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Press Releases
[Federal Register: March 11, 2005 (Volume 70, Number 47)]
[Proposed Rules]
[Page 12148-12161]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11mr05-22]

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

========================================================================



[[Page 12148]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 25

[Docket No. 05-04]
RIN 1557-AB98

FEDERAL RESERVE SYSTEM

12 CFR Part 228

[Regulation BB; Docket No. R-1225]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 345

RIN 3064-AC89


Community Reinvestment Act Regulations

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

ACTION: Joint notice of proposed rulemaking.

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

SUMMARY: The OCC, Board, and FDIC (collectively, ``federal banking
agencies'' or ``the Agencies'') are issuing this notice of proposed
rulemaking that would revise certain provisions of our rules
implementing the Community Reinvestment Act (CRA). We plan to take this
action in response to public comments received by the federal banking
agencies and the Office of Thrift Supervision (OTS) on a February 2004
inter-agency CRA proposal and by the FDIC on its August 2004 CRA
proposal. The current proposal would address regulatory burden imposed
on some smaller banks by revising the eligibility requirements for CRA
evaluation under the lending, investment, and service tests.
Specifically, the proposal would provide a simplified lending test and
a flexible new community development test for small banks with an asset
size between $250 million and $1 billion. Holding company affiliation
would not be a factor in determining which CRA evaluation standards
applied to a bank. In addition, the proposal would revise the term
``community development'' to include certain community development
activities, including affordable housing, in underserved rural areas
and designated disaster areas.

DATES: Comments must be received by May 10, 2005.

ADDRESSES: Comments should be directed to:
    OCC: You should include OCC and Docket Number 05-04 in your
comment. You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.
     OCC Web Site: http://www.occ.gov. Click on ``Contact

the OCC,'' scroll down and click on ``Comments on Proposed
Regulations.''
     E-mail Address: regs.comments@occ.treas.gov.
     Fax: (202) 874-4448.
     Mail: Office of the Comptroller of the Currency, 250 E
Street, SW., Mail Stop 1-5, Washington, DC 20219.
     Hand Delivery/Courier: 250 E Street, SW., Attn: Public
Information Room, Mail Stop 1-5, Washington, DC 20219.
    Instructions: All submissions received must include the agency name
(OCC) and docket number or Regulatory Information Number (RIN) for this
notice of proposed rulemaking. In general, the OCC will enter all
comments received into the docket without change, including any
business or personal information that you provide. You may review
comments and other related materials by any of the following methods:
     Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC's Public Information Room, 250 E
Street, SW., Washington, DC. You can make an appointment to inspect
comments by calling (202) 874-5043.
     Viewing Comments Electronically: You may request e-mail or
CD-ROM copies of comments that the OCC has received by contacting the
OCC's Public Information Room at regs.comments@occ.treas.gov.
     Docket: You may also request available background
documents and project summaries using the methods described above.
    Board: You may submit comments, identified by Docket No. R-1225, by
any of the following methods:
     Agency Web Site: http://www.federalreserve.gov Follow the instructions for submitting 
comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.   
     Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
     Fax: 202/452-3819 or 202/452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as

submitted, except as necessary for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
    FDIC: You may submit comments, identified by RIN number by any of
the following methods:
     Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html.
 Follow instructions for submitting comments on

the Agency Web Site.
     E-mail: Comments@FDIC.gov. Include the RIN number in the
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m.
     Instructions: All submissions received must include the
agency name and RIN for this rulemaking. All comments received will be
posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html



[[Page 12149]]

including any personal information provided.

FOR FURTHER INFORMATION CONTACT:
    OCC: Michael Bylsma, Director, or Margaret Hesse, Special Counsel,
Community and Consumer Law Division, (202) 874-5750; Karen Tucker,
National Bank Examiner, Compliance Division, (202) 874-4428; or Patrick
T. Tierney, Attorney, Legislative and Regulatory Activities (202) 874-
5090, Office of the Comptroller of the Currency, 250 E Street, SW.,
Washington, DC 20219.
    Board: William T. Coffey, Senior Review Examiner, (202) 452-3946;
Catherine M.J. Gates, Oversight Team Leader, (202) 452-3946; Kathleen
C. Ryan, Counsel, (202) 452-3667; or Dan S. Sokolov, Senior Attorney,
(202) 452-2412, Division of Consumer and Community Affairs, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue, NW., Washington, DC 20551.
    FDIC: Richard M. Schwartz, Counsel, Legal Division, (202) 898-7424;
Susan van den Toorn, Counsel, Legal Division, (202) 898-8707; or Robert
W. Mooney, Chief, CRA and Fair Lending Policy Section, Division of
Supervision and Consumer Protection, (202) 898-3911; Federal Deposit
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

Background

    Advance Notice of Proposed Rulemaking. In 1995, when the OCC, the
Board, the OTS, and the FDIC (collectively, ``federal banking and
thrift agencies'' or ``four agencies'') adopted major amendments to
regulations implementing the Community Reinvestment Act, they committed
to reviewing the amended regulations in 2002 for their effectiveness in
placing performance over process, promoting consistency in evaluations,
and eliminating unnecessary burden. (60 FR 22156, 22177, May 4, 1995).
The review was initiated in July 2001 with the publication in the
Federal Register of an advance notice of proposed rulemaking (66 FR
37602, July 19, 2001). The federal banking and thrift agencies
indicated that they would determine whether and, if so, how the
regulations should be amended to better evaluate financial
institutions' performance under CRA, consistent with the Act's
authority, mandate, and intent. The four agencies solicited comment on
the fundamental issue of whether any change to the regulations would be
beneficial or warranted, and on eight discrete aspects of the
regulations. About 400 comment letters were received, most from banks
and thrifts of varying sizes and their trade associations (``financial
institutions'') and local and national nonprofit community advocacy and
community development organizations (``community organizations'').
    The comments reflected a consensus that certain fundamental
elements of the regulations are sound, but demonstrated a disagreement
over the need and reasons for change. Community organizations advocated
that the regulations needed to be changed to reflect developments in
the industry and marketplace; financial institutions were concerned
principally with reducing burden consistent with maintaining or
improving the regulations' effectiveness. In reviewing these comments,
the federal banking and thrift agencies were particularly mindful of
the need to balance the desire to make changes that might ``fine tune''
the regulations, with the need to avoid unnecessary and costly
disruption to reasonable CRA policies and procedures that the industry
has put into place under the current rules.
    Joint Agency Regulatory Proposal to Address Small Institution
Regulatory Burden and Illegal or Predatory Lending Practices. In
February 2004, the federal banking and thrift agencies issued identical
proposals to amend their respective CRA regulations to increase the
limit on the asset size of institutions classified as ``small
institutions'' that are eligible for streamlined CRA evaluations and
exempt from CRA data reporting obligations. (69 FR 5729, Feb. 6, 2004).
Under the current rule, a ``small institution'' is an institution that
has less than $250 million in assets and is either independent or a
member of a holding company with less than $1 billion in assets. The
four agencies proposed to re-define a ``small institution'' as one with
fewer than $500 million in assets. The holding company criterion would
have been eliminated under the proposal.
    The commenters were deeply split on the proposal. A majority of
over 250 community bank commenters, and all of the trade associations
commenting on behalf of community banks, urged the federal banking and
thrift federal banking agencies to extend the proposed burden relief to
all institutions with assets under $2 billion, or at least to all
institutions with assets under $1 billion; a few favored the proposed
$500 million threshold. Virtually every one of over 250 community group
commenters strongly opposed changing the definition of ``small
institution'' or exempting any more institutions from the three-part
test (lending, services, and investments). These commenters urged that
the threshold not be changed so that community development activities
continue to be evaluated, as they are today, in banks with $250 million
or more in assets.
    The federal banking and thrift agencies also proposed to revise and
clarify the regulations to provide that evidence of certain abusive and
illegal credit practices will adversely affect an agency's evaluation
of a bank's CRA performance, including evidence of a pattern or
practice of extending home mortgage or consumer loans based
predominantly on the foreclosure or liquidation value of the collateral
by the institution, where the borrower cannot be expected to be able to
make the payments required under the terms of the loan. The proposal
clarified that a bank's evaluation will be adversely affected by such
abusive or illegal credit practices regardless of whether the practices
involve loans in the bank's assessment area(s) or in any other location
or geography. It also provided that a bank's CRA evaluation can be
adversely affected by evidence of such practices by any affiliate, if
any loans of that affiliate have been considered in the institution's
CRA evaluation.
    While commenters differed in their reaction to many aspects of the
proposal, many commenters, including community organizations and
financial institutions, opposed--as either inadequate or
inappropriate--the provision that evidence of collateral-based mortgage
lending would adversely affect a bank's CRA evaluation.
    Recent OTS Rulemaking. On August 18, 2004, the OTS published a
final rule that expanded the category of ``small savings associations''
subject to OTS CRA regulations to those under $1 billion, regardless of
holding-company affiliation. The OTS announced that it was taking this
action on July 16, 2004, and that same day, the OCC and the Board
announced separately that they would not proceed with their respective
proposals. The Board formally withdrew its proposal. The OCC did not
formally withdraw its proposal, but did not adopt it.
    On November 24, 2004, the OTS issued another proposed rulemaking to
revise the definition of ``community development'' to permit
consideration of such activities in underserved non-metropolitan areas,
and to solicit comment on the appropriate consideration of such
community development activities in any areas affected by natural
disasters or major community disruptions. The OTS

