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Financial Institution Letters


[Federal Register: December 20, 1995 (Volume 60, Number 244)]
[Rules and Regulations ]               
[Page 66047-66051]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



[[Page 66047]]

_______________________________________________________________________

Part VII

Department of the Treasury
Office of the Comptroller of the Currency



12 CFR Part 25

Federal Reserve System



12 CFR Part 228

Federal Deposit Insurance Corporation



12 CFR Part 345

Department of the Treasury
Office of Thrift Supervision



12 CFR Part 563e



_______________________________________________________________________



Community Reinvestment Act Regulations; Joint Final Rule


[[Page 66048]]


DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 25

[Docket No. 95-07]
RIN 1557-AB32

FEDERAL RESERVE SYSTEM

12 CFR Part 228

[Regulation BB; Docket No. R-0822]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 345

RIN 3064-AB27

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563e

[Docket No. 95-203]
RIN 1550-AA93

 
Community Reinvestment Act Regulations

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, 
Treasury (OTS).

ACTION: Joint final rule.

-----------------------------------------------------------------------

SUMMARY: The OCC, Board, FDIC, and OTS, (collectively, the Federal 
financial supervisory agencies or agencies) are issuing this final rule 
to make technical corrections and clarifications to their regulations 
concerning the Community Reinvestment Act (CRA). Since the publication 
of the agencies' joint CRA regulations, financial institutions and 
others have alerted the agencies that two errors exist and that the 
transition rules are confusing. This final rule is intended to correct 
the errors and clarify the transition rules.

EFFECTIVE DATE: January 1, 1996.

FOR FURTHER INFORMATION CONTACT:
    OCC: Stephen M. Cross, Deputy Comptroller for Compliance, (202) 
874-5216; Matthew Roberts, Director, or Margaret Hesse, Attorney, 
Community and Consumer Law Division, (202) 874-5750, Office of the 
Comptroller of the Currency, 250 E Street SW., Washington, DC 20219.
    Board: Glenn E. Loney, Associate Director, Division of Consumer and 
Community Affairs, (202) 452-3585; Robert deV. Frierson, Assistant 
General Counsel, Legal Division, (202) 452-3711; or Leonard N. Chanin, 
Managing Counsel, Division of Consumer and Community Affairs, (202) 
452-3667, Board of Governors of the Federal Reserve System, 20th Street 
and Constitution Avenue NW., Washington, DC 20551.
    FDIC: Bobbie Jean Norris, Chief, Fair Lending Section, Division of 
Compliance and Consumer Affairs, (202) 942-3090; Robert W. Mooney, Fair 
Lending Specialist, Division of Compliance and Consumer Affairs, (202) 
942-3092; or Ann Hume Loikow, Counsel, Regulation and Legislation 
Section, Legal Division, (202) 898-3796, Federal Deposit Insurance 
Corporation, 550 17th Street NW., Washington, DC 20429.
    OTS: Timothy R. Burniston, Assistant Director for Compliance 
Policy, (202) 906-5629; Theresa A. Stark, Program Analyst, Compliance 
Policy, (202) 906-7054; or John Flannery, Attorney, Regulations and 
Legislation Division, Chief Counsel's Office, (202) 906-7293, Office of 
Thrift Supervision, 1700 G Street NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

Introduction

    The Federal financial supervisory agencies jointly are amending 
their regulations implementing the CRA (12 U.S.C. 2901 et seq.). This 
final rule makes technical corrections and clarifications to the 
agencies' joint CRA regulations, 12 CFR parts 25, 228, 345, and 563e. 
Those regulations establish the framework and criteria by which the 
agencies assess an institution's record of helping to meet the credit 
needs of its community, including low- and moderate-income 
neighborhoods, consistent with safe and sound operations, and provide 
that the agencies will take those assessments into account in reviewing 
certain applications.

