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Part II

Department of the Treasury

Federal Reserve System

Federal Deposit Insurance Corporation

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Office of the Comptroller of the Currency

Office of Thrift Supervision

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12 CFR Parts 35, 207, 346, 533

Disclosure and Reporting of CRA-Related Agreements; Final Rules

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 35

[Docket No. 00-34] RIN 1557-AB85

FEDERAL RESERVE SYSTEM

12 CFR Part 207

[Regulation G; Docket No. R-1069]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 346

RIN 3064-AC33

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 533

[Docket No. 2000-107] RIN 1550-AB32

Disclosure and Reporting of CRA-Related Agreements

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

ACTION: Joint final rule.

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SUMMARY: The OCC, Board, FDIC, and OTS (collectively, the agencies) are publishing final rules to implement the CRA sunshine provisions of section 48 of the Federal Deposit Insurance Act. These provisions require nongovernmental entities or persons (NGEPs), insured depository institutions, and affiliates of insured depository institutions that are parties to certain agreements that are in fulfillment of the Community Reinvestment Act of 1977 to make the agreements available to the public and the appropriate agency and file annual reports concerning the agreements with the appropriate agency. These provisions were contained in section 711 of the Gramm-Leach-Bliley Act. The rule identifies the types of written agreements that are covered by section 48 (referred to as covered agreements) and defines many of the terms used in the statute. The rule also describes how the parties to a covered agreement must make the agreement available to the public and the appropriate agencies and explains the type of information that must be included in the annual report filed by a party to a covered agreement.

EFFECTIVE DATE: This joint rule is effective April 1, 2001.

FOR FURTHER INFORMATION CONTACT: OCC: Michael S. Bylsma, Director, Community and Consumer Law (202) 874-5750; or Karen O. Solomon, Director, Legislative and Regulatory Activities (202) 874-5090, Office of the Comptroller of the Currency, 250 E Street, SW, Washington, DC 20219. BOARD: Scott G. Alvarez, Associate General Counsel (202) 452-3583, Kieran J. Fallon, Senior Counsel (202) 452-5270, or Andrew Miller, Senior Attorney (202) 452-3428, Legal Division; Glenn E. Loney, Deputy Director (202) 452-3585, James H. Mann, Senior Attorney (202) 452-2412, or Kathleen C. Ryan, Senior Attorney (202) 452-3667, Division of Consumer and Community Affairs; For users of Telecommunications Device for the Deaf (*TDD*) only, contact Janice Simms at (202) 452-4984; Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, NW, Washington, DC 20551. FDIC: Deanna Caldwell, Senior Policy Analyst (202) 942-3366, or Robert Mooney, Assistant Director (202) 942-3378, Division of Compliance and Consumer Affairs; or A. Ann Johnson, Counsel, Regulation and Legislation Section (202) 898-3573, Federal Deposit Insurance Corporation, 550 17th Street, NW, Washington, DC 20429. OTS: Richard Bennett, Counsel (Banking and Finance), (202) 906- 7409; or Karen Osterloh, Assistant Chief Counsel, (202) 906-6639; Office of Thrift Supervision, 1700 G Street, NW, Washington, DC 20552.

SUPPLEMENTARY INFORMATION: The contents of this preamble are listed in the following outline:

I. Background II. Overview of Comments Received III. Detailed Explanation of Final Rule A. Definition of Covered Agreement B. Disclosure of Covered Agreements C. Annual Reports D. Effective Dates of Disclosure and Reporting Requirements E. Compliance Provisions F. Other Definitions and Rules of Construction IV. Regulatory Flexibility Act Analysis V. Executive Order 12866 Determination VI. Paperwork Reduction Act VII. Comments Regarding the Use of ``Plain Language'' VIII. Unfunded Mandates Act of 1995 IX. Compliance Chart

I. Background

Section 711 of the GLB Act (Pub. L. 106-102, 113 Stat. 1338 (1999)) added a new section 48 to the Federal Deposit Insurance Act (12 U.S.C. 1831y) (FDI Act) entitled ``CRA Sunshine Requirements.'' Section 48 applies to written agreements that (1) are made in fulfillment of the Community Reinvestment Act of 1977 (CRA),\1\\ \ (2) involve funds or other resources of an insured depository institution or affiliate with an aggregate value of more than $10,000 in a year, or loans with an aggregate principal value of more than $50,000 in a year, and (3) are entered into by an insured depository institution or affiliate of an insured depository institution and a nongovernmental entity or person. Section 48 does not, however, cover any agreement with a nongovernmental entity or person that has not had a CRA contact with an insured depository institution or affiliate or a banking agency, such as agreements entered into by entities or persons that solicit charitable contributions or other funds without regard to the CRA. Under section 48, the parties to a covered agreement must make the agreement available to the public and the appropriate agency. The parties also must file a report annually with the appropriate agency concerning the disbursement, receipt and use of funds or other resources under the agreement. ---------------------------------------------------------------------------

\1\ 12 U.S.C. 2901 et seq. ---------------------------------------------------------------------------

On May 19, 2000, the agencies published a joint notice of proposed rulemaking in the Federal Register (65 FR 31962, May 19, 2000) to implement section 48. The joint notice requested comment on all aspects of the proposed rule and on a wide variety of specific topics identified in the Supplementary Information accompanying the proposal.

II. Overview of Comments Received

The agencies collectively received more than 800 comments from the public on the proposed rule, although many commenters submitted copies of the same comments to each of the agencies. Comments were received from a wide variety of sources including members of Congress; state and local government officials; banks, savings associations and their holding companies and other affiliates; community-based and non-profit organizations, including national and regional associations whose membership is composed of such organizations; trade associations; other businesses; and individuals.

