph 23 of section 9 of the Federal
Reserve Act (12 U.S.C. 338a), a
description of the State member bank’s
potential liability under the proposed
investment, the amount of the State
member bank’s aggregate outstanding
public welfare investments under
paragraph 23 of section 9 of the Federal
Reserve Act, and the am ount of the State
member bank’s capital stock and
surplus as defined in 12 CFR 250.162,
(3) The Board will act on a request
under this paragraph w ithin 60 calendar
days after receipt of a request that meets
the requirements of paragraph (d)(2) of
this section, unless the Board notifies
the requesting State member bank that
a longer time period w ill be required.
(e) Divestiture o f investments. A State
member bank shall divest itself of an
investment made under paragraph (b),
(d) or (f) of this section to the extent that
the investment exceeds the scope of, or
ceases to meet, the requirements of
paragraphs (b)(1) through (b)(5), or
paragraph (d) of this section. The
divestiture shall be made in the manner
specified in 12 CFR 225.140, Regulation
Y, for interests acquired by a lending
subsidiary of a bank holding company
or the bank holding company itself in
satisfaction of a debt previously
contracted.
If) Preexisting investments. (1) For
ongoing investments made prior to
January 9,1995 that are covered by
paragraph (b) of this section, a State
member bank shall notify its Federal
Reserve Bank of the investment not
more than sixty days after January 9,
1995.
(2) For other ongoing investments
made prior to January 9.1995, a State




member bank shall request Board
approval not more than one year after
January 9,1995.

community development corporations
that are designed primarily to promote
the public welfare of low- and
moderate-income communities and
By order of the Board of Governors of the
persons in the areas of housing, services
Federal Reserve System, December 2,1994.
and em ploym ent On November 30,
W illiam W . Wiles,
1994, the Board adopted a final rule
Secretary of the Board.
amending Regulation H, 12 CFR 208,
[FR Doc. 94-30160 Filed 12-8-94; 8:45 ami
that permits state member banks to
BILLING CODE 6210-01-P
make certain investments without
specific Board approval.
The Board believes that these
12 CFR Part 225
revisions are consistent w ith the Board’s
[Regulation Y; Docket R -0860]
interpretation of, and decisions
regarding, the scope of community
Bank Holding Companies and Changes welfare activities permissible for bank
in Bank Control
holding companies. Accordingly, the
Board has revised its interpretation of
AGENCY: Board of Governors of the
Regulation Y, 12 CFR 225.127, to reflect
Federal Reserve System.
that bank holding companies that have
ACTION: Final rule; interpretation.
received approval under section 4(c)(8)
of the BHC Act and §225.25(b)(6) of the
SUMMARY: The Board has revised its
interpretation regarding the scope of
Board’s Regulation Y to engage in
community development activities
activities that promote community
permissible for bank holding companies welfare may make similar investments
to incorporate several decisions by the
permissible for state member banks.
Board and to reflect statutory changes
These community development
corporation and project investments by
that have broadened the authority of
national and state member banks to
bank holding companies would
primarily benefit low- and moderatemake certain community welfare
income persons or small businesses, and
investments.
address demonstrated community needs
EFFECTIVE DATE: January 9,1995.
by providing housing, services, and jobs
FOR FURTHER INFORMATION CONTACT:
to low- and moderate-income
Scott G. Alvarez, Associate General
Counsel (202/452-3583), or Deborah M. communities. In particular, the revised
interpretation provides that a bank
Awai, Senior Attorney (202/452-3594),
holding company may, directly or
Legal Division; or Don E. Kline,
through a subsidiary:
Associate Director (202/452-3421), or
Larry R. Cunningham, Supervisory
• Invest in and provide financing to a
corporation or project or class of corporations
Financial Analyst (202/452-2701).
or projects that the Board previously has
Division of Banking Supervision and
Regulation of the Board of Governors of determined is a public welfare project
pursuant to paragraph 23 of section 9 of the
the Federal Reserve System. For the
Federal Reserve Act (12 U.S.C. 338a);
hearing impaired only.
• Invest in and provide financing to a
Telecommunications Device for the Deaf corporation or project that the Office of the
(TDD). Dorothea Thompson (202/452—
Comptroller of the Currency previously has
determined, by order or regulation, is a
3544).
public welfare investment pursuant to
SUPPLEMENTARY INFORMATION: The Board
section 5136 of the Revised Statutes (12
has previously determined that the
U.S.C. 24 (Eleventh));
making of equity and debt investments
• Invest in and provide financing to a
in corporations or projects is designed
community development financial institution
“primarily to promote community
pursuant to section 103(5) of the Community
Development Banking and Financial
welfare” as an activity that “is closely
related to banking” under section 4(c)(8) Institutions Act of 1994 (12 U.S.C. 4702(5));
• Invest in, provide financing to, develop,
of the Bank Holding Company Act (12
rehabilitate, manage, sell, and rent residential
U.S.C. 1843(c)(8)) (BHC Act). 12 CFR
property if a majority of the units will be
225.25(b)(6). The Board has also
occupied by low- and moderate-income
previously adopted an interpretation
persons, or if the property is a “qualified
that provides guidance regarding the
low-income building” as defined in section
types of investments that are considered 42(c)(2) of the Internal Revenue Code (26
U.S.C. 42(c)(2));
to be^permissible for bank holding
• Invest in, provide financing to, develop,
companies under this authority.
rehabilitate, manage, sell, and rent
Section 6(b) of the Depository
nonresidential real property or other assets
Institutions Disaster Relief Act of 1992
located in a low- or moderate-income area
(12 U.S.C. 338a), enacted on October 23, and to be used primarily for low- and
1992, amended section 9 of the Federal
moderate-income persons;
Reserve Act to permit state member
• Invest in and provide financing to one or
more small businesses located in a low- or
banks to invest in the stock of