Background

    The agencies published a joint notice of proposed rulemaking to 
amend their CRA regulations on December 21, 1993 (58 FR 67466). In 
response to over 6,700 comments received, the agencies published a 
second joint notice of proposed rulemaking on October 7, 1994 (59 FR 
51232). After considering over 7,200 comments received in response to 
the second joint proposed rule, the agencies adopted a joint final rule 
on May 4, 1995 (60 FR 22156) (1995 Rule).

Need for Final Rule

    The agencies are amending their recently adopted CRA regulations to 
correct two technical errors and to clarify the transition rules. Since 
the publication of the 1995 Rule, a number of financial institutions 
have expressed confusion about the transition rules.
    The agencies find that notice and public procedure concerning this 
joint final rule are impracticable, unnecessary, and contrary to the 
public interest under 5 U.S.C. Sec. 553(b)(B). The agencies make this 
finding because: (1) This joint final rule involves only technical 
corrections and clarifications to the recently adopted 1995 Rule, which 
was subject to public notice and comment; (2) some institutions will be 
subject to the performance tests and standards of the 1995 Rule 
beginning on January 1, 1996, so it is in the public interest that the 
joint final rule be effective at that time; and (3) this joint final 
rule makes no substantive change to the 1995 Rule, rather it makes 
corrections and eliminates ambiguities associated with the transition 
requirements.
    Furthermore, under 5 U.S.C. Sec. 553(d)(3), the agencies have 
determined to make this joint final rule effective with less than 30 
days prior publication. The agencies find that there is good cause for 
shortened notice due to the minor nature of the changes, the fact that 
some institutions will be subject to the performance tests and 
standards of the 1995 Rule beginning January 1, 1996, and for other 
reasons previously discussed.

Corrections

    The agencies' 1995 Rule contains two errors. First, an internal 
cross reference is incorrect. The cross reference is found in the 
discussions about how an institution may amend its strategic plan, 
found at 12 CFR 25.27(h), 228.27(h), 345.27(h), and 563e.27(h). These 
identical sections incorrectly state that the amendment process must be 
done in accordance with the public participation requirements of 
``paragraph (c) of this section.'' The correct cross reference is 
``paragraph (d) of this section.'' The agencies are amending their 
respective regulations to reflect the correct cross reference.
    Second, an external cross reference is incorrect. In their joint 
preamble to the final rule, the agencies discussed the definition of 
``community development'' contained in the regulations. In the 
preamble, the agencies stated that ``[t]he section of the definition 
that discusses activities that promote economic development by 
financing small business and farms refers to 13 CFR 121.802(a)(2), the 
size limitations for the Small Business Administration's (SBA's) Small 
Business Investment 

[[Page 66049]]
Company and Development Company programs'' (60 FR 22159). The agencies' 
final regulations do, indeed, reference 13 CFR 121.802(a)(2). However, 
because of an amendment to the SBA regulation (59 FR 16953) made during 
the agencies' CRA rulemaking process, this citation refers to only the 
SBA's Development Company Programs. The correct reference should be 13 
CFR 121.802(a) (2) and (3), which include both the Development Company 
and Small Business Investment Company Programs, as intended. Therefore, 
the agencies are amending the cross references in 12 CFR 25.12(h)(3), 
228.12(h)(3), 345.12(h)(3), and 563e.12(g)(3). The citations are 
changed from ``13 CFR 121.802(a)(2)'' to ``13 CFR 121.802(a) (2) and 
(3).''

