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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 8382
July 7, 1978
]
PROPOSED N E W R EG U LA TIO N IM PLEM ENTING
TH E C O M M U N ITY R EIN VESTM EN T A CT OF 1977
To
Member
and OtAer-f Concerned,
m f/ze Second FederoJ 7?ejerre DfjtrfcC*
In conjunction with the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, and the Federal Home Loan Bank Board, the Board of Governors of the Federal
Reserve System has announced proposed regulations to implement the Community Reinvestment
Act of 1977. Printed below is the text of a statement issued by the Board of Governors on behalf
of the four agencies, containing the announcement:
Federal regulators of banks and savings and loan associations today [/im c Jd] announced proposed regu
lations to implement the Community Reinvestment A ct.
Th e agencies requested comment by A ugust 15, 1978. Comments should be directed to Theodore E .
A llison, Secretary, Federal Reserve Board, W ashington, D .C . 20551.
The C R A statute requires the four agencies t o :
1. Encourage institutions they regulate to help meet the credit needs of their communities, including
low and moderate income neighborhoods, consistent with safe and sound operations;
2.
nities ;
Assess the records of the institutions they regulate in meeting the credit needs of their commu
3. Take such assessments into account when considering applications by the institutions for
branches, mergers, charters, deposit insurance, holding company acquisitions and office relocations.
The C R A calls for the four agencies to have regulations implementing these requirements in effect by
November 6, 1978.
The regulations proposed by the four agencies are identical in their substantive provisions, but they
contain technical variations that relate to the fact the agencies regulate different categories of financial insti
tutions. Each agency is promulgating its proposed regulation separately. Each regulation is preceded by a
preamble setting forth in identical language the main provisions o f the proposed regulation. The common
preamble, and the substantive and identical portions of the four regulations are attached.
Th e agencies proposed, pursuant to the Community Reinvestment A ct, to require the Board of Directors of
each regulated lender to adopt (not later than 90 days after the C R A regulations are in effect) a C R A
Statement.
The C R A Statement w ould:
— Delineate— with the aid of guidelines provided in the agencies' regulations— the "entire com
m unity" the lender serves (lenders would be encouraged to use a map in delineating the community
they s e r v e );
— Specify the types of credit the lender is prepared to extend to its community.
The C R A Statement may also contain information describing how the institution's programs relate to its
communities. Institutions are encouraged to include a periodic public accounting of their records of meeting
community credit needs. The Statement would have to be reviewed at least annually by the lender's board
of directors.
Lenders would be required to give notice in the public area of their offices that the C R A Statement
is available for inspection. Public comments would be kept for two years, and would be reviewed by the lend
er's supervisory agency when it is assessing the lender's record.
The agencies proposed a list of factors their examiners would use in assessing a lender's record of
helping to meet its community's credit needs, and a statement of the types of applications that would be
affected.
The agencies requested comment specifically as to whether small lenders (assets under $ 1 0 million)
not located in metropolitan areas should be exempted from providing the C R A Statement.
In making their proposals the agencies sa id :
"T h e agencies believe that it is more likely that community credit needs, which can be met on a safe
and sound basis, will be met when members o f the community are aware of the availability of credit,
the lending institutions are well informed about community credit needs, and such institutions make a
sincere effort to meet those needs.
"Institutions are encouraged to offer the types of credit and credit-related services that will meet
the credit needs o f their communities. The regulators, however, would not require institutions to offer
particular kinds or amounts of credit. It is the purpose of the proposed regulations to encourage each
institution to help meet the credit needs of its entire community while preserving to every institution the
flexibility necessary to operate in a safe and sound manner, and to serve the convenience and needs of
its community effectively and imaginatively."
The agencies proposed to include the following guidance on community delineation:
M any factors determine a lender's community, incl uding the size of the lending institution, geographic fac
tors, and economic forces. A n institution's entire comm unity may consist of more than one local community.
Lenders should include local communities consisting of the contiguous areas surrounding each office or group
of their offices, without excluding low or moderate incom e neighborhoods. A s bases for delineating communi
ties, the agencies proposed that lenders might use Standard Metropolitan Statistical Areas ( S M S A s ) , coun
ties or their "effective lending territories."
The agencies are also considering modifications to their existing application procedures concerning public
notice and opportunity to be heard.
The agencies' proposals reflect much o f the oral testimony and written comment received in a number
of hearings held throughout the country by the regulators tjo help them develop their regulations.
The preamble setting forth the main provisions of the agencies' proposed regulations and the common
substantive portions of the regulations, are attached. The full proposed regulations may be obtained from the
agencies upon request.