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These comments addressed to some degree nearly all aspects of the proposed rule. A number of these comments are described in more detail in the description of the final rule below. This section provides a brief overview of the comments and is not intended to represent a detailed summary of all of the comments. The agencies have carefully reviewed and considered the information and views provided by all commenters. Commenters generally requested additional guidance on the types of actions that would constitute a written arrangement or understanding between an insured depository institution or affiliate and a NGEP. Many commenters supported the proposed rule's definition of ``fulfillment of the CRA,'' while others asserted that the proposed definition was too broad.\2\ In this regard, a number of commenters expressed concern that the proposed rule could require the disclosure of, and reporting on, a wide range of agreements between banking organizations and NGEPs that are not directly related to or affected by the CRA. They also expressed concern that the proposed rule could discourage banking organizations from entering into agreements with NGEPs to provide loans, investments or banking services in their local communities. ---------------------------------------------------------------------------

\2\ The proposed rule generally defined ``fulfillment of the CRA'' by reference to the full list of factors that the agencies consider in evaluating the CRA performance of an insured depository institution or in acting on an application for a deposit facility under the CRA, as described in the lending, investment and service tests set forth in the CRA regulations jointly adopted by the agencies (``CRA Regulations''). See 12 CFR Part 25 (OCC); 12 CFR Part 228 (Board); 12 CFR Part 345 (FDIC); 12 CFR Part 563e (OTS). ---------------------------------------------------------------------------

Many commenters addressed the exemption included in the statute and the proposed rule for agreements that are entered into by an insured depository institution or affiliate with a NGEP that has not ``commented on, testified about, or discussed with the institution, or otherwise contacted the institution, concerning the Community Reinvestment Act.'' \3\ Most commenters that addressed this issue requested that the agencies clarify the types of actions by a NGEP that would constitute a CRA contact as described in the statutory exemption. Some commenters recommended that the agencies define a CRA contact to include only CRA-related contacts by a NGEP with a Federal banking agency or discussions with an insured depository institution or affiliate about such contacts. Commenters also urged that the agencies clarify that certain types of discussions with an institution or affiliate, such as a general discussion by a NGEP with an institution concerning the eligibility of products or services for consideration under the CRA, were not CRA contacts (and were therefore exempt) within the meaning of the statute. Other commenters asserted that the statute did not allow the agencies to limit CRA contacts only to those that occur with a Federal banking agency and that Congress intended a CRA contact to encompass a broad range of CRA-related contacts including discussions by a NGEP with an insured depository institution or affiliate concerning the CRA. ---------------------------------------------------------------------------

\3\ See 12 U.S.C. 1831y(e)(1)(B)(iii). ---------------------------------------------------------------------------

A number of commenters also argued that a CRA contact must be with an appropriate official or representative of the insured depository institution or affiliate. A significant number of commenters also urged that a CRA contact be recognized only if the contact occurred within a specified period of time before the parties entered into the agreement. Some commenters expressed concern that, without these or other limitations, the statute or proposed rule would impose a substantial burden on persons claiming the exemption and make the exemption virtually meaningless. Other commenters asserted that the agencies lacked the authority to require that a CRA contact be temporally related to a CRA-related agreement. A number of commenters argued that the statute or the proposed rule imposed a substantial burden on persons who engage in discussions with banking organizations concerning the CRA or petition the Federal banking agencies for action related to the CRA. These commenters argued that these burdens could chill the public's exercise of free speech or right to petition the government as protected by the Constitution. Commenters generally supported the provisions of the proposed rule that sought to streamline the disclosure and annual reporting obligations of the parties to a covered agreement to the extent consistent with the statute. For example, commenters widely supported the proposed rule's provisions giving insured depository institutions, affiliates and NGEPs flexibility in making covered agreements available to the public and allowing insured depository institutions, affiliates and NGEPs that are party to a number of covered agreements the ability to file a single, consolidated annual report relating to all of the agreements. Commenters also generally supported the provisions of the proposed rule that required a NGEP to make its covered agreements available to an agency only upon request. Some commenters requested that insured depository institutions and affiliates also be permitted to make covered agreements available to the appropriate agency upon request, or that the agencies further streamline the agency disclosure obligations applicable to institutions and affiliates. Commenters requested that the agencies streamline the process for determining what information contained in a covered agreement may be withheld from public disclosure, such as by identifying categories of information that could be withheld from public disclosure without prior agency review. Commenters overwhelmingly supported the proposed rule's provisions allowing NGEPs to use Federal tax forms and other reports to fulfill the reporting requirements of the rule. Comments were mixed concerning the proposed rule's provisions governing the reporting of specific purpose funds received by a NGEP, with some commenters supporting this reporting method and others asserting that the method was burdensome or not authorized by the statute. Commenters also supported the provisions of the rule that provided that a NGEP is not required to file an annual report for any year in which NGEP did not receive funds under a covered agreement. Several commenters requested that the agencies provide a similar exemption from the annual reporting requirements to insured depository institutions and affiliates.

III. Detailed Explanation of Final Rule

This section provides a more detailed discussion of the comments received on the proposal, the changes made by the agencies in response to comments, and the other provisions of the final rule. As with the proposal, the final rule uses the term ``insured depository institution,'' rather than ``bank'' or ``savings associations,'' to facilitate compliance and consistency among the agencies' rules. As discussed below, the rule identifies the specific agency or agencies with whom a covered agreement and its related annual reports should be filed, and the agency or agencies that would be considered a relevant supervisory agency for a covered agreement. The final rule and the remaining portions of this preamble also refer to a ``nongovernmental'' entity or person'' as a ``NGEP.'' The final rule uses this term, rather than the term ``person,'' to avoid confusion over the scope of the rule. The term ``nongovernmental entity or person'' or ``NGEP'' is defined in section ____.11 of the rule generally to include