Clarification

    The agencies are amending their transition rules, found at 12 CFR 
25.51, 228.51, 345.51, and 563e.51. The transition rules are correct 
for purposes of incorporation into and expiration from the Code of 
Federal Regulations. However, the banks and thrifts that must comply 
with them have expressed confusion regarding how the rules apply.
    The transition rules state the final date of applicability to all 
institutions with regard to each particular provision of the CRA 
regulation. However, the transition rules inadequately explain the 
transition from the former regulation to the new regulation. The 
agencies are clarifying that when an institution, either mandatorily or 
voluntarily, becomes subject to the requirements of the performance 
tests and standards in the 1995 Rule (12 CFR 25.21 through 25.27, 
228.21 through 228.27, 345.21 through 345.27, and 563e.21 through 
563e.27, as applicable), the institution must comply with all aspects 
of the 1995 Rule (12 CFR 25.11 through 25.44, 228.11 through 228.44, 
345.11 through 345.44, or 563e.11 through 563e.44) applicable to it.
    For example, the transition rules state that the agencies will 
evaluate small institutions under the small institution performance 
standards described in 12 CFR 25.26, 228.26, 345.26, and 563e.26 on 
January 1, 1996. However, so that the agencies may evaluate a small 
institution under the small institution performance standards, the 
small institution must also comply with other provisions of the 
regulation that are pertinent. Those provisions would include 
delineating an assessment area (12 CFR 25.41, 228.41, 345.41, or 
563e.41, as applicable), maintaining a public file (12 CFR 25.43, 
228.43, 345.43, or 563e.43, as applicable), and providing the proper 
public notice (12 CFR 25.44, 228.44, 345.44, or 563e.44, as 
applicable). The transition rules at 12 CFR 25.51(c) (4) and (5), 
228.51(c) (4) and (5) 345.51(c) (4) and (5), and 563e.51(c) (4) and 
(5), however, state that these requirements do not become applicable 
until January 1 or July 1, 1997. The 1997 dates refer to the last point 
in time that these requirements become effective for any institution. 
However, the requirements become effective for small institutions as 
soon as the small institutions are subject to evaluation under the 
small institution performance standards.
    In some cases, an institution may choose to comply with the 
performance standards and tests of the May 1995 rule before it must do 
so. For instance, a large institution may elect to be evaluated under 
the lending, investment and service tests (12 CFR 25.22 through 25.24, 
228.22 through 228.24, 345.22 through 345.24, or 563e.22 through 
563e.24, as applicable) before it is required to do so in July of 1997. 
In this case, the institution must comply with all other provisions of 
the 1995 Rule.
    Similarly, the transition rules state that, for example, the 
section of the former CRA regulation (12 CFR 25.6, 228.6, 345.6 or 
563e.6, as applicable) that addresses public notice requirements does 
not expire until January 1, 1997. However, the public notice 
requirements (12 CFR 25.44, 228.44, 345.44 or 563e.44, as applicable) 
in the 1995 Rule are different from the former requirements. 
Institutions would find it confusing, if not impossible, to comply 
completely with both provisions. Therefore, once an institution either 
voluntarily or mandatorily becomes subject to the performance tests and 
standards of the 1995 Rule, the provisions of the former CRA regulation 
(12 CFR 25.3 through 25.7, 228.3 through 25.7, 345.3 through 345.7, or 
563e.3 through 563e.7, as applicable) no longer apply to that 
institution, even though they may continue to apply to other 
institutions.
    Therefore, to clarify these provisions, the agencies are amending 
12 CFR 25.51(a), 228.51(a), 345.51(a), and 563e.51(a) by adding at the 
end of paragraph (a), a sentence explaining that once an institution is 
either voluntarily or mandatorily subject to the performance tests and 
standards of the 1995 Rule, the institution must comply with all of the 
requirements of the 1995 Rule and is no longer subject to the 
requirements of the former CRA regulation.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
OCC, Board, FDIC, and OTS hereby certify that this joint final rule 
will not have a significant economic impact on a substantial number of 
small entities. The agencies expect that this joint final rule will not 
have significant secondary or incidental effects on a substantial 
number of small entities, or create any additional burden on small 
entities. The joint final rule merely makes technical corrections to 
two cross-references and clarifies requirements of the transition rules 
already adopted by the agencies. These changes will not increase and 
may, in fact, reduce the burden on institutions because they will make 
the rules clearer. Accordingly, a regulatory flexibility analysis is 
not required.