Enclosed, for State member banks, is a copy of the proposed regulatory preamble and of the
other common portions of the proposed regulation, referred to above. Comments on the proposal
should be submitted by August 15, 1978, and may be sent to our Consumer Affairs and Bank
Regulations Department.
The full text of the proposed regulation should soon be available and may be obtained from
the above-named department.
PAUL A .
VOLCKER,
June 30, 1978
Community Reinvestment Act Regulations
AGENCIES: Board of Governors of the Federal Reserve System,
Comptroller of the Currency, Federal Deposit Insurance Corporation,
and the Federal Home Loan Bank Board.
ACTION:
Proposed regulations
SUMMARY: These regulations would implement the Community
Reinvestment Act of 1977, which directs the named agencies to
encourage the institutions they regulate to fulfill their continuing
and affirmative obligation to help meet the credit needs of their
communities, including low- and moderate-income neighborhoods,
consistent with safe and sound operation of such institutions, and
to assess their record in doing so and take such assessments into
account when evaluating certain applications by such institutions.
COMMENTS MUST BE RECEIVED BY: August 15, 1978
ADDRESS: Please send four sets of comments to: Theodore Allison,
Secretary to the Board of Governors of the Federal Reserve System,
20th Street and Constitution Avenue, N. W ., Washington, D. C. 20551.
FOR FURTHER INFORMATION, CONTACT: Robert Lawrence, Board
of Governors of the Federal Reserve System: 452-3766; Alan Herlands,
Comptroller of the Currency: 447-1177; Roger Hood, Federal Deposit
Insurance Corporation: 389-4628; Nancy Feldman, Federal Home Loan
Bank Board: 377-6404.
_
............
PREAMBLE TO COMMUNITY REINVESTMENT ACT REGULATION
Supplemental Information:
The Board of Governors of the Federal
Reserve System, the Comptroller of the Currency,
the Federal
Deposit Insurance Corporation, and the Federal Home Loan Bank
Board (collectively referred to as "the Agencies") propose this
regulation to implement the Community Reinvestment Act of 1977
("the CRA")..
The CRA, which was enacted as title VIII of the
Housing and Community Development Act of 1977 (P. L.
95-128),
.requires that in connection with their examination of institutions
in their jurisdiction,
the Agencies assess each institution's record
of meeting the credit needs of its entire community,
including low-
and moderate-income neighborhoods, consistent with the safe and
sound operation of the institution.
The CRA further requires that
the appropriate Agency take that record into account in its evaluation
of any application by the institution for a charter, deposit insurance,
branch or other deposit facility,
office relocation, m erger,
or
acquisition of bank or savings institution shares or assets.
The agencies announced, in notices published in the Federal
Register on January 25,
February 21, and March 29,
a series of hearings to be held around the country.
1978 [cites]
The January 25,
1978, notice contained questions regarding issues raised by the CRA,
and all the notices requested testimony and written comments to aid
the Agencies in drafting regulations.
Substantial amounts of oral
testimony and written submissions were accepted and reviewed and
much of that material is reflected in the following proposals.
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Communitv Reinvestment Act Statement.
(a)
Within 90 days after the effective date of this Part,
the board of directors of each institution shall adopt a clear and
concise Community Reinvestment Act (CRA) Statement and shall
provide in each of its offices having interior public space, a notice
that a copy of the current statement (and, if the statement is drawn
separately for local communities,
the portion pertaining to such
office's community) is readily available on request.
The notice
shall also indicate that interested persons may submit to the insti
tution or to the [agency's supervisory authorities] in the district
where the institution is located, with officials' titles
and addresses
provided, written comments pertaining to the information contained
in the Statement.
In addition, a CRA Statement shall have been
adopted by the time an application enumerated in § ____________ is
submitted.
(b)
The CRA Statement shall include at least the following:
(1)
the delineation of the entire community and local
communities, if any, as adopted by the institution; and
(2)
a list of specific types of credit within certain
categories,
such as,
residential loans for l-t o -4 dwelling
units, residential loans for 5 dwelling units and over,
housing rehabilitation loans, home improvement loans,
-
4-
sraa.ll business loans, community development loans,
commercial development loans, and consumer loans,
which the institution is prepared to extend to its entire
community or local communities.
(c)
The Statement may contain any additional information
the institution considers helpful in describing how its efforts, including
special programs, relate to meeting types of credit needed by its community.
(d)
The institution is encouraged to provide, as part of its
CRA Statement a periodic public accounting of its record of meeting
community credit needs.
(e)
The institution's board of directors shall review each
CRA Statement at least annually,
changes whenever made.
(f)
Such actions shall be noted in its minutes.
The institution shall maintain a public file of all CRA
comments received for,
years,
and shall approve any material
at a minimum,
the two most recent calendar
and all CRA Statements in effect during those years.