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any company or individual other than the Federal government; a state, local or tribal government; an insured depository institution or affiliate; or a representative of any of the foregoing. The Supplementary Information accompanying the proposed rule included examples illustrating the scope and application of the proposed rule. Commenters generally favored having examples that provide additional guidance concerning the rule's provisions. Some commenters requested that the agencies clarify or amend certain examples, and commenters were divided on whether the agencies should incorporate all examples into the final rule. The final rule includes examples illustrating some of the key provisions of the rule, including the definition of a ``CRA communication,'' the scope of the exemptions for qualifying loan agreements, and the information required to be provided in the annual report of an NGEP. The examples included in the rule are part of the rule and compliance with an example, to the extent applicable, constitutes compliance with the rule. (See section ____.1(d).) The examples included in the rule illustrate only the scope and application of the particular topic addressed by the example and do not illustrate any other topic or issue that may arise under the rule. The agencies also have included in this preamble examples that illustrate other provisions of the rule. The agencies have not included these other examples in the final rule because fewer questions appear to arise in connection with these provisions and, thus, including the examples in the rule could make the rule longer without providing a commensurate level of benefit. The agencies, however, have included these examples in the preamble to illustrate the manner in which the agencies expect to interpret the rule in these areas. To further assist members of the public in complying with the rule, the agencies have included in this preamble a chart that summarizes the disclosure and reporting requirements of the rule. This chart, which is not part of the rule, is located at Part IX of this preamble. By operation of law, the regulations of the agencies implementing section 48 shall take effect on the first day of the calendar quarter which begins on or after the date on which the regulations are published in final form, which is April 1, 2001.\4\ ---------------------------------------------------------------------------

\4\ 12 U.S.C. 4802(b). ---------------------------------------------------------------------------

The agencies requested comment on whether the rule should remain, as proposed, in a separate part of each agency's regulations or be incorporated into the agencies' existing CRA Regulations. Commenters generally favored keeping the rule separate from the CRA Regulations. In addition, section 48 amended the FDI Act, and not the CRA, and is independent of the CRA and the CRA Regulations. Accordingly, the final rule is promulgated as a new part to each agency's regulations. Section ____.1(c) of the final rule provides that nothing in the final rule affects in any way the CRA, the agencies' CRA Regulations, or any agency's interpretations or administration of the CRA or the CRA Regulations. The following description applies to the rule of each agency. Since each agency's rule will be codified at a different part of the Code of Federal Regulations, the following description references the rule using only the section numbers used in the rule.

A. Definition of Covered Agreement

Section ____.2 of the rule defines which agreements are covered by the rule and includes the Act's exemptions from the definition of a covered agreement for qualified loan agreements. 1. Covered Agreements The proposed rule defined a covered agreement as any contract, arrangement, or understanding that meets all of the following four criteria: <bullet> The agreement is in writing; <bullet> The agreement is made pursuant to, or in connection with, the fulfillment of the CRA, as defined by the rule (see section __.4); <bullet> The parties to the agreement include (1) one or more insured depository institutions or affiliates of an insured depository institution, and (2) one or more NGEPs; and <bullet> The agreement provides for the insured depository institution or affiliate to provide cash payments, grants, or other consideration (except loans) having an aggregate value of more than $10,000 in any calendar year, or to make loans in an aggregate principal amount of more than $50,000 in any calendar year. The final rule retains these four criteria for coverage. The final rule also provides that, in order for an agreement to be covered, one of the NGEPs that is a party to the agreement must have had a CRA communication (as defined in section __.3) prior to the time the parties entered into the agreement. As noted above, section 48 specifically exempts from coverage any agreement entered into by an institution or affiliate with a NGEP who has not had a CRA communication. The agencies believe that structuring this statutory exemption as an affirmative requirement for coverage makes the rule easier to understand without affecting the scope of the rule. The scope of the exemption for agreements with a NGEP that has not had a CRA communication is discussed in detail below. A covered agreement may be with an insured depository institution or any affiliate of an insured depository institution, including a bank holding company or a nonbank affiliate. Section 48 and the rule apply only to written contracts, arrangements or understandings, and do not apply to oral contracts or agreements. Some commenters requested that the agencies provide additional guidance concerning when written communications between a NGEP and an insured depository institution or affiliate would constitute a ``contract, arrangement or understanding.'' In addition, some commenters asserted that the rule should apply only to legally enforceable contracts, while comments were mixed on whether the rule should apply to unilateral lending or investment pledges made by an insured depository institution or affiliate in response to previous actions by a NGEP. As noted above, section 48 by its terms applies not only to written contracts, but also to written arrangements and written understandings that are entered into by an insured depository institution or affiliate with a NGEP and that otherwise meet the statutory criteria to be a covered agreement. For this reason, the agencies have not limited the final rule to legally binding written contracts. Other written agreements that do not constitute a legally binding contract, but that reflect a mutual arrangement or understanding between an insured depository institution or affiliate and a NGEP would be a covered agreement if they meet the other criteria set forth in the rule.\5\ A written arrangement or understanding may be reflected by one or more documents. ---------------------------------------------------------------------------

\5\ 12 U.S.C. 1831y(a) and (e)(1). ---------------------------------------------------------------------------

The agencies have included three examples in the final rule that illustrate when a written arrangement or understanding would and would not exist. (See section ____.2(b).) Example 1 involves a NGEP that meets with an insured depository institution and states that the institution needs to make more community development investments in the NGEP's community. The NGEP and institution, however, do not reach an agreement concerning the community