[[Page 12150]]

further solicited comment on providing substantial flexibility in the
way that CRA ratings are assigned for institutions subject to the
lending, investment, and service tests (savings associations with
assets of $1 billion or more). Under the OTS proposal, 50% or more of a
large savings association's CRA rating would be based on lending, and
the remaining percentage would be based on any other type or types of
CRA activity (services or investments) that the association elects to
have evaluated. The OTS also asked for comment on whether it should
eliminate the Investment Test entirely.
    FDIC Proposal. On August 20, 2004, the FDIC issued a new proposal
on the CRA evaluation of banks defined as ``small.'' (69 FR 51611, Aug.
20, 2004) The FDIC's new proposal would expand the category of ``small
banks'' to those under $1 billion, regardless of any holding-company
size or affiliation. For small banks with assets between $250 million
and $1 billion, the FDIC proposal would add to the five performance
criteria of the current streamlined small bank test a new sixth
criterion taking into account a bank's record of community development
lending, investments, or services ``based on the opportunities in the
market and the bank's own strategic strengths.'' While these community
development activities would not be a separately rated test, the FDIC
requested comment on whether it should apply a separate community
development test in addition to the existing streamlined performance
criteria and on what weighting the community development test would
have in assigning an overall performance rating. The FDIC also proposed
to expand the definition of ``community development'' to include
activities that benefit rural areas and individuals in rural areas.
    The FDIC's proposal generated approximately 11,500 comment letters.
These comments were sent by a wide spectrum of commenters, including
over 4,000 from community bankers, over 1,500 from various community
organizations, and over 5,000 from individuals. As with the February
2004 interagency proposal, the commenters were deeply divided on the
issues presented in the August proposal. Nearly all of the comments
received from bankers and banking organizations supported a change in
the small bank dollar threshold, primarily as a way to reduce
administrative burden. Bankers were mixed on the community development
performance criterion. Some supported a community development criterion
as an effective compromise, while others opposed the criterion
altogether on one of two grounds: (1) Community development lending and
investments are already part of the loan-to-deposit performance
criterion assessing the level of lending activity \1\ or (2) community
development activities should be based on an overall subjective
assessment, not an artificial test. Most of the banking commenters
opposed making the community development test a separate test.
---------------------------------------------------------------------------

    \1\ Some commenters also noted that, under existing regulations,
small banks can elect to be evaluated under the large bank lending,
investment, and service tests.
---------------------------------------------------------------------------

    Community groups almost universally opposed any increase in the
small bank threshold. These commenters asserted that the burden
argument made by banks did not justify a change. This group also
uniformly opposed the community development performance criterion on
the ground that permitting banks to choose one or more lending,
investment, and service activities would lead to cut backs in
investments and services currently required under the large bank test.
The community group commenters generally supported a separate community
development test.
    Commenters were mixed on the addition of ``rural'' to the
definition of ``community development.'' Some supported the proposal
because it would permit CRA credit for such rural-based activities as
funding local water projects, school construction, or rehabilitation of
a Main Street retail district in rural areas lacking sufficient
financial resources. Many commenters were concerned that the mere
inclusion of the phrase ``individuals who reside in rural areas'' would
permit banks to get CRA credit for loans, investments, or services to
middle-class or wealthy individuals.

Discussion

    The CRA requires the federal banking and thrift agencies to assess
the record of each insured depository institution in meeting the credit
needs of its entire community, including low- and moderate-income
neighborhoods, consistent with safe and sound operation of the
institution and to take that record into account when the agency
evaluates an application by the institution for a deposit facility.\2\
---------------------------------------------------------------------------

    \2\ 12 U.S.C. 2903.
---------------------------------------------------------------------------

    The federal banking agencies continue to believe that it is both
worthwhile and possible to improve the CRA rules in ways that reduce
unnecessary burden while at the same time maintaining and improving the
effective implementation of the CRA. Moreover, we believe that it is
important to take steps at this time to develop and propose rules to
achieve these goals, and to work toward achieving standards that
ultimately can apply on a uniform basis to all banks subject to the
CRA. Therefore, the federal banking agencies request comment on
proposed regulatory revisions that balance the objective of providing
meaningful regulatory relief for additional community banks with the
objectives of preserving and encouraging meaningful CRA activities by
those same banks.
    As noted above, commenters were divided on the merits of that
portion of the February 2004 and August 2004 proposals that would have
increased the limit on the size of banks that would be eligible for
treatment as a ``small bank.'' The comments in favor of the proposal
focused on the potential regulatory relief for insured institutions,
while those opposed expressed concern that the proposal would result in
decreased community development activities in areas that are
particularly in need of credit and investment, notably rural areas.
    In light of these comments, the federal banking agencies request
comment on this revised proposal. The new proposal addresses both the
comments from community banks and comments from community
organizations. It responds to community banks concerned about the
reduction of undue regulatory burden by extending eligibility for
streamlined lending evaluations and the exemption from data reporting
to banks under $1 billion without regard to holding company assets. It
addresses the concerns of community organizations that urged the
federal banking and thrift agencies to continue to evaluate community
development participation, by providing that the community development
records of banks between $250 million and $1 billion would be
separately evaluated and rated, but provides a more streamlined basis
than the current rule for doing so. It responds to suggestions from
both community banks and community organizations that the definition of
``community development'' is too confined by proposing a more flexible
approach to the types of community development activities that would be
considered, and by expanding the definition of community development
activities in underserved rural areas and designated disaster areas. In
short, the new proposal tries to strike a balance between burden
reduction for community banks and effective evaluation of community
development by those banks.
    The key differences between this proposal and the February 2004
interagency proposal are three-fold. First, as with the FDIC's August
2004

[[Page 12151]]

proposal, the new proposal would raise the threshold for a ``small
bank'' to banks with assets of less than $1 billion, not $500 million,
regardless of any holding company size or affiliation. Unlike the prior
proposals, the new proposal would provide an adjustment of the
threshold for inflation, based on changes to the Consumer Price Index.
    Second, the new proposal would add a flexible new community
development test that would be separately rated in CRA examinations for
banks with at least $250 million and less than $1 billion in assets
(these banks will be referred to as ``intermediate small banks'').
Ratings for intermediate small banks would be based on a rating on this
community development test and on a separate rating for the streamlined
small bank lending test. An intermediate small bank would not be
eligible for an overall rating of ``satisfactory'' unless it received
ratings of ``satisfactory'' on both the lending and community
development tests.
    Third, the definition of ``community development'' would be
expanded to encompass: (1) Affordable housing for individuals in
underserved rural areas and designated disaster areas (in addition to
low- or moderate-income individuals) and (2) community development
activities that revitalize or stabilize underserved rural areas and
designated disaster areas (in addition to low- or moderate-income
areas).\3\ The current definition of ``community development,'' which
hinges on targeting low- or moderate-income people or census tracts,
has been criticized by community banks and community organizations
alike for needlessly excluding rural areas that often do not have
census tracts that meet the definition of ``low- or moderate-income.''
Indeed, about 60% of non-metropolitan counties lack such low- and
moderate-income tracts. As a result, many rural areas in need of
community development activities are not in low- or moderate-income
tracts.
---------------------------------------------------------------------------

    \3\ This represents a change from the FDIC's August 2004
proposal. In that proposal, FDIC proposed amending the prong of the
definition of community development relating to community services.
See 12 CFR 345.12(g)(2).
---------------------------------------------------------------------------

    The current definition of ``community development'' also does not
explicitly provide that it encompasses activities in areas affected by
disasters. For example, there has been unnecessary uncertainty about
the CRA treatment of bank revitalization activities in areas affected
by natural disasters such as hurricanes or in, for example, the
commercial and residential areas surrounding the site of the World
Trade Center. Affordable housing for individuals in underserved rural
areas and in designated disaster areas, and activities that promote the
revitalization and stabilization of such areas, such as for
infrastructure improvements, community services, and small business
development, are fully consistent with the goals and objectives of the
CRA because these projects can benefit the entire community, including,
but not limited to, low- or moderate-income individuals or
neighborhoods.

Size Threshold

    Under the proposal, intermediate small banks would no longer have
to report originations and purchases of small business, small farm, and
community development loans. This change would account for most of the
cost savings and paperwork burden reduction for intermediate small
banks.
    The proposal also would annually adjust the asset size for small
and intermediate small banks based on changes to the Consumer Price
Index. Using an index to adjust dollar figures for the effects of
inflation is commonplace, and is used in other federal lending
regulations, such as the Home Mortgage Disclosure Act. 12 U.S.C. 2801
et seq.