Assessing the Record.
In connection with its examination of an institution,
the
[agency] shall assess the record of the institution in helping to
meet the credit needs of its entire community, including low- and
moderate-income neighborhoods, consistent with safe and sound
operation of the institution.
The [agency] will review the institution's
-
5-
CRA Statement and marketing and lending policies and practices
to determine whether they are designed to help meet those needs,
and assess its record of performance.
The [agency] will consider
the following factors in assessing an institution's record:
(a)
activities conducted by the institution to ascertain
the credit needs of its entire community;
(b)
the extent to which the institution has attempted to
consult with members of local communities on the institution's
plans and policies relating to credit services offered to those
communities;
(c)
the extent and effectiveness of the institution's
marketing programs and special services to make members of
the community aware of the credit services offered by the institution;
(d)
evidence of discouragement of applications for types
of credit set forth in the institution's CRA Statement;
(e)
the extent of participation by the institution's board
of directors in formulating and reviewing the institution's policies
and performance with respect to the Community Reinvestment Act;
(f)
the geographic distribution of the institution's loans;
(g)
the institution's participation, including investments,
in government-sponsored local community development projects or
other local community redevelopment programs;
-6 -
(h)
loans,
the institution's origination of residential mortgage
housing rehabilitation loans^diome improvement loans,
commercial real estate loans,
and similar loans within its entire
community, or the purchase of such loans originated in its community;
(i)
the institution's participation in governmentally-insured,
-guaranteed, or -subsidized housing or small business loan programs;
(j)
the institution's history of prohibited discriminatory or
other illegal credit practices,
(k)
if any;
the institution's history of opening and closing offices
and providing services at offices;
(l)
the institution's history of lending to both existing
community members and new residents of the community;
(m)
the institution's ability to meet various community
credit needs based on its financial condition, size,
legal impedi
ments, and local economic and other factors; and
(n)
such other factors as may,
in the [agency]'s judgment,
reasonably bear upon the extent to which an institution is helping
to meet the credit needs of its entire community.
Applications procedures.
[To be done individually by each agency. ]
Community Reinvestment Act Regulation
Authority
[To be done individually by each agency.]
.
j '
Purpose
The purposes of this regulation are to require institutions
to demonstrate that their offices serve the convenience and needs
of their communities; to provide guidance to institutions as to how
the agencies will assess the record of institutions in satisfying
their continuing and affirmative obligations to help meet the credit
needs of their local communities, including low- and moderate income neighborhoods, consistent with safe and sound operation of
such institutions; and to provide for taking into account those
records in connection with certain applications.
Delineation of entire community.
(a)
Each institution shall prepare, and at least annually
review, a delineation of the geographic area(s) comprising its
entire community.
(b)
The use of maps is encouraged. -
An institution's entire community may consist of more
than one local community.
More than one office of an institution
may serve the same local community.
Institutions shall delineate
local communities consisting of the contiguous areas surrounding
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each office or group of offices, without excluding low- and moderate
income neighborhoods.
In preparing its delineation, an institution
shall consider the following.
(1)
Existing boundaries such as those of Standard
Metropolitan Statistical Areas (SMSAs) or counties may
. be used and, where appropriate, portions of adjacent
areas may be included.
The institution may make adjust
ments in the case of areas divided by state borders or
significant geographic barriers,
or areas which are
extremely large or of unusual configuration.
In addition,
a small institution may delineate those portions of SMSAs
or counties which it reasonably may be expected to serve.
(2)
An institution may use its effective lending
terriroty, meaning that area or areas around each of its
offices where it makes a substantial portion of its loans
and all other areas equidistant from its offices as those
areas, with such adjustments as may be made under
paragraph (b)(1) of this section.
(3)
An institution may use any other reasonably-
delineated area which meets the purposes of the Community
Reinvestment Act
(CRA), and does not exclude low- and
moderate-income neighborhoods.
-2 -
It is the purpose of the CRA to require the Agencies to
encourage institutions to help meet the credit needs of their local
communities consistent with safe and sound operations.
The
Agencies believe that it is more likely that community credit needs,
which can be met on a safe and sound basis, will be met when
members of the community are aware of the availability of credit,
the lending institutions are well informed about community credit
needs, and such institutions make a sincere effort to meet those
needs.
Accordingly,
the proposed regulations are designed to
encourage institutions to become aware of the full range of credit
needs of their communities and to seek the views of all segments
of their communities regarding those needs.
Institutions are
encouraged to offer the types of credit and credit-related services
that will meet the credit needs of their communities.
The regula
tions, however, would not require institutions to offer particular
kinds or amounts of credit.