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development investments the institution should make in the community, and the parties do not reach any mutual arrangement or understanding. The institution later unilaterally issues a press release that announces the institution has established a general goal of making $100 million of community grants in low- and moderate-income neighborhoods in the institution's community over the next 5 years and does not identify the NGEP. Since there was no agreement or understanding between the institution and NGEP, and the institution acted unilaterally to establish its investment goal, Example 1 states that the press release issued by the institution is not a written arrangement or understanding. In Example 2, a NGEP meets with an insured depository institution and states that the institution needs to offer new loan programs in the NGEP's community. The NGEP and the insured depository institution reach a mutual understanding that the institution will provide $10 million in additional loans in low- and moderate-income neighborhoods in the NGEP's community. The insured depository institution tells the NGEP that it will issue a press release announcing the program and subsequently issues a press release that incorporates the key terms of the mutual understanding between the institution and NGEP. The press release reflects the mutual arrangement or understanding between the NGEP and the insured depository institution and is, therefore, a written arrangement or understanding. In Example 3, a NGEP sends a letter to an insured depository institution requesting that the institution provide a $15,000 grant to the NGEP. The insured depository institution responds in writing and agrees to provide the grant to the NGEP in connection with its annual grant program. Since the exchange of letters reflects an understanding or arrangement between the insured depository institution and the NGEP, the agreement would be a covered agreement if it meets the other criteria set forth in the rule including, in particular, the requirement that the NGEP have had a CRA communication. These examples are not exclusive and other written exchanges may or may not constitute a written arrangement or understanding depending on the facts and circumstances of the particular situation. 2. Loan Agreements That Are Not Covered Agreements Section 48(e)(1)(B) specifically exempts certain types of loan agreements from coverage even if they otherwise meet the definition of a covered agreement. Section ____.2(c) of the final rule implements these exemptions. a. Mortgage Loans. The first statutory exemption is for any individual mortgage loan. Under this exemption, any mortgage loan made by an insured depository institution or affiliate to any individual or entity is exempt from the requirements of section 48. This exemption is available for any mortgage loan, regardless of the identity of the borrower or the rate charged on the loan. The agencies requested comment on what types of loans would qualify as a ``mortgage loan'' for purposes of this statutory exemption. A number of commenters addressed this issue, with the vast majority stating that the exemption should be available for any loan that is secured by real estate. A few commenters asserted that the agencies should define a mortgage loan to include any loan the proceeds of which are used for real estate-related purposes, even if the loan was not secured by real estate. Some commenters also contended that investments in mortgage-backed securities or other types of real estate investments should be exempt under this provision. The final rule provides that this statutory exemption is available to any individual loan that is secured by real estate. The real estate securing the loan may be used for residential or commercial purposes, and the loan does not need to have been obtained for purposes of purchasing or improving the real estate. Since section 48 specifically provides that this exemption is available only to mortgage loans, an agreement to make a real-estate related investment (including an investment in mortgage-backed securities) or to make a loan that is not secured by real estate is not exempt under this provision, although such agreements may be exempt from coverage under other provisions of the rule. Section ____.2(d) of the final rule provides examples illustrating the rule's exemptions for qualifying loan agreements. The first example (Example 1) illustrates the exemption for any individual mortgage loan. In this example, an insured depository institution provides an organization with a $1 million loan pursuant to a written agreement. The loan is secured by real estate that is owned or to-be-acquired by the organization. Accordingly, Example 1 states that the agreement is exempt from coverage regardless of the interest rate on the loan or whether the loan was made for purposes of re-lending. b. Specific Contracts or Commitments for Qualifying Loans. The statute also exempts from coverage ``any specific contract or commitment for a loan or extension of credit to individuals, businesses, farms, or other entities, if the funds are loaned at rates [that are] not substantially below market rates and if the purpose of the loan or extension of credit does not include any re-lending of the borrowed funds to other parties.`` \6\ Under the statute, this exemption is available for any type of loan to any individual or entity if the loan meets the market rate and re-lending restrictions of the statute. ---------------------------------------------------------------------------

\6\ 12 U.S.C. 1831y(e)(1)(B)(ii). ---------------------------------------------------------------------------

The agencies requested comment on whether this exemption covers only a specific commitment to make a qualifying loan or extension of credit (such as a loan commitment typically made in the course of providing a line of credit to a small business), or also would provide an exemption for a commitment to make multiple loans that meet the Act's restrictions. The agencies also requested comment on whether the agencies should define when a loan is made at ``substantially below market rates'' or for purposes of re-lending. Most commenters that addressed these issues requested that the agencies provide additional guidance concerning the phrases ``substantially below market rates'' and ``for purposes of re-lending,'' and some of these commenters suggested definitions for these phrases. Comments were mixed on whether the exemption was available only to a specific contract or commitment for an individual loan or if it also would cover a general commitment by an insured depository institution to make multiple loans over a period of time. After carefully reviewing the language and purposes of section 48 and the comments received, the agencies have determined that the exemption in section ____.2(c)(2) is available only with respect to a specific contract or commitment by an insured depository institution to make a single loan or extension of credit that meets the Act's market- rate and re-lending restrictions, and does not cover an agreement or commitment by an institution or affiliate to make multiple loans or extensions of credit. The agencies also have amended the rule to provide that a loan is made for ``purposes of re-lending'' only if the loan application or other loan documents indicate that the borrower intends or is authorized to use the borrowed funds to make a loan or

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extension of credit to one or more third parties. The final rule retains the statute's restriction that the loan or extension of credit may not be made at a rate that is substantially below market rates. In determining whether a loan or extension of credit is made at ``substantially below market rates,'' an institution should compare the rate charged on the loan or extension of credit to the rate the institution has or would charge a comparable borrower (e.g., a NGEP with similar financial resources and credit history) on a comparable type of transaction (e.g., a construction loan, permanent financing, small business loan, or unsecured consumer loan). Since the rates charged on particular types of loans vary over time and may vary depending on the location of the lender and borrower, the agencies have not included in the rule a fixed formula for determining whether a loan or extension is made at ``substantially below market rates.'' Examples 2, 3 and 4 in section ____.2(c) of the rule illustrate the scope and application of this exemption. In Example 2, an insured depository institution commits to provide a $500,000 line of credit to a small business pursuant to a written agreement. The example provides that the loan is made at a rate within the range of rates offered by the institution to other similarly situated small businesses in the market and the loan documentation does not indicate that the borrower intends or is authorized to re-lend the borrowed funds. Accordingly, the example states that this commitment for an individual loan is exempt under section ____.2(c)(2) of the rule. In Example 3, a small business obtains a $75,000 small business loan, documented in writing, from an insured depository institution. The institution offers its borrowers small business loans that are guaranteed by the Small Business Administration (SBA) and the loan is made under this loan program. The loan documentation does not indicate that the borrower intends or is authorized to re-lend the funds to any third-party. Although the rate charged by the institution on the loan is well below that charged by the institution on commercial loans, the rate is within the range of rates that the institution would charge a similarly situated small business for a similar loan under the institution's SBA loan program. Accordingly, the example states that the loan is not made at substantially below market rates and is exempt from coverage under section ____.2(c)(2) of the rule. Example 4 involves a bank holding company that enters into a written agreement with a community development organization. The agreement provides for the insured depository institutions owned by the bank holding company to make $250 million in small business loans in their communities over the next 5 years. Since the agreement provides for the institutions to make multiple loans, the agreement is not a specific contract or commitment for a loan or extension of credit and, thus, is not exempt from coverage under section ____.2(c)(2) of the rule. The example notes, however, that each small business loan made pursuant to this general commitment would be exempt from coverage if the loan separately meets market rate and re-lending restrictions of the exemption. To be entirely exempt from coverage under section ____.2(c)(1) or (2) of the rule, an agreement must be exclusively a loan, extension of credit or loan commitment that meets the requirements of the relevant exemption. The rule provides, however, that if an agreement includes a loan, extension of credit or loan commitment that, if documented separately, would meet the rule's requirements to be exempt and also provides for the insured depository institution or affiliate to provide other funds or resources, the exempt loan, extension of credit or loan commitment may be excluded for purpose of determining whether the agreement meets the Act's dollar thresholds or is in fulfillment of the CRA. (See section ____.2(e).)\7\ ---------------------------------------------------------------------------