Community Development Test for Intermediate Small Banks

    As stated above, comments were mixed on the FDIC's inquiry as to
whether the community development test should be separated from the
current small bank test. Many industry commenters preferred to have a
community development criterion, which would permit a bank to engage in
one or more community development activities, and opposed a separate
community development test. On the other hand, many community
organizations and others expressed concern that the criterion was
overly flexible and would result in a narrow focus that would ignore a
broad range of community needs, including investments.
    The OCC, FDIC, and Board believe that the proposal for a separate
community development rating presents an appropriate focus on community
development activities for intermediate small banks and makes
transparent the weight that community development performance receives
in the overall rating. Under the proposed community development test
for these ``intermediate'' small banks, community development loans,
qualified investments, and community development services would be
evaluated together, resulting in a single rating for community
development performance. While the lending test for small banks permits
consideration of community development lending and qualified
investments ``as appropriate,'' such activities by an intermediate
small bank generally would be considered under the community
development test. An intermediate small bank's rating for community
development would play a significant role in the bank's overall rating,
as would its rating on the separate test of the bank's lending. To
ensure that community development performance and retail lending are
appropriately weighted under the proposal, and given the flexibility
that would be available to satisfy the community development test
through a variety of activities, an intermediate small bank would have
to achieve a rating of at least satisfactory on both tests to be
assigned an overall rating of satisfactory.
    The number and amount of community development loans, the number
and amount of qualified investments, and the provision of community
development services, by an intermediate small bank, and the bank's
responsiveness through such activities to community development
lending, investment, and services needs, would be evaluated in the
context of the bank's capacities, business strategy, the needs of the
relevant community, and the number and types of opportunities for
community development activities. The federal banking agencies intend
that the proposed community development test would be applied flexibly
to permit a bank to apply its resources strategically to the types of
community development activities (loans, investments, and services)
that are most responsive to helping to meet community needs, even when
those activities are not necessarily innovative, complex, or new.
    As noted in the February 2004 proposal, some community banks face
intense competition for a limited supply of qualified investments that
are safe and sound and yield an acceptable return. Competition for
scarce investments also may result in ``churning,'' or the repeated
purchase and sale, of the same pool of investments. To ``fill the
silo'' of investments for purposes of the CRA investment test, these
banks may have made or purchased investments that may not be meaningful
or responsive to the needs of their community, whereas additional
lending or provision of services by the bank could have been more
responsive to local community development needs. The OCC, FDIC, and
Board recognize that these constraints may affect the investment
performance of particular banks, and believe that a more flexible
community

[[Page 12152]]

development test for intermediate small banks provides a better
framework to evaluate a bank's capacity, the types of investments that
are reasonably available in a bank's community, and how a bank fosters
community development goals in its assessment areas.
    As part of the proposed community development test for intermediate
small banks, the OCC, FDIC, and Board also anticipate that examiners
would use their discretion, using performance context, to assign
appropriate weight in a bank's current period rating to prior-period
outstanding investments that reflect a substantial financial commitment
or outlay by the bank designed to have a multi-year impact, in addition
to investments made during the current examination cycle.
    In providing this flexibility for intermediate small banks, it is
not the intention of the federal banking agencies to permit a bank to
simply ignore one or more categories of community development. Nor
would the proposal prescribe any required threshold proportion of
community development loans, qualified investments, and community
development services for these banks. Instead, the OCC, FDIC, and Board
would expect that a bank will appropriately assess the needs in its
community, engage in different types of community development
activities based on those needs and the bank's capacities, and that it
will take reasonable steps to apply its community development resources
strategically to meet those needs.
    Under the proposal, retail banking services provided by
intermediate small banks would no longer be evaluated in a separate
service test. Instead, services for low- and moderate-income people
would be taken into account in the community development test. Under
that test, the federal banking agencies would consider bank services
intended primarily to benefit low- and moderate-income people, such as
low-cost bank accounts and banking services such as low-cost remittance
services.
    Giving banks more flexibility on how to apply their community
development resources to respond to community needs through a more
strategic use of loans, investments, and services is intended to reduce
burden and make the evaluation of community banks' community
development records more effective.

Community Development Definition

    The regulations' present definition of ``community development''
has been criticized by community banks and community organizations
alike for failing to recognize the unique community development needs
of certain rural areas. The definition covers four categories of
activities, three of which (affordable housing, community services, and
economic development) are defined in terms of the activity's targeting
of low- or moderate-income people or small businesses or farms, and one
of which (revitalization and stabilization activities) is defined in
terms of its targeting of low- or moderate-income census tracts. The
OCC, FDIC, and Board propose to amend two of the categories--affordable
housing and revitalization and stabilization activities--by adding
references to individuals in ``underserved rural areas'' and in
``designated disaster areas.'' \4\
---------------------------------------------------------------------------

    \4\ Staff interpretations of ``affordable housing'' and
``revitalization and stabilization'' can be found in Interagency
Questions and Answers Regarding Community Reinvestment, (66 FR
36620, 36625-36626, July 12, 2001) (Q&A --.12(h)(1)-1, --.12(h)(4)-
1).
---------------------------------------------------------------------------

    In response to the FDIC's August 2004 proposal to revise the
definition of ``community development'' to include the provision of
affordable housing to individuals in rural areas (in addition to low-
or moderate-income individuals under the current rule), several
commenters noted that the provision of affordable housing was critical
in certain rural areas. Some community organizations serving rural
areas commented that the CRA process should promote affordable housing
in rural areas across the country.
    As described in the ``Request for Comments'' discussion below, the
OCC, FDIC, and Board seek comment on a variety of approaches to
identify the community development needs of rural areas. The approach
reflected in the proposed amendments is based on the premise that the
provision of affordable housing--in addition to activities that
revitalize and stabilize underserved rural areas--may meet a critical
need of individuals in certain underserved rural areas, even if those
individuals may not meet the technical requirements of the definition
of ``low- or moderate-income'' in the current regulation. The proposed
amendment would clarify that bank support of affordable housing that
benefits individuals in need of affordable housing in underserved rural
areas will qualify as a community development activity.
    With respect to the current definition covering revitalization and
stabilization activities, this category does not address revitalization
and stabilization activities in most rural counties, since most rural
counties do not have any low- or moderate-income census tracts.\5\
Under the CRA regulation, a tract's income classification derives from
its relationship to the median family income of the state's rural, or
non-metropolitan areas as a whole, which could be relatively low and
declining. Community banks and community organizations have said that
the tract-income limitation has made the definition of ``community
development'' ineffective for addressing the needs of rural areas that
do not have low- or moderate-income tracts, but are in decline, have
been designated for redevelopment, or need revitalizing or stabilizing.
This aspect of the proposed amendment to the definition of ``community
development'' is designed to recognize the benefits of activities that
revitalize and stabilize underserved rural areas that do not meet the
technical definition of ``low- or moderate-income'' census tracts. Such
activities might include, depending upon the circumstances, state or
local infrastructure bonds and loans to construct healthcare
facilities. They would not include, however, activities that benefit
primarily higher-income individuals in underserved rural areas or rural
areas that are not underserved. In evaluating the responsiveness of
community development activities in underserved rural areas, examiners
would give significant weight to factors such as the extent to which
low- or moderate-income individuals benefited from the activities.
---------------------------------------------------------------------------

    \5\ Under the definition of ``low- or moderate-income'' census
tract in the CRA regulations, 57 percent of non-metropolitan
counties have no low- or moderate-income tracts, compared to 13
percent of metropolitan counties. The reason for this disparity is
that rural census tracts are drawn over relatively large geographic
areas, often having relatively heterogeneous populations that, when
averaged, tend toward the middle. This leads to a concentration of
72 percent of rural census tracts in the middle-income category,
which leaves a small share (15 percent) in the low- and moderate-
income categories. Moreover, because most rural counties have
relatively few census tracts, the relatively few low- or moderate-
income rural census tracts are distributed unevenly among rural
counties. As would be expected, they also appear to be distributed
unevenly among bank CRA assessment areas. About 42 percent of non-
metropolitan assessment areas reported by large banks in 2003,
compared to 14 percent of the metropolitan assessment areas they
reported, lacked such tracts. (The regulation requires large banks
to report their assessment areas; the assessment areas of small
banks are not required to be reported.)
---------------------------------------------------------------------------

    Under the revised community development definition, a ``designated
disaster area'' is an area that has received an official designation as
a disaster area.