Paperwork Reduction Act of 1995

    There are no collection of information requirements in this joint 
final rule.

Executive Order 12866

    OCC and OTS: The OCC and the OTS have determined that this joint 
final rule is not a significant regulatory action as defined in 
Executive Order 12866.

Unfunded Mandates Reform Act of 1995

    OCC and OTS: Section 202 of the Unfunded Mandates Reform Act of 
1995, Pub. L. 104-4, 109 Stat. 48 (1995) (Unfunded Mandates Act), 
requires that covered agencies prepare a budgetary impact statement 
before promulgating a rule that includes any Federal mandate that may 
result in the expenditure by State, local, and tribal governments, in 
the aggregate, or by the private sector, of $100 million or more in any 
one year. If a budgetary impact statement is required, section 205 of 
the Unfunded Mandates Act also requires covered agencies to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule. As discussed in the preamble, this joint final 
rule amends the agencies' CRA regulations to make two technical 
corrections and one clarification. Therefore, the OCC and the OTS have 
determined that the joint final rule will not result in expenditures by 
State, local, and tribal governments, or by the private sector, of more 
than $100 million in any one year. Accordingly, the OCC and the OTS 
have not prepared a budgetary impact statement or specifically 
addressed the regulatory alternatives considered. 

[[Page 66050]]


List of Subjects

12 CFR Part 25

    Community development, Credit, Investments, National banks, 
Reporting and recordkeeping requirements.

12 CFR Part 228

    Banks, Banking, Community development, Credit, Federal Reserve 
System, Investments, Reporting and recordkeeping requirements.

12 CFR Part 345

    Banks, Banking, Community development, Credit, Investments, 
Reporting and recordkeeping requirements.

12 CFR Part 563e

    Community development, Credit, Investments, Reporting and 
recordkeeping requirements, Savings associations.

OFFICE OF THE COMPTROLLER OF THE CURRENCY

12 CFR CHAPTER I

    For the reasons discussed in the joint preamble, 12 CFR part 25 is 
amended as follows:

PART 25--[AMENDED]

    1. The authority citation for part 25 continues to read as follows:

    Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215, 
215a, 481, 1814, 1816, 1828(c), and 2901 through 2907.


Sec. 25.12  [Amended]

    2. In Sec. 25.12(h)(3), the cross reference ``13 CFR 
121.802(a)(2)'' is revised to read ``13 CFR 121.802(a) (2) and (3)''.


Sec. 25.27  [Amended]

    3. In the last sentence of Sec. 25.27(h), the internal cross 
reference ``paragraph (c) of this section'' is revised to read 
``paragraph (d) of this section''.
    4. Paragraph (a) of Sec. 25.51 is amended by adding a sentence at 
the end of the paragraph to read as follows:


Sec. 25.51  Transition rules.

    (a) * * * Notwithstanding paragraph (c) of this section, when a 
bank, either voluntarily or mandatorily, becomes subject to the 
performance tests and standards of Secs. 25.21 through 25.27, the bank 
must comply with all the pertinent requirements of Secs. 25.11 through 
25.44, and no longer must comply with the requirements of Secs. 25.3 
through 25.7.
* * * * *
    Dated: December 8, 1995.
Eugene A. Ludwig,
Comptroller of the Currency.

FEDERAL RESERVE SYSTEM

12 CFR CHAPTER II

    For the reasons discussed in the joint preamble, 12 CFR part 228 is 
amended as follows:

PART 228--[AMENDED]

    1. The authority citation for part 228 continues to read as 
follows:

    Authority: 12 U.S.C. 321, 325, 1828(c), 1842, 1843, 1844, and 
2901 et seq.


Sec. 228.12  [Amended]

    2. In Sec. 228.12(h)(3), the cross reference ``13 CFR 
121.802(a)(2)'' is revised to read ``13 CFR 121.802(a) (2) and (3)''.