\7\ The agencies note, however, that if the other consideration would reduce the effective interest rate paid on the loan or extension of credit to a rate that is substantially below the market rate, the loan or extension of credit would not itself be exempt from coverage. ---------------------------------------------------------------------------

3. CRA Communication Section 48(e)(1)(B)(iii) provides a statutory exemption from the CRA Sunshine provisions for ``any agreement entered into by an insured depository institution or affiliate with a [NGEP] who has not commented on, testified about, or discussed with the institution, or otherwise contacted the institution, concerning the Community Reinvestment Act of 1977.'' This exemption for agreements with persons who have not had a CRA contact was included in section ____.2(b)(2) of the proposed rule, which contained an exemption that restated the statutory language in section 48(e)(1)(B)(iii). Section ____.2(b)(2) also provided examples of actions that would constitute a CRA contact and other examples of actions that would not be considered a CRA contact. The preamble invited comment on this aspect of the proposal, including comment on whether the agencies should provide a more detailed definition of the exemption and on several alternative approaches to defining CRA contact. Nearly all commenters requested that the agencies change the definition of CRA contact in the proposed rule to explain the breadth of the exemption, to provide additional clarity regarding what constitutes a CRA contact, or to exempt specifically certain types of contacts. Many commenters underscored the importance of a rule that allowed persons to determine before entering into an agreement whether or not they have had a CRA contact and qualify for the exemption. While many commenters expressed concern about various aspects of the proposal on CRA contact, commenters were divided on how to address these concerns. A significant number of commenters argued that the agencies should define a CRA contact to cover only providing CRA-related comments or testimony to an agency and discussions with an insured depository institution or affiliate about providing (or refraining from providing) such comments or testimony. There was also significant support for an alternative that would have excluded discussions with an insured depository institution or affiliate concerning whether particular loans, services, investment or community development activities are generally eligible for consideration by an agency under the CRA Regulations. Others argued that only conversations related specifically to the CRA performance record of an institution should be covered. A significant number of commenters advocated exempting contacts that are incidental to ordinary business dealings, which were perceived as outside the intended scope of the statute. Others advocated exempting certain types of ``routine inquiries,'' such as inquiries about what an institution's CRA rating is or about the CRA statute or rule. Some commenters, on the other hand, supported a broad interpretation of CRA contact that would cover general discussions of the CRA. A small number of commenters supported a broad interpretation of CRA contact while also advocating that the agencies narrow other aspects of the definition of a covered agreement, such as the definition of fulfillment. In addition to these issues regarding the scope of the exemption, many commenters urged the agencies to

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address other issues raised by the CRA contact definition. In particular, a number of commenters suggested that the agencies indicate who at the relevant institution or affiliate and who at the NGEP must have a CRA contact or have knowledge that a CRA contact has occurred, or require a temporal or other connection between the CRA contact and negotiation of a CRA agreement. As explained more fully below, the final rule incorporates changes in three areas to address comments regarding the definition of CRA contact. In summary, in order to identify contacts that have a relationship to an agreement and to avoid imposing substantial burden on parties entitled to claim the exemption, the final rule adopts a definition of ``CRA communication'' that has three parts. First, the rule adds clarity regarding the type of communication that is considered to concern the CRA; second, the rule provides that the institution and the NGEP must have knowledge of the CRA communication and specifies who must have that knowledge; third, the rule recognizes a temporal relationship between the communication and the agreement. In addition, the final rule relocates and rewords the CRA communication provision from an exemption for NGEPs that have not had a CRA communication to a requirement in the definition of a covered agreement that the agreement be with a NGEP that has had a CRA communication. The final rule also refers to a CRA contact as a ``CRA communication.'' This relocation and rewording makes the final rule easier to read and understand and does not have any substantive effect. a. Definition of CRA Communication. In considering the scope of the exemption in section 48(e)(1)(B)(iii) for NGEPs that have not had a contact concerning the CRA, the agencies have carefully considered the words of the statute and the purpose of the exemption as well as the comments received by the agencies. The Conference Report for the Act indicates that this exemption was designed to provide an exemption from the requirements of the CRA Sunshine provisions for a wide range of organizations that solicit funds without regard to the CRA. The Conference Report lists as examples of the types of groups that might qualify for this exemption civil rights groups, community groups providing housing or other services in low-income neighborhoods, veterans groups, and community theater groups.\8\ ---------------------------------------------------------------------------

\8\ See H.R. Conf. Rep. No. 106-434 at 179 (1999). ---------------------------------------------------------------------------

The final rule clarifies the definition of a CRA communication by adding specificity that was drawn from the examples published in the original proposal and in the preamble to the original proposal. Under the final rule, a CRA communication is defined to include any of the following five types of contacts: <bullet> Any written or oral comment or testimony provided to a Federal banking agency concerning the adequacy of the performance under the CRA of the insured depository institution, any affiliated insured depository institution or any CRA affiliate;\9\ ---------------------------------------------------------------------------

\9\ As discussed more fully below, a ``CRA affiliate'' is an affiliate of an insured depository institution whose activities are considered in evaluating the CRA performance of the institution. Accordingly, it is viewed as part of the insured depository institution for these purposes. ---------------------------------------------------------------------------