It is the purpose of the proposed
regulations to encourage each institution to help meet the credit
needs of its entire community while preserving to every institution
the flexibility necessary to operate in a safe and sound manner,
and to serve the convenience and needs of its community effectively
and imaginatively.
-3 -
The Agencies' proposed regulations, which are presented
together for convenience, are identical in their substantive pro
visions, but contain procedural variations.
An explanation of the
provisions of the regulations, how they operate, and why they were
chosen,
is set forth below.
Authority
Each Agency's regulation sets forth that Agency's authority
to adopt its regulations.
Purpose
The statement of purpose is adopted from the CRA.
A
discussion of this purpose is set forth above.
Community
The Agencies believe that there are many factors which
determine a lender's community,
geographic factors,
including the institution's size,
economic forces,
and local tradition.
No
single definition or rigidly-applied rule, therefore, would be
appropriate to all communities and institutions.
Accordingly,
the
proposed regulation would direct each institution to delineate its
entire community with the aid of broad guidelines.
The delineation
would be available to members of the public who could offer their
comments and suggestions to the institution and to the institution's
supervisory agency.
Agency examiners would review each institu
tion's delineation and any community comments to ensure that no
-
areas,
4-
including low- and moderate-income neighborhoods, are
unreasonably excluded from the delineation, and that the delineation
is not so broad that the institution fails to focus on its local
community.
The term "office, " as used in the regulation, includes
electronic deposit facilities unless it is otherwise modified.
Community Reinvestment Act Statement
The board of directors of each institution would be required
to adopt a Community Reinvestment Act ("C R A ") Statement.
The
CRA Statement would include the institution's delineation of its
community and a list of the types of credit that the institution
would offer to members of its communities.
The Statement would
be required to be made available to the public.
Where an institution
has offices serving more than one local community, it would delineate
those communities and could adapt its Statement to the needs of each
community.
The purposes of requiring a Statement would be to ensure
that each institution's board of directors considers the purpose of
the CRA and what their institution's response will be,
to inform
the community of the types of credit that the institution offers,
and
to aid the agencies' examiners in assessing each institution's record.
If an institution believes that the purposes of the CRA Statement
would be better served,
it may incorporate additional material,
such
-5 -
as a description of how its efforts,
including special programs,
relate to meeting types of credit needed by its community.
The Agencies believe that institutions are aware of the
areas they serve and have well-articulated internal loan policies.
The Agencies,
therefore, believe that adoption of a CRA Statement
would not be burdensome to institutions.
However,
the Agencies
invite particular comment on whether institutions with assets of
less than $10 million located outside standard metropolitan statistical
areas should be exempted from the written Statement requirement
unless the Agencies impose it as a supervisory requirement in
individual cases.
Institutions are required to review their Statements at least
annually.
They are encouraged to review their statements in light
of community comments and their experience with offering various
types of credit and to provide as part of the Statement a public
accounting of their efforts to meet community credit needs.
To aid Agency examiners and the public,
each institution
is required to keep a file of all CRA Statements in effect over the
previous two years and of all public comments received during that
period.
Agency examiners would review the Statement and the file
in connection with their assessment of each institution's record.
-6 -
Assessing the Record
The CRA requires the Agencies to assess each institution's
record of meeting the credit needs of its entire community including
low- and moderate-income neighborhoods.
The proposed regulation
would provide for that assessment and set forth a list of factors that
the Agencies would consider in making the assessm ent.
The list is
only intended to be indicative of the evidence that the Agencies would
consider.
Institutions may serve their communities in ways not
reflected in the list and need not adopt particular activities specified
in the list.
Examination procedures,
will be publicly available.
to be issued later by the Agencies,
The Agencies will consult with state
supervisory authorities regarding the assessm ent process.
Effect on Applications
The CRA requires the Agencies to take an institution's
record into account in acting upon certain applications involving
that institution.
This section would implement that requirement
and list the particular applications to which each Agency's regulation
applies.
The Agencies would consult with state supervisors regarding
applications involving state-chartered institutions.
The regulations of the Federal Reserve Board and the
Federal Home Loan Bank Board would provide that those Agencies
-7-
may consider the credit-granting record of non-depository sub
sidiaries of a holding company that is making an application
covered by the CRA to the Agency.
The Agencies are considering modifications to their
existing application procedures concerning public notice and
opportunity to be heard with respect to applications covered by
the CRA.
Accordingly,
Reserve System,
the Board of Governors of the Federal
the Comptroller of the Currency,
the Federal
Deposit Insurance Corporation, and the Federal Home Loan Bank
Board, propose to amend 12 CFR Parts 25, 228 and 345, and add
Part 563e, to read as set forth below.
@FedFRASER