[[Page 12153]]

Effect of Certain Credit Practices on CRA Evaluations

    The OCC, FDIC, and Board again propose to revise the regulations to
address the impact on a bank's CRA rating of evidence of discrimination
or other illegal credit practices. The regulations would provide that
evidence of discrimination, or evidence of credit practices that
violate an applicable law, rule, or regulation, will adversely affect
an agency's evaluation of a bank's CRA performance. The regulations
also would be revised to include an illustrative list of such
practices, including evidence of discrimination against applicants on a
prohibited basis in violation of, for example, the Equal Credit
Opportunity (15 U.S.C. 1691 et seq.) or Fair Housing Acts (42 U.S.C.
3601 et seq.); evidence of illegal referral practices in violation of
section 8 of the Real Estate Settlement Procedures Act (12 U.S.C.
2607); evidence of violations of the Truth in Lending Act (12 U.S.C.
1601 et seq.) concerning a consumer's right to rescind a credit
transaction secured by a principal residence; evidence of violations of
the Home Ownership and Equity Protection Act (15 U.S.C. 1639); and
evidence of unfair or deceptive credit practices in violation of
section 5 of the Federal Trade Commission Act (15 U.S.C. 45(a)(1)).\6\
We believe that specifying examples of violations that give rise to
adverse CRA consequences in the CRA regulations, rather than solely in
interagency guidance on the regulations, will improve the usefulness of
the regulations and provide critical information in primary compliance
source material.
---------------------------------------------------------------------------

    \6\ Evidence of credit practices that violate other laws, rules
or regulations, including a federal banking agency regulation or a
state law, if applicable, also may adversely affect a bank's CRA
evaluation.
---------------------------------------------------------------------------

    Under the proposal, a bank's evaluation will be adversely affected
by such practices regardless of whether the practices involve loans in
the bank's assessment area(s) or in any other location or geography. In
addition, a bank's CRA evaluation also can be adversely affected by
evidence of such practices by any affiliate, if any loans of that
affiliate have been considered in the bank's CRA evaluation.
    In response to comments on the February 2004 proposal, the federal
banking agencies do not propose to include in the CRA regulations a
provision that evidence of collateral-based lending also can adversely
affect an agency's evaluation of a bank's CRA performance.

Request for Comments

    The OCC, FDIC, and Board welcome comments on any aspect of this
proposal, particularly, those issues noted below.
     The federal banking agencies invite comment on whether
other approaches would be more appropriate to addressing the CRA
burdens and obligations of banks with less than $1 billion in assets.
Is there another appropriate asset threshold to use when defining
intermediate small banks, and, if so, why?
     We seek comment on the proposal to adjust the asset size
for small and intermediate small banks on an ongoing basis, based on
changes to the Consumer Price Index.
     Under the proposal, banks with assets between $250 million
and $1 billion will no longer be required to report data on small
business, small farm, and community development lending. The federal
banking agencies seek comment specifically addressing whether and how
the public has used the loan information that has been reported to date
by such intermediate small banks (for example, by reference to specific
studies on bank lending patterns that used the data), and whether other
sources of data about this lending can be used for such purposes going
forward.
     Does the proposal provide more flexibility in how an
intermediate small bank may apply its community development resources
through a more strategic use of loans, investments and services? Does
the proposal to permit examiners to use performance context to give
consideration in a current-period rating, to prior-period outstanding
investments that reflect a substantial financial commitment by the
bank, also provide more flexibility for intermediate small banks?
     Does the proposal to evaluate all community development
activities of intermediate small banks under one test have the
potential to make the evaluations of those banks' community development
performance more effective than under the current regulation?
     Should the community development test for intermediate
small banks be separately rated as proposed? If so, should an
intermediate small bank be required to achieve a rating of at least
``satisfactory'' under both the small bank lending and community
development tests to achieve an overall ``satisfactory'' CRA rating?
Should the bank's community development test performance be weighted
equally with its lending test performance in assigning an overall CRA
rating? Would other ratings floors or weights be appropriate to provide
greater flexibility in certain circumstances? If so, under what
circumstances?
     The federal banking agencies seek comment on whether the
existing definition of ``community development'' provides sufficient
recognition for community services to individuals residing in
underserved rural areas and designated disaster areas and, if not, how
to encourage the provision of such services to persons in underserved
rural areas and designated disaster areas that have the greatest
need.\7\
---------------------------------------------------------------------------

    \7\ The FDIC's August NPRM added individuals in rural
communities to the community services category. Comments were mixed
in response to this part of that proposal. Some commenters expressed
the concern that a broader definition would permit consideration of
activities that benefit middle- and upper-income individuals. On the
other hand, others stated that the regulations should recognize that
some rural communities lack financial resources for economic and
infrastructure improvement such as school construction, revitalizing
Main Street, and maintaining or improving water and sewer systems.
Banks are frequently called upon to help meet these needs. In light
of these comments, this proposal would not change the definition of
community development regarding community services provided to low-
or moderate-income individuals. Rather, the proposal recognizes that
activities that revitalize and stabilize underserved areas may also
include many activities that benefit rural residents. We also seek
comment on whether the definition of ``community development''
should be amended to explicitly include community services targeted
to individuals in undeserved rural and designated disaster areas.
---------------------------------------------------------------------------

     We also seek comment on the merits of the proposed
treatment of the definition of ``community development'' in underserved
rural and designated disaster areas and invite suggestions for
alternatives.
     We seek comment on the proper way to define ``rural.''
Should we adopt a definition and, if so, which one? For example, should
all areas outside a metropolitan area be considered ``rural''?
Alternatively, should the federal banking agencies define rural
consistent with the definition employed by the Census Bureau? The
Census Bureau defines any territory or population not meeting its
criteria for ``urban'' to be ``rural.'' Are there other definitions the
federal banking agencies should consider?
     We also seek comment on the proper way to define
``underserved'' when used in connection with rural areas. Should we
adopt a definition and, if so, which one? For example, should the term
refer solely to those rural areas showing signs of economic distress or
lack of investment? If so, what indicia should the federal banking
agencies use to identify such rural areas? Should we use criteria from
other federal programs, such as the Community Development

[[Page 12154]]

Financial Institutions Fund (CDFI) rules? Indicators used by the CDFI
Fund to define ``investment areas'' include counties with (a)
unemployment rates one-and-a-half times the national average, (b)
poverty rates of 20% or more, or (c) population loss of 10 percent or
more between the previous and most recent census, or a net migration
loss of 5 percent or more over the five-year period preceding the most
recent census.
     Should ``underserved rural area'' be defined in the
regulation to also encompass those rural areas that have been targeted
by a governmental agency for redevelopment, without regard to median
income characteristics of the area?
     Should ``underserved rural area'' be limited to low- and
moderate-income areas, without regard to whether those areas show signs
of economic distress, lack of investment, or are targeted for
redevelopment by a governmental agency? If so, should the OCC, FDIC,
and Board adopt a different method than currently exists in the
regulation for determining when a rural area is low- or moderate-
income? For example, under the current regulations, the area must be a
low- or moderate-income census tract, which the regulations define as a
tract with median family income that does not exceed 80% of the
statewide non-metropolitan median family income. Would raising the low-
and moderate-income threshold in non-metropolitan communities from 80%
of non-metropolitan median family income to some higher figure, such as
85%, 90%, or 100%, more appropriately identify underserved rural areas?
Alternatively, would identifying another measure of median income
instead of the non-metropolitan median income, such as the statewide
median income, more appropriately define low- and moderate-income for
purposes of defining underserved rural areas by reference to low- and
moderate-income characteristics?
     As proposed, the definition of ``community development''
would encompass affordable housing for people who do not meet the
regulatory definition of ``low- or moderate-income'' if, and only if,
they reside in underserved rural areas. The federal banking agencies
seek comment on whether the current regulatory definition of ``low- or
moderate-income individual'' is unduly restrictive for purposes of
identifying individuals in rural areas who need affordable housing. If
so, in what ways?

Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, sec.
722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the federal banking
agencies to use plain language in all proposed and final rules
published after January 1, 2000. We invite your comments on how to make
the proposal easier to understand. For example:
     Have we organized the material to suit your needs? If not,
how could this material be better organized?
     Are the requirements in the proposal clearly stated? If
not, how could the regulation be more clearly stated?
     Does the proposal contain language or jargon that is not
clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes to the format would make the regulation
easier to understand?
     What else could we do to make the regulation easier to
understand?

Community Bank Comment Request

    In addition, we invite your comments on the impact of this proposal
on community banks. The federal banking agencies recognize that
community banks operate with more limited resources than larger
institutions and may present a different risk profile. Thus, the
federal banking agencies specifically request comments on the impact of
the proposal on community banks' current resources and available
personnel with the requisite expertise, and whether the goals of the
proposal could be achieved, for community banks, through an alternative
approach.