<bullet> Any written comment submitted to the insured depository institution that discusses the adequacy of the performance under the CRA of the institution and that must be included in the institution's CRA public file; <bullet> Any discussion or other contact with an insured depository institution or any affiliate about providing or refraining from providing written or oral comments or testimony to any Federal banking agency concerning the adequacy of the performance under the CRA of the insured depository institution, any affiliated insured depository institution or any CRA affiliate; <bullet> Any discussion or other contact with an insured depository institution or any affiliate about providing or refraining from providing written comments that concern the adequacy of the institution's CRA performance and that must be included in the institution's CRA public file; and <bullet> Any discussion or other contact with an insured depository institution or affiliate about the adequacy of the performance under the CRA of the insured depository institution, any affiliated insured depository institution, or any CRA affiliate. The first four types of contacts include contacts with a Federal banking agency or with an institution or affiliate about contacting a Federal banking agency, as well as written communications that, under existing rules, must be retained by an institution in its CRA public file. The final rule includes a fifth type of contact that relates to any discussion or other contact with an institution or affiliate about the adequacy of the institution's performance under the CRA. In adopting this fifth type of contact, the agencies have carefully considered the suggestion of a number of commenters that CRA communications be limited to the first four types of agency contacts or to discussions with an institution regarding agency contacts. The agencies note that the exemption in section 48(e) for a NGEP that has not had a CRA communication, by its terms, is available only if the NGEP has not ``discussed with the institution, or otherwise contacted the institution, concerning the CRA.'' By its terms, the exemption appears to contemplate that, in order to qualify for the exemption, the NGEP not have had discussions or contacts ``concerning the CRA.'' Contacts ``concerning the CRA'' would cover discussions that are not limited to discussions regarding providing testimony or comments to an agency. In order to explain what type of contact is covered by the words ``concerning the CRA,'' the final rule includes the fifth category for discussions or other contacts about the ``adequacy'' of the institution's performance under the CRA. This reference was included to indicate that a contact that is related to how well or how poorly an institution is fulfilling its obligation to help meet the credit needs of the institution's community as evaluated under the CRA is one of the types of contacts that would be most likely to influence a CRA agreement, and, consequently, would be a CRA communication that disqualifies a NGEP from claiming the exemption in section 48(e)(1)(B)(iii). To help illustrate when a discussion or contact relates to the adequacy of an institution's CRA performance, the final rule contains several examples of contacts that would be covered and several examples of contacts that would be exempt.\10\ These examples address only the content of a CRA communication and assume that all other requirements regarding the communication (and agreement) are otherwise satisfied. ---------------------------------------------------------------------------

\10\ Some commenters argued that the examples in the proposed rule were helpful in illustrating the scope of the CRA contact exemption and requested additional examples. Other commenters argued that the examples would broadly discourage certain kinds of contacts and should be eliminated. Section ____.1(d) of the final rule states that the examples included in the rule are not exclusive, and the agencies believe that, on this basis, the examples are a useful illustration of the scope of the rule. ---------------------------------------------------------------------------

Three examples address contacts that are CRA communications and, consequently, would cause a written agreement involving the NGEP to be a covered agreement. In the first example, a NGEP files a written comment with a Federal banking agency in response to a general agency request for comments on an application to open a new branch.

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The comment filed by the NGEP states that the applicant insured depository institution has successfully addressed the credit needs of its community. In the second example, a NGEP states to an executive officer of an insured depository institution that the institution must improve its CRA performance. Both of these examples illustrate a contact in which the CRA performance record of the institution is specifically mentioned. The statute does not require that a specific reference to the Community Reinvestment Act of 1977 be made in order to represent a CRA communication, and, in fact, a number of commenters indicated that discussions leading to agreements often do not include a specific reference to the CRA because the context of the negotiation makes clear that the agreement is intended to address CRA performance. To illustrate this, an example of a CRA communication has been included that involves an oral discussion in which the NGEP claims that the institution needs to make more mortgage loans in low- and moderate- income neighborhoods. The connection with the CRA is indicated by the reference to the action requested, which involves activities that are often the focus of CRA performance evaluations, along with a statement indicating an obligation that the institution take this action, an obligation that is considered to arise out of CRA evaluations. The final rule also includes several examples of contacts that are not considered to be CRA communications. One example involves a fund- raising letter sent by a NGEP to an insured depository institution and to other businesses in the community encouraging all businesses in the community to meet their obligation to make the community a better place to live by supporting the fund-raising efforts of the NGEP. This example illustrates that a fund-raising letter that is widely distributed in a way that does not imply an obligation under the CRA is not itself considered to be a CRA communication. Similarly, a contact by a NGEP with an insured depository institution to simply determine what rating the institution received at its most recent CRA performance examination would not, by itself, constitute a discussion concerning the adequacy of the institution's performance. A number of commenters advocated clarifying that the definition of CRA communication would not include marketing efforts for products or services that might relate to CRA activities. The rule contains two examples that illustrate that general marketing efforts and general discussions regarding the eligibility of products and services for CRA consideration are not considered to be CRA communications unless the communication includes a discussion concerning the adequacy of the particular institution's CRA performance. One example involves a discussion by a NGEP with an insured depository institution regarding whether particular loans, services, investments, community development activities or other activities are generally eligible for consideration by a Federal banking agency under the CRA, without any discussion of the adequacy of the CRA performance of the insured depository institution or affiliate. Another example illustrates a situation in which the NGEP combines a general marketing discussion with a discussion of the eligibility of particular loans for consideration under the CRA, but without any discussion of the adequacy of the CRA performance record of the institution or obligation of the institution to take any action related to the CRA. In this example, the NGEP engages in the sale or purchase of loans in the secondary market and sends a general offering circular to financial institutions offering to sell or purchase a portfolio of loans. The NGEP then meets with the institution and discusses whether specific loans are generally eligible for consideration under the CRA, including which loans are made in the institution's community, without discussing the CRA performance or obligations of the institution. The agencies believe that purchases and sales of loans in the secondary market are typically done in the manner illustrated in the example and, therefore, generally do not involve a CRA communication. The final rule also retains two examples contained in the proposed rule regarding other matters. One illustrates that statements made at a widely attended conference on a general topic (but not a meeting or hearing regarding a specific institution, affiliate or transaction) are not considered to be CRA communications. Statements made at widely attended conferences on general topics are not likely to be effective in influencing CRA agreements and cannot be effectively monitored. The other example illustrates that statements made in response to a direct request to the specific NGEP from a Federal banking agency (but not a general request for comment in connection with an application for approval of a transaction or an examination) are not considered to be CRA communications. Some commenters suggested that this example be deleted because it suggested a preference for statements made by NGEPs that have been directly contacted by a banking agency over NGEPs that provide information to the agency in the course of a general solicitation of public comment. The final rule retains the example because the agencies believe that it is important to the agencies' ability to meet their statutory obligations under the CRA that the agencies obtain information regarding the credit needs of the community from sources that include NGEPs that may enter into agreements with insured depository institutions. In these circumstances, the contact results due to an action by the agency, not an attempt by the NGEP to influence the agency or obtain a CRA agreement. Imposing the rule's requirements on the NGEP in this context might discourage cooperation between NGEPs and the agencies and impede the ability of the agencies to obtain useful information regarding the banking and credit needs of communities. b. Knowledge of CRA Communications. To define when a NGEP has had a CRA communication with an insured depository institution for purposes of the exemption provided in section 48(e)(1)(B)(iii), it is essential to know when a communication is ``with the [insured depository] institution'' and when it is by a NGEP. In other words, it is essential to know who speaks for the institution and for the NGEP. The statute is silent on this point. A number of commenters suggested that the rule apply only to CRA communications that occur with designated officers of the insured depository institution or affiliate, such as the CRA compliance officer or persons that negotiate covered agreements. In circumstances where the individuals involved in or responsible for negotiating agreements do not know that a CRA communication has occurred, commenters claimed that it would be difficult, if not impossible, for institutions and NGEPs to know whether they properly claimed the exemption or were, in fact, in violation of the CRA Sunshine provisions. For example, casual conversations between a bank teller and a customer who is also an employee of a business consulting firm might involve CRA activities of the bank and meet a broad reading of the proposed definition of CRA contact. Commenters were concerned that, if so, the contact could cause a written agreement between the institution and business consulting firm