t C>~7 ^5 3>

Federal Register / Vol. 59, No. 236 f Friday, December 9, 1994 / Rules and Regulations
moderate-income area to stimulate economic
development;
• Invest in, provide financing to, develop,
and otherwise assist job training and
placement facilities or programs designed
primarily for low- and moderate income
persons;
• Invest in and provide financing to an
entity located in a low- or moderate-income
area if that entity creates long-term
employment opportunities, a majority of
which (based on full time equivalent
positions) will be held by low- and moderateincome persons; and
• Provide technical assistance, credit
counseling, research, and program
development assistance to low- and
moderate-income persons, small businesses,
or nonprofit corporations to help achieve
community development.
Community development corporation
and project investment proposals by a
bank holding company that comply
with these requirements and do not
exceed five percent of the total
consolidated capital stock and surplus
of the bank holding company when
aggregated with similar types of
investments made by depository
institutions controlled by the bank
holding company, may be made without
additional Board or Reserve Bank
approval. For purposes of this
interpretation, the term total
consolidated capital stock and surplus
of the bank holding company means
total equity capital and the allowance
for loan and lease losses. For bank
holding companies that file the FR Y 9C (Consolidated Financial Statements
for Bank Holding Companies), these
items are readily ascertained from
Schedule HC—Consolidated Balance
Sheet (total equity capital (line 27h) and
allowance for loan and lease losses (line
4b)). For bank holding companies filing
the FR Y-SP (Parent Company Only
Financial Statements for Small Bank
Holding Companies), an approximation
of these items is ascertained from the
Balance Sheet (total equity capital (line
16e) and allowance for loan and lease
losses (line 3b)) and from the Report of
Condition for Insured Banks (Schedule
RC—Balance Sheet (line 4b)).
The revised interpretation does not
define the full scope of community
welfare projects that may be permissible
for bank holding companies, and is
intended only to provide guidance
regarding the types of projects that, in
the Board's experience, have been
proposed by bank holding companies.
Accordingly, a bank holding company
that proposes to invest in a community
development corporation or project that
is not discussed in the interpretation
may, nonetheless, seek Board approval
to invest in or conduct such project
pursuant to § 225.25(b)(6) of the Board’s




Regulation Y. Such a proposal must
include a detailed description and an
explanation of how the project would
serve the community welfare.

63713

§ 225.127 Investment in corporations or
projects designed primarily to promote
com munity welfare.