Regulatory Flexibility Act

    OCC and FDIC: Under section 605(b) of the Regulatory Flexibility
Act (RFA), 5 U.S.C. 605(b), the regulatory flexibility analysis
otherwise required under section 604 of the RFA is not required if an
agency certifies, along with a statement providing the factual basis
for such certification, that the rule will not have a significant
economic impact on a substantial number of small entities. The OCC and
FDIC have reviewed the impact of this proposed rule on small banks and
certify that the proposed rule will not have a significant economic
impact on a substantial number of small entities.
    The Small Business Administration (SBA) has defined ``small
entities'' for banking purposes as a bank or savings institution with
less than $150 million in assets. See 13 CFR 212.01. This proposed rule
primarily affects banks with assets of at least $250 million and under
$1 billion. The proposed amendments decrease the regulatory burden for
banks within that asset range by relieving them of certain reporting
and recordkeeping requirements applicable to larger institutions.
    The proposal to eliminate the $1 billion holding company threshold
as a factor in determining whether banks will be subject to the
streamlined CRA examination or the more in-depth CRA examination
applicable to larger institutions will impact a limited number of small
banks, which are affiliated with holding companies with assets over $1
billion. The FDIC estimates that only 110 of approximately 5,300 FDIC-
regulated banks had assets of under $150 million and were affiliated
with a holding company with over $1 billion in assets. The OCC
estimates that only 36 of approximately 2,000 OCC-regulated banks met
these criteria. Because so few small banks will be affected by the
proposed revisions to Parts 25 and 345, a regulatory flexibility
analysis is not required. Nevertheless, the OCC and FDIC are willing,
in response to any comments received regarding the proposal's economic
impact on small banks with assets of under $150 million, to reevaluate
the RFA certifications and, if appropriate, publish regulatory
flexibility analyses in conjunction with the issuance of any final
rule.
    Board: Subject to certain exceptions, the Regulatory Flexibility
Act (5 U.S.C. 601-612) (RFA) requires an agency to publish an initial
regulatory flexibility analysis with a proposed rule whenever the
agency is required to publish a general notice of proposed rulemaking
for a proposed rule. The Supplementary Information describes the
proposed regulations and the proposal's objectives. The Board, in
connection with its initial regulatory flexibility analysis, requests
public comment in the following areas.

A. Reasons for the Proposed Rule

    As described in the SUPPLEMENTARY INFORMATION section, the Board,
together with the other Agencies, seek to improve the effectiveness of
the CRA regulations in placing performance over process, promoting
consistency in evaluations, and eliminating unnecessary burden. The
proposed rule is intended to reduce unnecessary burden while
maintaining or improving CRA's effectiveness in evaluating performance.

[[Page 12155]]

B. Statement of Objectives and Legal Basis

    The Supplementary Information describes the proposal's objectives.
The legal basis for the proposed rule is section 806 of the CRA.

C. Description of Small Entities To Which the Rule Applies

    The proposed rule would apply to all state-chartered banks that are
members of the Federal Reserve System; there are approximately 932 such
banks. The RFA requires the Board to consider the effect of the
proposal on small entities, which are defined for RFA purposes as all
banks with assets of less than $150 million. There are 473 state member
banks with less than $150 million of assets. All but about 12 state
member banks with assets of less than $150 million are already subject
to a streamlined CRA process that is unaffected by this proposal. The
rule would eliminate data reporting requirements for these 12 state
member banks by eliminating holding-company affiliation as a
disqualification for treatment as a ``small bank'' under the CRA
regulations.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    The Board does not believe that the proposed rule imposes any new
reporting or recordkeeping requirements, as defined in section 603 of
the RFA. As noted, the rule would eliminate holding-company affiliation
as a disqualification for treatment as a ``small bank'' under the CRA
regulations. Accordingly, the rule would eliminate data reporting
requirements for about 12 state member banks with assets of less than
$150 million. As noted above, all other state member banks with assets
under $150 million are already exempt from this reporting requirement.
    The Board believes that the proposed revisions to the definition of
``community development'' would not place additional compliance costs
or burdens on small institutions. Instead, this proposal would add
greater flexibility to the definition in response to requests made by
many small banks. The Board believes the same of the provisions
regarding the effect of evidence of illegal credit practices on CRA
evaluations. State banks of all sizes are already subject to laws
against such practices, and the proposal would not affect that.
    The Board seeks information and comment on whether application of
the proposed rule would impose any costs, compliance requirements, or
changes in operating procedures in addition to or which may differ from
those arising from the application of the statute.

E. Identification of Duplicative, Overlapping, or Conflicting Federal
Rules

    The Board does not believe there are any federal statutes or
regulations that would duplicate, overlap, or conflict with the
proposed rule. The Board seeks comment regarding any statues or
regulations, including state or local statutes or regulations, that
would duplicate, overlap, or conflict with the proposed rule.

F. Discussion of Significant Alternatives

    The proposed rule maintains the approach of the existing CRA
regulations in exempting small entities from reporting requirements and
providing for streamlined lending evaluations for small entities. A
complete exemption of small entities from all of the CRA's requirements
would be impermissible under the CRA statute. The Board welcomes
comments on any significant alternatives that would minimize the impact
of the proposed rule on small entities.

Executive Order 12866

    The OCC has determined that this proposed rule is not a significant
regulatory action under Executive Order 12866.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency
prepare a budgetary impact statement before promulgating any rule
likely to result in a 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 an agency to identify and consider a
reasonable number of regulatory alternatives before promulgating a
rule. The OCC has determined that the proposal will not result in
expenditures by State, local, and tribal governments, or by the private
sector, of $100 million or more in any one year. Accordingly, the
proposal is not subject to section 202 of the Unfunded Mandates Act.

Paperwork Reduction Act

Request for Comment on Proposed Information Collection

    In accordance with the requirements of the Paperwork Reduction Act
of 1995, the Agencies may not conduct or sponsor, and the respondent is
not required to respond to, an information collection (IC) unless it
displays a currently valid Office of Management and Budget (OMB)
control number (OCC, 1557-0160; Board, 7100-0197; and FDIC, 3064-0092).
    The FDIC has obtained OMB-approval for the paperwork burden
associated with its CRA regulation at 12 CFR Part 345 under OMB IC
3064-0092. The change in burden to IC 3064-0092 associated with this
proposal to raise the threshold for small banks from those with under
$250 million in assets to those with under $1 billion in assets was
submitted to and approved by OMB in connection with a similar proposal
published by the FDIC in August 2004 (69 FR 51611, Aug. 20, 2004). This
interagency proposal would not, if adopted as final, result in any
added change in burden to IC 3064-0092. Therefore, the FDIC is not
required to make a submission to OMB under the Paperwork Reduction Act
at this time. Nevertheless, the FDIC joins the OCC and the Board in
seeking additional comment on the paperwork burden associated with the
current proposal.
    The Agencies give notice that, at the end of the comment period,
the proposed collections of information, along with an analysis of the
comments, and recommendations received, will be submitted to OMB for
review and approval.
    Comments are invited on:
    (a) Whether the collection of information is necessary for the
proper performance of the Agencies' functions, including whether the
information has practical utility;
    (b) The accuracy of the estimates of the burden of the information
collection, including the validity of the methodology and assumptions
used;
    (c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
    (d) Ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
    (e) Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
    At the end of the comment period, the comments and recommendations

[[Page 12156]]

received will be analyzed to determine the extent to which the
information collections should be modified prior to submission to OMB
for review and approval. The comments will also be summarized or
included in the Agencies' requests to OMB for approval of the
collections. All comments will become a matter of public record.
    Comments should be addressed to:
    OCC: Mary H. Gottlieb or Camille Dixon, Office of the Comptroller
of the Currency, Legislative and Regulatory Activities Division,
Attention: Docket No. 05-04, 250 E Street, SW., Mailstop 8-4,
Washington, DC 20219. Due to delays in paper mail in the Washington
area, commenters are encouraged to submit their comments by fax to
(202) 874-4889 or by e-mail to camille.dixon@occ.treas.gov.
    Board: Comments should refer to Docket No. R-1225 and may be mailed
to Jennifer J. Johnson, Secretary, Board of Governors of the Federal
Reserve System, 20th Street and Constitution Avenue, N.W., Washington,
DC 20551. Please consider submitting your comments through the Board's
Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm
, by e-mail to regs.comments@federalreserve.gov, or by

fax to the Office of the Secretary at (202) 452-3819 or (202) 452-3102.
Rules proposed by the Board and other federal agencies may also be
viewed and commented on at http://www.regulations.gov.