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to be a covered agreement even though the conversation had no influence over the agreement because officials of the institution and of the NGEP responsible for negotiating the agreement were not aware of the conversation. To address this, a number of commenters urged the agencies to include a requirement that officers of the institution and of the NGEP responsible for negotiating agreements have knowledge of the CRA communication. Others suggested that contacts include only communications with executive officers and the CRA compliance officer of insured institutions and with senior officers of NGEPs. As noted above, the CRA Sunshine provisions do not indicate who a NGEP must contact at an insured depository institution or affiliate in order to have been considered to have made a CRA contact for purposes of the exemption in section 48(e). The statute is also silent on who speaks for a NGEP that is an organization or company, rather than an individual. The agencies believe that a CRA communication can only have an effect on an institution's willingness to enter into an agreement or on the terms of an agreement if the communication is with or is known to individuals at the organization who are either involved in negotiating the agreement or have authority or responsibility for such agreements. These are the individuals that speak for the institution and represent the institution in its decision making. Moreover, these are the individuals that are the most likely to have communications regarding the CRA that could lead to or affect the types of agreements that the CRA Sunshine provisions are intended to cover. There is no evidence in the terms of the CRA Sunshine provisions or in the legislative history for those provisions that Congress intended to deny the exemption based on CRA contacts that are not known to the individuals that are involved with or have the authority to influence the negotiation of CRA agreements. In fact, the example referred to in the legislative history of the type of organization the exemption was designed to protect is a large youth organization with national membership.\11\ Given the size, scope and nature of the organization, it is impossible to believe that members of that organization have not--at some time and in some capacity--had contacts with insured depository institutions regarding the CRA. Without a requirement in the rule that attributes CRA communications only to members of the organization that have authority or responsibility for negotiating agreements on behalf of that organization, this organization identified in the legislative history would not be able to claim the exemption. ---------------------------------------------------------------------------

\11\ See H.R. Conf. Rep. No. 106-434 at 179 (1999); 145 Cong. Rec. S13887 (daily ed. Nov. 4, 1999). ---------------------------------------------------------------------------

Moreover, there would be significant burden imposed on both banking organizations and NGEPs if organizations and NGEPs are not entitled to rely on the exemption in section 48(e)(1)(B)(iii) because of a CRA communication between any employee at the organization with any member of a NGEP. To assure that no unauthorized contacts occur and that agreements are properly exempt under section 48(e)(1)(B)(iii), a banking organization and NGEP would be required to monitor all contacts by all employees and members of the organization and NGEP. Even in organizations of only moderate size, this could entail tracking contacts by thousands of employees at a single banking organization. The burden from this monitoring effort is likely to be overwhelming with few benefits because few if any CRA communications that result in CRA agreements are likely to occur among individuals at the organization other than those individuals with authority and responsibility for these agreements. For these reasons, the final rule modifies the proposed rule to require that, in order to be a CRA communication that disqualifies a NGEP from the exemption in section 48(e)(1)(B)(iii), specified individuals at the institution or affiliate and at the NGEP must have knowledge of the communication. Under the final rule, an insured depository institution or affiliate is considered to have knowledge of a CRA communication with a NGEP if any of the following representatives of the institution or affiliate have knowledge of the contact with the NGEP: <bullet> An employee who approves, directs, authorizes or negotiates the agreement with the NGEP; <bullet> An employee who is designated with responsibility for compliance with the CRA and who knows that the institution or any affiliate of the institution is negotiating, intends to negotiate, or has been informed by the NGEP that it expects to request that the institution or affiliate negotiate an agreement with the NGEP; or <bullet> An executive officer of the institution or affiliate and who knows that the institution or any affiliate of the institution is negotiating, intends to negotiate, or has been informed by the NGEP that it expects to request that the institution or affiliate negotiate an agreement with the NGEP. In addition to contacts between an institution or affiliate and a NGEP, there are several types of CRA contacts that arise in the agency review process or the CRA examination process or that involve records that the institution is responsible for maintaining. These contacts are of such importance that the institution is deemed by the final rule to have knowledge of the communication. In particular, an institution or affiliate is deemed under the final rule to have knowledge of any testimony provided to a Federal banking agency at a public meeting or hearing and of any written comment submitted to the insured depository institution that must be and has been included in the institution's CRA public file. An institution or affiliate is also considered under the final rule to have knowledge of any comment (written or oral) that has been made by a NGEP to a Federal banking agency if the comment is conveyed in writing by the agency to the insured depository institution or affiliate. The rule establishes a parallel knowledge requirement for a NGEP. A NGEP is considered to have knowledge of a CRA communication if any of the following have knowledge of the contact: <bullet> A director, employee or member of the NGEP who approves, directs, authorizes or negotiates the agreement with the insured depository institution of affiliate; <bullet> A person who functions as an executive officer of the NGEP and who knows that the NGEP is negotiating or intends to negotiate an agreement with the insured depository institution or affiliate; or <bullet> Where the NGEP is an individual, the individual. For purposes of this requirement, an executive officer of an institution, affiliate or NGEP is defined as provided in Regulation O to include any person that participates or has authority to participate in the major policymaking functions of the institution, affiliate or NGEP, regardless of the person's title (see 12 CFR 215.2(e)). In addition, persons who serve as counsel to or agent for an insured depository institution or NGEP are considered to be acting for the insured depository institution or NGEP for purposes of receiving written comments or testimony from an agency. Under the final rule, the designated individuals are not required personally to have had the CRA communication. Instead, a CRA communication is