Sec. 228.27  [Amended]

    3. In the last sentence of Sec. 228.27(h), the internal cross 
reference ``paragraph (c) of this section'' is revised to read 
``paragraph (d) of this section''.
    4. Paragraph (a) of Sec. 228.51 is amended by adding a sentence at 
the end of the paragraph to read as follows:


Sec. 228.51  Transition rules.

    (a) * * * Notwithstanding paragraph (c) of this section, when a 
bank, either voluntarily or mandatorily, becomes subject to the 
performance tests and standards of Secs. 228.21 through 228.27, the 
bank must comply with all the pertinent requirements of Secs. 228.11 
through 228.44, and no longer must comply with the requirements of 
Secs. 228.3 through 228.7.
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System, December 8, 1995.
William W. Wiles,
Secretary of the Board.

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR CHAPTER III

    For the reasons discussed in the joint preamble, 12 CFR part 345 is 
amended as follows:

PART 345--[AMENDED]

    1. The authority citation for part 345 continues to read as 
follows:

    Authority: 12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u and 2901-
2907, 3103-3104, and 3108(a).


Sec. 345.12  [Amended]

    2. In Sec. 345.12(h)(3), the cross reference ``13 CFR 
121.802(a)(2)'' is revised to read ``13 CFR 121.802(a) (2) and (3)''.


Sec. 345.27  [Amended]

    3. In the last sentence of Sec. 345.27(h), the internal cross 
reference ``paragraph (c) of this section'' is revised to read 
``paragraph (d) of this section''.
    4. Paragraph (a) of Sec. 345.51 is amended by adding a sentence at 
the end of the paragraph to read as follows:


Sec. 345.51  Transition rules.

    (a) * * * Notwithstanding paragraph (c) of this section, when a 
bank, either voluntarily or mandatorily, becomes subject to the 
performance tests and standards of Secs. 345.21 through 345.27, the 
bank must comply with all the pertinent requirements of Secs. 345.11 
through 345.44, and no longer must comply with the requirements of 
Secs. 345.3 through 345.7.
* * * * *
    By order of the Board of Directors of the Federal Deposit 
Insurance Corporation.

    Dated: December 8, 1995.
Jerry L. Langley,
Executive Secretary.

OFFICE OF THRIFT SUPERVISION

12 CFR CHAPTER V

    For the reasons discussed in the joint preamble, 12 CFR part 563e 
is amended as follows:

PART 563e--[AMENDED]

    1. The authority citation for part 563e continues to read as 
follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1814, 1816, 
1828(c), and 2901 through 2907.


Sec. 563e.12  [Amended]

    2. In Sec. 563e.12(g)(3), the cross reference ``13 CFR 
121.802(a)(2)'' is revised to read ``13 CFR 121.802(a) (2) and (3)''.


Sec. 563e.27  [Amended]

    3. In the last sentence of Sec. 563e.27(h), the internal cross 
reference ``paragraph (c) of this section'' is revised to read 
``paragraph (d) of this section''.
    4. Paragraph (a) of Sec. 563e.51 is amended by adding a sentence at 
the end of the paragraph to read as follows:


Sec. 563e.51  Transition rules.

    (a) * * * Notwithstanding paragraph (c) of this section, when a 
savings association, either voluntarily or mandatorily, becomes subject 
to the performance tests and standards of Secs. 563e.21 through 
563e.27, the savings association must comply with all the pertinent 
requirements of Secs. 563e.11 through 563e.44, and no longer must 
comply with the requirements of Secs. 563e.3 through 563e.7.
* * * * * 

[[Page 66051]]

    Dated: December 13, 1995.

    By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 95-30823 Filed 12-19-95; 8:45 am]
BILLING CODE 4810-33-P
Last Updated 07/17/1999 communications@fdic.gov