    All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as

submitted, except as necessary for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper in Room MP-500 of the Board's Martin Building (C and 20th
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
    FDIC: Leneta G. Gregorie, Legal Division, Room MB-3082, Federal
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC
20429. All comments should refer to the title of the proposed
collection. Comments may be hand-delivered to the guard station at the
rear of the 17th Street Building (located on F Street), on business
days between 7 a.m. and 5 p.m., Attention: Comments/Executive
Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
    Comments should also be sent to Mark D. Menchik, Desk Officer,
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, Washington, DC 20503. Comments may also be sent by
e-mail to Mark_D._Menchik@omb.eop.gov.
    Title of Information Collection:
    OCC: Community Reinvestment Act Regulation--12 CFR 25.
    Board: Recordkeeping, Reporting, and Disclosure Requirements in
Connection with Regulation BB (Community Reinvestment Act).
    FDIC: Community Reinvestment--12 CFR 345.
    Frequency of Response: Annual.
    Affected Public:
    OCC: National banks.
    Board: State member banks.
    FDIC: State nonmember banks.
    Abstract: This Paperwork Reduction Act section estimates the burden
that would be associated with the regulations were the agencies to
change the definition of ``small institution'' as proposed, that is,
increase the asset threshold from $250 million to $1 billion and
eliminate any consideration of holding-company size. The two proposed
changes, if adopted, would make ``small'' approximately 1,522 insured
depository institutions that do not now have that status. That estimate
is based on data for all FDIC-insured institutions that filed Call
Reports in 2004. Those data also underlie the estimated paperwork
burden that would be associated with the regulations if the proposals
were adopted by the agencies. The proposed change to amend the
intermediate small bank performance standards to incorporate a separate
community development test would have no impact on paperwork burden
because the evaluation is based on information prepared by examiners.
    Estimated Paperwork Burden under the Proposal:
    OCC:
    Number of Respondents: 1,877.
    Estimated Time per Response: Small business and small farm loan
register, 219 hours; Consumer loan data, 326 hours; Other loan data, 25
hours; Assessment area delineation, 2 hours; Small business and small
farm loan data, 8 hours; Community development loan data, 13 hours;
HMDA out-of-MSA loan data, 253 hours; Data on lending by a consortium
or third party, 17 hours; Affiliated lending data, 38 hours; Request
for designation as a wholesale or limited purpose bank, 4 hours;
Strategic Plan, 275 hours; and Public file, 10 hours.
    Total Estimated Annual Burden: 160,782 hours.
    Board:
    Number of Respondents: 934.
    Estimated Time per Response: Small business and small farm loan
register, 219 hours; Consumer loan data, 326 hours; Other loan data, 25
hours; Assessment area delineation, 2 hours; Small business and small
farm loan data, 8 hours; Community development loan data, 13 hours;
HMDA out-of-MSA loan data, 253 hours; Data on lending by a consortium
or third party, 17 hours; Affiliated lending data, 38 hours; Request
for designation as a wholesale or limited purpose bank, 4 hours; and
Public file, 10 hours.
    Total Estimated Annual Burden: 114,580 hours.
    FDIC:
    Number of Respondents: 5,296.
    Estimated Time per Response: Small business and small farm loan
register, 219 hours; Consumer loan data, 326 hours; Other loan data, 25
hours; Assessment area delineation, 2 hours; Small business and small
farm loan data, 8 hours; Community development loan data, 13 hours;
HMDA out-of-MSA loan data, 253 hours; Data on lending by a consortium
or third party, 17 hours; Affiliated lending data, 38 hours; Request
for designation as a wholesale or limited purpose bank, 4 hours; and
Public file, 10 hours.
    Total Estimated Annual Burden: 193,975 hours.

Executive Order 13132

    The OCC has determined that this proposal does not have any
Federalism implications, as required by Executive Order 13132.

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, Investments,
Reporting and recordkeeping requirements.

12 CFR Part 345

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

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons discussed in the joint preamble, part 25 of chapter
I of title 12 of the Code of Federal Regulations is proposed to be
amended as follows:

[[Page 12157]]

PART 25--COMMUNITY REINVESTMENT ACT AND INTERSTATE DEPOSIT
PRODUCTION REGULATIONS

    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), 1835a, 2901 through 2907, and 3101
through 3111.

    2. In Sec.  25.12, revise paragraphs (g)(1), (g)(4), and (u) to
read as follows:


Sec.  25.12  Definitions.

* * * * *
    (g) Community development means:
    (1) Affordable housing (including multifamily rental housing) for
low- or moderate-income individuals, individuals in underserved rural
areas, or individuals located in designated disaster areas;
* * * * *
    (4) Activities that revitalize or stabilize low- or moderate-income
geographies, underserved rural areas, or designated disaster areas.
* * * * *
    (u) Small bank--(1) Definition. Small bank means a bank that, as of
December 31 of either of the prior two calendar years, had assets of
less than $1 billion. Intermediate small bank means a small bank with
assets of at least $250 million and less than $1 billion as of December
31 of both of the prior two calendar years.
    (2) Adjustment. The dollar figures in paragraph (u)(1) of this
section shall be adjusted annually and published by the OCC, based on
the year-to-year change in the average of the Consumer Price Index for
Urban Wage Earners and Clerical Workers, not seasonally adjusted, for
each twelve-month period ending in November, with rounding to the
nearest million.
* * * * *
    3. Revise Sec.  25.26 to read as follows:


Sec.  25.26  Small bank performance standards.

    (a) Performance criteria--(1) Small banks with assets of less than
$250 million. The OCC evaluates the record of a small bank that is not,
or that was not during the prior calendar year, an intermediate small
bank, of helping to meet the credit needs of its assessment area(s)
pursuant to the criteria set forth in paragraph (b) of this section.
    (2) Intermediate small banks. The OCC evaluates the record of a
small bank that is, or that was during the prior calendar year, an
intermediate small bank, of helping to meet the credit needs of its
assessment area(s) pursuant to the criteria set forth in paragraphs (b)
and (c) of this section.
    (b) Lending test. A small bank's lending performance is evaluated
pursuant to the following criteria:
    (1) The bank's loan-to-deposit ratio, adjusted for seasonal
variation, and, as appropriate, other lending-related activities, such
as loan originations for sale to the secondary markets, community
development loans, or qualified investments;
    (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
    (3) The bank's record of lending to and, as appropriate, engaging
in other lending-related activities for borrowers of different income
levels and businesses and farms of different sizes;
    (4) The geographic distribution of the bank's loans; and
    (5) The bank's record of taking action, if warranted, in response
to written complaints about its performance in helping to meet credit
needs in its assessment area(s).
    (c) Community development test. An intermediate small bank's
community development performance also is evaluated pursuant to the
following criteria:
    (1) The number and amount of community development loans;
    (2) The number and amount of qualified investments;
    (3) The extent to which the bank provides community development
services; and
    (4) The bank's responsiveness through such activities to community
development lending, investment, and services needs.
    3a. Revise Sec.  25.28, paragraph (c) to read as follows:


Sec.  25.28  Assigned ratings.

* * * * *
    (c) Effect of evidence of discriminatory or other illegal credit
practices.
    (1) The OCC's evaluation of a bank's CRA performance is adversely
affected by evidence of discriminatory or other illegal credit
practices in any geography by the bank or in any assessment area by any
affiliate whose loans have been considered as part of the bank's
lending performance. In connection with any type of lending activity
described in Sec.  25.22(a), evidence of discriminatory or other credit
practices that violate an applicable law, rule, or regulation includes,
but is not limited to:
    (i) Discrimination against applicants on a prohibited basis in
violation, for example, of the Equal Credit Opportunity Act or the Fair
Housing Act;
    (ii) Violations of the Home Ownership and Equity Protection Act;
    (iii) Violations of section 5 of the Federal Trade Commission Act;
    (iv) Violations of section 8 of the Real Estate Settlement
Procedures Act; and
    (v) Violations of the Truth in Lending Act provisions regarding a
consumer's right of rescission.
    (2) In determining the effect of evidence of practices described in
paragraph (c)(1) of this section on the bank's assigned rating, the OCC
considers the nature, extent, and strength of the evidence of the
practices; the policies and procedures that the bank (or affiliate, as
applicable) has in place to prevent the practices; any corrective
action that the bank (or affiliate, as applicable) has taken or has
committed to take, including voluntary corrective action resulting from
self-assessment; and any other relevant information.
    4. In Appendix A to part 25, revise paragraph (d) to read as
follows:

Appendix A to Part 25--Ratings

* * * * *
    (d) Banks evaluated under the small bank performance
standards.--(1) Lending test ratings.--(i) Eligibility for a
satisfactory lending test rating. The OCC rates a small bank's
lending performance ``satisfactory'' if, in general, the bank
demonstrates:
    (A) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the bank's size, financial condition, the credit
needs of its assessment area(s), and taking into account, as
appropriate, other lending-related activities such as loan
originations for sale to the secondary markets and community
development loans and qualified investments;
    (B) A majority of its loans and, as appropriate, other lending-
related activities, are in its assessment area;
    (C) A distribution of loans to and, as appropriate, other
lending-related activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of different sizes that is reasonable given the
demographics of the bank's assessment area(s);
    (D) A record of taking appropriate action, when warranted, in
response to written complaints, if any, about the bank's performance
in helping to meet the credit needs of its assessment area(s); and
    (E) A reasonable geographic distribution of loans given the
bank's assessment area(s).
    (ii) Eligibility for an ``outstanding'' lending test rating. A
small bank that meets each of the standards for a ``satisfactory''
rating under this paragraph and exceeds some or all of those
standards may warrant consideration for a lending test rating of
``outstanding.''
    (iii) Needs to improve or substantial noncompliance ratings. A
small bank may also receive a lending test rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its