*

*

*
*
*
(f)
Section 6 of the Depository
Regulatory Flexibility Act Analysis
Institutions Disaster Relief Act of 1992
permits state member banks (12 U.S.C.
Pursuant to section 605(b) of the
338a) and national banks (12 U.S.C. 24
Regulatory Flexibility Act (5 U.S.C.
(Eleventh)) to invest in the stock of
605(b)), the Board does not believe that
community development corporations
these changes will have a significant
that are designed primarily to promote
adverse economic impact on a
the public welfare of low- and
substantial number of small entities.
moderate-income communities and
The revised interpretation will reduce
persons in the areas of housing, services
regulatory burdens imposed by the
and employment. The Board and the
Board’s procedures on small bank
Office of the Comptroller of the
holding companies, and have no
Currency have adopted rules that permit
particular adverse effect on other
state member banks and national banks
entities.
to make certain investments without
Paperwork Reduction Act Analysis
prior approval. The Board believes that
these rules are consistent with the
In accordance with section 3507 of
the Paperwork Reduction Act (44 U.S.C. Board’s interpretation of, and decisions
regarding, the scope of community
3507), the revised interpretation has
welfare activities permissible for bank
been reviewed by the Board under the
holding companies. Accordingly,
authority delegated to the Board by the
approval received by a bank holding
Office of Management and Budget. The
company to conduct activities designed
Board believes there is no impact on the
to promote the community welfare
paperwork burden for bank holding
under section 4(c)(8) of the Bank
companies.
Holding Company Act (12 U.S.C.
1843(c)(8)) and § 225.25(b)(6) of the
List of Subjects in 12 CFR Part 225
Board’s Regulation Y (12 CFR
Administrative practice and
225.25(b)(6)) includes approval to
procedure, Banks, banking, Federal
engage, either directly or through a
Reserve System, Holding companies,
subsidiary, in the following activities,
Reporting and recordkeeping
up to five percent of the bank holding
requirements, Securities.
com pany’s total consolidated capital
For the reasons set forth in the
stock and surplus, without additional
preamble, the Board amends 12 CFR
Board or Reserve Bank approval:
Part 225 as set forth below:
(1) Invest in and provide financing to
a corporation or project or class of
PART 225—BANK HOLDING
corporations or projects that the Board
COMPANIES AND CHANGE IN BANK
previously has determined is a public
CONTROL (REGULATION Y)
welfare project pursuant to paragraph 23
of section 9 of the Federal Reserve Act
1. The authority citation for Part 225
(12 U.S.C. 338a);
continues to read as follows:
(2) Invest in and provide financing to
Authority: 12 U.S.C. 1817(j)(13), 1818,
a corporation or project that the Office
1831i, 1813p-l, 1843(c)(8), 1844(b), 1972(1),
of the Comptroller of the Currency
3106, 3108,3310.3331-3351, 3907, and
previously has determined, by order or
3909.
regulation, is a public welfare
investment pursuant to section 5136 of
2. Section 225.127 is amended as
the Revised Statutes (12 U.S.C. 24
follows:
(Eleventh));
a. In the first sentence of paragraph
(3) Invest in and provide financing to
(a), the reference “§ 225.4(b)” is revised
a community development financial
to read ” §225.23”;
institution pursuant to section 103(5) of
b. In the fifth sentence of paragraph
the Community Development Banking
(a), the word “permissable” is revised to
and Financial Institutions Act of 1994
read "permissible”;
(12 U.S.C. 4702(5));
c. In the last sentence of paragraph
(4) Invest in, provide financing to,
(d), the reference to "§ 225.4(b)(1)” is
develop, rehabilitate, manage, sell, and
revised to read "§ 225.23”;
rent residential property if a majority of
d. In paragraphs (a), (b), (c), and (d),
the units will be occupied by low- and
all references "§ 225.4(a)(7)” are revised moderate-income persons or if the
to read "§ 225.25(b)(6)”; and
property is a "qualified low-income
(e)
New paragraphs (f), (g), and (h) arebuilding” as defined in section 42(c)(2)
added.
of the Internal Revenue Code (26 U.S.C.
42(c)(2));
The additions read as follows:

63714

Federal Register / Vol. 59, No. 236 / Friday, December 9, 1994 / Rules md Regulations

(5) Invest in, provide financing to,
develop, rehabilitate, manage, sell, and
rent nonresidential real property or
other assets located in a low- or
moderate-income area provided the
property is used primarily for low- and
moderate-income persons;
(6) Invest in ana provide financing to
one or more small businesses located in
a low- or moderate-income area to
stimulate economic development;
(7) Invest in, provide financing to,
develop, and otherwise assist job
training or placement facilities or
programs designed primarily for lowand moderate-income persons;
(8) Invest in and provide financing to
an entity located in a low- or moderateincome area if that entity creates long­
term employment opportunities, a
majority of w hich (based on full time
equivalent positions) will be held by
low- and moderate-income persons; and
(9) Provide technical assistance, credit
counseling, research, and program
development assistance to low- and
moderate-income persons, small
businesses, or nonprofit corporations to
help achieve com m unity development.
(g) For purposes of paragraph (f) of
this section, low- and moderate-income
persons or areas means individuals and
communities whose incomes do not
exceed 80 percent of the median income
of the area involved, as determined by
the U.S. Department of Housing and
Urban Development. Small businesses
are businesses that are smaller than the
maximum size eligibility standards
established by the Small Business
Administration (SBA) for the Small
Business Investment Company and
Development Company Programs or the
SBA section 7A loan program; and
specifically include those businesses
that are majority-owned by members of
minority groups or by women.
(h) For purposes of paragraph (f) of
this section, five percent of the total
consolidated capital stock and surplus
of a bank holding company includes its
total investment in projects described in
paragraph (f) of this section, when
aggregated with similar types of
investments made by depository
institutions controlled by the bank
holding company. The term total
consolidated capital stock and surplus
of the bank holding company means
total equity capital and the allowance
for loan and lease losses. For bank
holding companies that file the FR Y9C (Consolidated Financial Statements
for Bank Holding Companies), these
items are readily ascertained from
Schedule HC—Consolidated Balance
Sheet (total equity capital (line 27h) and
allowance for loan and lease losses (line
4b)). For bank holding companies filing




the FR Y-SP (Parent Company Only
Financial Statements for Small Bank
Holding Companies), an approximation
of these items is ascertained from the
Balance Sheet (total equity capital (line
16e)) and allowance for loan and lease
losses (line 3b)) and from the Report of
Condition for Insured Banks (Schedule
RC—Balance Sheet (line 4b)).
By order of the Board of Governors of the
Federal Reserve System, December 2,1994.
William W. Wiles,

Secretary of the Board.
[FR Doc. 94-30159 Filed 12-8-94; 8:45 am]
BILLING CODE 6210-01-P