[[Page 12158]]

performance has failed to meet the standard for a ``satisfactory''
rating.
    (2) Community development test ratings for intermediate small
banks--(i) Eligibility for a satisfactory community development test
rating. The OCC rates an intermediate small bank's community
development performance ``satisfactory'' if the bank demonstrates
adequate responsiveness to the community development needs of its
assessment area(s) or a broader statewide or regional area that
includes the bank's assessment area(s) through community development
loans, qualified investments, and community development services.
The adequacy of the bank's response will depend on its capacity for
such community development activities, its assessment area's need
for such community development activities, and the availability of
such opportunities for community development in the bank's
assessment area(s).
    (ii) Eligibility for an outstanding community development test
rating. The OCC rates an intermediate small bank's community
development performance ``outstanding'' if the bank demonstrates
excellent responsiveness to community development needs in its
assessment area(s) through community development loans, qualified
investments, and community development services, as appropriate,
considering the bank's capacity and the need and availability of
such opportunities for community development in the bank's
assessment area(s).
    (iii) Needs to improve or substantial noncompliance ratings. An
intermediate small bank may also receive a community development
test rating of ``needs to improve'' or ``substantial noncompliance''
depending on the degree to which its performance has failed to meet
the standards for a ``satisfactory'' rating.
    (3) Overall rating--(i) Eligibility for a satisfactory overall
rating. No intermediate small bank may receive an assigned overall
rating of ``satisfactory'' unless it receives a rating of at least
``satisfactory'' on both the lending test and the community
development test.
    (ii) Eligibility for an outstanding overall rating. (A) An
intermediate small bank that receives an ``outstanding'' rating on
one test and at least ``satisfactory'' on the other test may receive
an assigned overall rating of ``outstanding.''
    (B) A small bank that is not an intermediate small bank that
meets each of the standards for a ``satisfactory'' rating under the
lending test and exceeds some or all of those standards may warrant
consideration for an overall rating of ``outstanding.'' In assessing
whether a bank's performance is ``outstanding,'' the OCC considers
the extent to which the bank exceeds each of the performance
standards for a ``satisfactory'' rating and its performance in
making qualified investments and its performance in providing
branches and other services and delivery systems that enhance credit
availability in its assessment area(s).
    (iii) Needs to improve or substantial noncompliance overall
ratings. A small bank may also receive a rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standards for a
``satisfactory'' rating.
* * * * *

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

    For the reasons set forth in the joint preamble, the Board of
Governors of the Federal Reserve System proposes to amend part 228 of
chapter II of title 12 of the Code of Federal Regulations as follows:

PART 228--COMMUNITY REINVESTMENT (REGULATION BB)

    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.

    2. In Sec.  228.12, revise paragraphs (g)(1), (g)(4), and (u) to
read as follows:


Sec.  228.12  Definitions.

* * * * *
    (g) Community development means:
    (1) Affordable housing (including multifamily rental housing) for
low-or moderate-income individuals, individuals in underserved rural
areas, or individuals located in designated disaster areas;
* * * * *
    (4) Activities that revitalize or stabilize low- or moderate-income
geographies, underserved rural areas, or designated disaster areas.
* * * * *
    (u) Small bank--(1) Definition. Small bank means a bank that, as of
December 31 of either of the prior two calendar years, had assets of
less than $1 billion. Intermediate small bank means a small bank with
assets of at least $250 million and less than $1 billion as of December
31 of both of the prior two calendar years.
    (2) Adjustment. The dollar figures in paragraph (u)(1) of this
section shall be adjusted annually and published by the Board, based on
the year-to-year change in the average of the Consumer Price Index for
Urban Wage Earners and Clerical Workers, not seasonally adjusted, for
each twelve-month period ending in November, with rounding to the
nearest million.
* * * * *
    3. Revise Sec.  228.26 to read as follows:


Sec.  228.26  Small bank performance standards.

    (a) Performance criteria--(1) Small banks with assets of less than
$250 million. The Board evaluates the record of a small bank that is
not, or that was not during the prior calendar year, an intermediate
small bank, of helping to meet the credit needs of its assessment
area(s) pursuant to the criteria set forth in paragraph (b) of this
section.
    (2) Intermediate small banks. The Board evaluates the record of a
small bank that is, or that was during the prior calendar year, an
intermediate small bank, of helping to meet the credit needs of its
assessment area(s) pursuant to the criteria set forth in paragraphs (b)
and (c) of this section.
    (b) Lending test. A small bank's lending performance is evaluated
pursuant to the following criteria:
    (1) The bank's loan-to-deposit ratio, adjusted for seasonal
variation, and, as appropriate, other lending-related activities, such
as loan originations for sale to the secondary markets, community
development loans, or qualified investments;
    (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
    (3) The bank's record of lending to and, as appropriate, engaging
in other lending-related activities for borrowers of different income
levels and businesses and farms of different sizes;
    (4) The geographic distribution of the bank's loans; and
    (5) The bank's record of taking action, if warranted, in response
to written complaints about its performance in helping to meet credit
needs in its assessment area(s).
    (c) Community development test. An intermediate small bank's
community development performance also is evaluated pursuant to the
following criteria:
    (1) The number and amount of community development loans;
    (2) The number and amount of qualified investments;
    (3) The extent to which the bank provides community development
services; and
    (4) The bank's responsiveness through such activities to community
development lending, investment, and services needs.
    3a. Revise Sec.  228.28(c) to read as follows:


Sec.  228.28  Assigned ratings.

* * * * *
    (c) Effect of evidence of discriminatory or other illegal credit
practices. (1) The Board's evaluation of a bank's CRA performance is
adversely affected by evidence of discriminatory or other illegal
credit practices in any geography by the bank or in any assessment area
by any affiliate whose

[[Page 12159]]

loans have been considered as part of the bank's lending performance.
In connection with any type of lending activity described in Sec.
228.22(a), evidence of discriminatory or other credit practices that
violate an applicable law, rule, or regulation includes, but is not
limited to:
    (i) Discrimination against applicants on a prohibited basis in
violation, for example, of the Equal Credit Opportunity Act or the Fair
Housing Act;
    (ii) Violations of the Home Ownership and Equity Protection Act;
    (iii) Violations of section 5 of the Federal Trade Commission Act;
    (iv) Violations of section 8 of the Real Estate Settlement
Procedures Act; and
    (v) Violations of the Truth in Lending Act provisions regarding a
consumer's right of rescission.
    (2) In determining the effect of evidence of practices described in
paragraph (c)(1) of this section on the bank's assigned rating, the
Board considers the nature, extent, and strength of the evidence of the
practices; the policies and procedures that the bank (or affiliate, as
applicable) has in place to prevent the practices; any corrective
action that the bank (or affiliate, as applicable) has taken or has
committed to take, including voluntary corrective action resulting from
self-assessment; and any other relevant information.
    4. In Appendix A to part 228, revise paragraph (d) to read as
follows:

Appendix A to Part 228--Ratings

* * * * *
    (d) Banks evaluated under the small bank performance
standards.--(1) Lending test ratings.--(i) Eligibility for a
satisfactory lending test rating. The Board rates a small bank's
lending performance ``satisfactory'' if, in general, the bank
demonstrates:
    (A) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the bank's size, financial condition, the credit
needs of its assessment area(s), and taking into account, as
appropriate, other lending-related activities such as loan
originations for sale to the secondary markets and community
development loans and qualified investments;
    (B) A majority of its loans and, as appropriate, other lending-
related activities, are in its assessment area;
    (C) A distribution of loans to and, as appropriate, other
lending-related activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of different sizes that is reasonable given the
demographics of the bank's assessment area(s);
    (D) A record of taking appropriate action, when warranted, in
response to written complaints, if any, about the bank's performance
in helping to meet the credit needs of its assessment area(s); and
    (E) A reasonable geographic distribution of loans given the
bank's assessment area(s).
    (ii) Eligibility for an ``outstanding'' lending test rating. A
small bank that meets each of the standards for a ``satisfactory''
rating under this paragraph and exceeds some or all of those
standards may warrant consideration for a lending test rating of
``outstanding.''
    (iii) Needs to improve or substantial noncompliance ratings. A
small bank may also receive a lending test rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standard for a
``satisfactory'' rating.
    (2) Community development test ratings for intermediate small
banks--(i) Eligibility for a satisfactory community development test
rating. The Board rates an intermediate small bank's community
development performance ``satisfactory'' if the bank demonstrates
adequate responsiveness to the community development needs of its
assessment area(s) or a broader statewide or regional area that
includes the bank's assessment area(s) through community development
loans, qualified investments, and community development services.
The adequacy of the bank's response will depend on its capacity for
such community development activities, its assessment area's need
for such community development activities, and the availability of
such opportunities for community development in the bank's
assessment area(s).
    (ii) Eligibility for an outstanding community development test
rating. The Board rates an intermediate small bank's community
development performance ``outstanding'' if the bank demonstrates
excellent responsiveness to community development needs in its
assessment area(s) through community development loans, qualified
investments, and community development services, as appropriate,
considering the bank's capacity and the need and availability of
such opportunities for community development in the bank's
assessment area(s).
    (iii) Needs to improve or substantial noncompliance ratings. An
intermediate small bank may also receive a community development
test rating of ``needs to improve'' or ``substantial noncompliance''
depending on the degree to which its performance has failed to meet
the standards for a ``satisfactory'' rating.
    (3) Overall rating--(i) Eligibility for a satisfactory overall
rating. No intermediate small bank may receive an assigned overall
rating of ``satisfactory'' unless it receives a rating of at least
``satisfactory'' on both the lending test and the community
development test.
    (ii) Eligibility for an outstanding overall rating. (A) An
intermediate small bank that receives an ``outstanding'' rating on
one test and at least ``satisfactory'' on the other test may receive
an assigned overall rating of ``outstanding.''
    (B) A small bank that is not an intermediate small bank that
meets each of the standards for a ``satisfactory'' rating under the
lending test and exceeds some or all of those standards may warrant
consideration for an overall rating of ``outstanding.'' In assessing
whether a bank's performance is ``outstanding,'' the Board considers
the extent to which the bank exceeds each of the performance
standards for a ``satisfactory'' rating and its performance in
making qualified investments and its performance in providing
branches and other services and delivery systems that enhance credit
availability in its assessment area(s).
    (iii) Needs to improve or substantial noncompliance overall
ratings. A small bank may also receive a rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standards for a
``satisfactory'' rating.
* * * * *

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

    For the reasons set forth in the joint preamble, the Board of
Directors of the Federal Deposit Insurance Corporation proposes to
amend part 345 of chapter III of title 12 of the Code of Federal
Regulations to read as follows:

PART 345--COMMUNITY REINVESTMENT

    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).

    2. In Sec.  345.12, revise paragraphs (g)(1), (g)(4), and (u) to
read as follows:


Sec.  345.12  Definitions.

* * * * *
    (g) Community development means:
    (1) Affordable housing (including multifamily rental housing) for
low- or moderate-income individuals, individuals in underserved rural
areas, or individuals located in designated disaster areas;
* * * * *
    (4) Activities that revitalize or stabilize low- or moderate-income
geographies, underserved rural areas, or designated disaster areas.
* * * * *
    (u) Small bank--(1) Definition. Small bank means a bank that, as of
December 31 of either of the prior two calendar years, had assets of
less than $1 billion. Intermediate small bank means a small bank with
assets of at least $250 million and less than $1 billion as of December
31 of both of the prior two calendar years.
    (2) Adjustment. The dollar figures in paragraph (u)(1) of this
section shall be adjusted annually and published by the

[[Page 12160]]

FDIC, based on the year-to-year change in the average of the Consumer
Price Index for Urban Wage Earners and Clerical Workers, not seasonally
adjusted, for each twelve-month period ending in November, with
rounding to the nearest million.
* * * * *
    3. Revise Sec.  345.26 to read as follows:


Sec.  345.26  Small bank performance standards.

    (a) Performance criteria--(1) Small banks with assets of less than
$250 million. The FDIC evaluates the record of a small bank that is
not, or that was not during the prior calendar year, an intermediate
small bank, of helping to meet the credit needs of its assessment
area(s) pursuant to the criteria set forth in paragraph (b) of this
section.
    (2) Intermediate small banks. The FDIC evaluates the record of a
small bank that is, or that was during the prior calendar year, an
intermediate small bank, of helping to meet the credit needs of its
assessment area(s) pursuant to the criteria set forth in paragraphs (b)
and (c) of this section.
    (b) Lending test. A small bank's lending performance is evaluated
pursuant to the following criteria:
    (1) The bank's loan-to-deposit ratio, adjusted for seasonal
variation, and, as appropriate, other lending-related activities, such
as loan originations for sale to the secondary markets, community
development loans, or qualified investments;
    (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
    (3) The bank's record of lending to and, as appropriate, engaging
in other lending-related activities for borrowers of different income
levels and businesses and farms of different sizes;
    (4) The geographic distribution of the bank's loans; and
    (5) The bank's record of taking action, if warranted, in response
to written complaints about its performance in helping to meet credit
needs in its assessment area(s).
    (c) Community development test. An intermediate small bank's
community development performance also is evaluated pursuant to the
following criteria:
    (1) The number and amount of community development loans;
    (2) The number and amount of qualified investments;
    (3) The extent to which the bank provides community development
services; and
    (4) The bank's responsiveness through such activities to community
development lending, investment, and services needs.
    3a. Revise Sec.  345.28(c) to read as follows:


Sec.  345.28  Assigned ratings.

* * * * *
    (c) Effect of evidence of discriminatory or other illegal credit
practices. (1) The FDIC's evaluation of a bank's CRA performance is
adversely affected by evidence of discriminatory or other illegal
credit practices in any geography by the bank or in any assessment area
by any affiliate whose loans have been considered as part of the bank's
lending performance. In connection with any type of lending activity
described in Sec.  345.22(a), evidence of discriminatory or other
credit practices that violate an applicable law, rule, or regulation
includes, but is not limited to:
    (i) Discrimination against applicants on a prohibited basis in
violation, for example, of the Equal Credit Opportunity Act or the Fair
Housing Act;
    (ii) Violations of the Home Ownership and Equity Protection Act;
    (iii) Violations of section 5 of the Federal Trade Commission Act;
    (iv) Violations of section 8 of the Real Estate Settlement
Procedures Act; and
    (v) Violations of the Truth in Lending Act provisions regarding a
consumer's right of rescission.
    (2) In determining the effect of evidence of practices described in
paragraph (c)(1) of this section on the bank's assigned rating, the
FDIC considers the nature, extent, and strength of the evidence of the
practices; the policies and procedures that the bank (or affiliate, as
applicable) has in place to prevent the practices; any corrective
action that the bank (or affiliate, as applicable) has taken or has
committed to take, including voluntary corrective action resulting from
self-assessment; and any other relevant information.
    4. In Appendix A to part 345, revise paragraph (d) to read as
follows:

Appendix A to Part 345--Ratings

* * * * *
    (d) Banks evaluated under the small bank performance standards--
(1) Lending test ratings.--
    (i) Eligibility for a satisfactory lending test rating. The FDIC
rates a small bank's lending performance ``satisfactory'' if, in
general, the bank demonstrates:
    (A) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the bank's size, financial condition, the credit
needs of its assessment area(s), and taking into account, as
appropriate, other lending-related activities such as loan
originations for sale to the secondary markets and community
development loans and qualified investments;
    (B) A majority of its loans and, as appropriate, other lending-
related activities, are in its assessment area;
    (C) A distribution of loans to and, as appropriate, other
lending-related activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of different sizes that is reasonable given the
demographics of the bank's assessment area(s);
    (D) A record of taking appropriate action, when warranted, in
response to written complaints, if any, about the bank's performance
in helping to meet the credit needs of its assessment area(s); and
    (E) A reasonable geographic distribution of loans given the
bank's assessment area(s).
    (ii) Eligibility for an ``outstanding'' lending test rating. A
small bank that meets each of the standards for a ``satisfactory''
rating under this paragraph and exceeds some or all of those
standards may warrant consideration for a lending test rating of
``outstanding.''
    (iii) Needs to improve or substantial noncompliance ratings. A
small bank may also receive a lending test rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standard for a
``satisfactory'' rating.
    (2) Community development test ratings for intermediate small
banks--(i) Eligibility for a satisfactory community development test
rating. The FDIC rates an intermediate small bank's community
development performance ``satisfactory'' if the bank demonstrates
adequate responsiveness to the community development needs of its
assessment area(s) or a broader statewide or regional area that
includes the bank's assessment area(s) through community development
loans, qualified investments, and community development services.
The adequacy of the bank's response will depend on its capacity for
such community development activities, its assessment area's need
for such community development activities, and the availability of
such opportunities for community development in the bank's
assessment area(s).
    (ii) Eligibility for an outstanding community development test
rating. The FDIC rates an intermediate small bank's community
development performance ``outstanding'' if the bank demonstrates
excellent responsiveness to community development needs in its
assessment area(s) through community development loans, qualified
investments, and community development services, as appropriate,
considering the bank's capacity and the need and availability of
such opportunities for community development in the bank's
assessment area(s).
    (iii) Needs to improve or substantial noncompliance ratings. An
intermediate small bank may also receive a community development
test rating of ``needs to improve'' or ``substantial noncompliance''
depending on the degree to which its performance has failed to meet
the standards for a ``satisfactory'' rating.

[[Page 12161]]

    (3) Overall rating--(i) Eligibility for a satisfactory overall
rating. No intermediate small bank may receive an assigned overall
rating of ``satisfactory'' unless it receives a rating of at least
``satisfactory'' on both the lending test and the community
development test.
    (ii) Eligibility for an outstanding overall rating. (A) An
intermediate small bank that receives an ``outstanding'' rating on
one test and at least ``satisfactory'' on the other test may receive
an assigned overall rating of ``outstanding.''
    (B) A small bank that is not an intermediate small bank that
meets each of the standards for a ``satisfactory'' rating under the
lending test and exceeds some or all of those standards may warrant
consideration for an overall rating of ``outstanding.'' In assessing
whether a bank's performance is ``outstanding,'' the FDIC considers
the extent to which the bank exceeds each of the performance
standards for a ``satisfactory'' rating and its performance in
making qualified investments and its performance in providing
branches and other services and delivery systems that enhance credit
availability in its assessment area(s).
    (iii) Needs to improve or substantial noncompliance overall
ratings. A small bank may also receive a rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standards for a
``satisfactory'' rating.
* * * * *

    Dated: February 22, 2005.
Julie L. Williams,
Acting Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve
System, March 4, 2005.
Jennifer J. Johnson,
Secretary of the Board.
    By order of the Board of Directors.

    Dated at Washington, DC, this 22nd day of February, 2005.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

[FR Doc. 05-4797 Filed 3-10-05; 8:45 am]

BILLING CODE 4810-33-P  



Last Updated 3/11/2005 communications@fdic.gov