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covered if the communication involved or is known to one of the designated individuals. The individuals identified in the rule at the insured depository institution or affiliate and at the NGEP are the individuals who either are involved in or are responsible for CRA agreements. A CRA communication with an employee of an insured depository institution, affiliate or NGEP that is not known to the individuals that negotiate an agreement or to a person with authority to intervene in the negotiation of an agreement is unlikely to influence the agreement in any way. The knowledge requirement also significantly reduces the burden on insured depository institutions, affiliates and NGEPs to monitor contacts of employees or members that play no role or have no influence in the negotiations or decisions regarding agreements. c. Timing of CRA Communications. A majority of commenters argued that the final rules should require a temporal relationship between the CRA communication and the agreement. These commenters contended that a communication that occurs long before or anytime after an agreement has been entered into does not influence the terms of an agreement or encourage an institution to enter into an agreement. Consequently, commenters argued that taking account of CRA communications that are distant in time from the date of an agreement would be contrary to the purpose of the exemption granted in section 48(e)(1)(B)(iii), which they argued was to exempt any agreement with an NGEP that has not attempted to use the CRA to negotiate the agreement. These commenters argued that only CRA communications that occur during some period prior to the date of the agreement be considered to be CRA contacts. Commenters suggested periods that varied from 30 days to 2 years prior to the agreement, with some arguing that only contacts that occur during the public comment period for an agency's review of a transaction or a CRA examination be considered. Many commenters also contended that failure to adopt a temporal connection between a CRA communication and a covered agreement would forever disqualify a NGEP for the exemption based on one CRA communication, regardless of when it occurred, its influence on a written agreement or how circumstances may have changed. They argued that this would significantly chill free speech and the right to provide comments to a Federal agency. On the other hand, several commenters argued that section 48(e)(1)(B)(iii) by its terms does not provide any limitation on the timing of a CRA communication, and that the exemption is available only to a NGEP that has not had a CRA communication with an agency or insured depository institution at any time. These commenters believed that the agencies have no authority to adopt a temporal requirement. The agencies have taken particular care in considering the views presented by commenters on this matter. A purpose of the CRA Sunshine provisions is to provide public disclosure of agreements that are in fulfillment of the CRA in order to allow the public and Congress to monitor how resources paid under these agreements are used.\12\ The exemption in section 48(e)(1)(B)(iii) was included in order to provide relief from the reporting and disclosure provisions for agreements with NGEPs that have not had a discussion concerning the CRA. Thus, the agencies believe that the purposes of the exemption and of the CRA Sunshine provisions generally assume a connection between the CRA communication and the covered agreement. ---------------------------------------------------------------------------

\12\ See, e.g., 145 Cong. Rec. S13877-78 (daily ed. Nov. 4, 1999). ---------------------------------------------------------------------------

As a practical matter, in the case of agreements that are intended to be covered by the CRA Sunshine provisions, CRA communications normally occur during the period in which the agreement is discussed or negotiated, which is a relatively short period immediately before the agreement is reached. Indeed, it is during this negotiating period that communications regarding the CRA have the most effect on whether a CRA agreement will be reached and on what will be the purpose and the terms of the agreement. This view was supported by commenters representing insured depository institutions as well as commenters representing NGEPs, most of whom indicated that CRA communications occurred regularly during the negotiation period for CRA agreements. This view is also consistent with one of the purposes of the CRA Sunshine provisions, which was to allow monitoring of agreements that result from contacts concerning the CRA. The exemption provided in section 48(e)(1)(B)(iii) would, over time, become meaningless if the exemption is lost because of statements concerning the CRA that are made long before or after an agreement has been reached. Without a temporal relationship, all persons that potentially may have agreements with insured depository institutions or their affiliates regarding activities that receive favorable consideration under the CRA would likely feel compelled to maintain records that allow them to determine whether a CRA contact had ever been made by any person in the organization in order to ensure that the NGEP is in compliance with the exemption and the CRA Sunshine provisions. This would represent a significant recordkeeping burden on persons, including businesses, community organizations and individuals, that the exemption was intended to benefit. For many of these organizations, this would mean tracking and reviewing contacts from numerous employees or members on a continuous and long-term basis. This heavy burden is inconsistent with the purpose of the exemption. It is also inconsistent with the directive in the CRA Sunshine provision that the agencies prescribe regulations designed to ensure and monitor compliance with the CRA Sunshine provisions without imposing an undue burden on the parties. The agencies believe that recognizing a temporal relationship is an effective and objective method for identifying CRA communications that are most likely to have influenced the shape or the existence of an agreement. Conversely, by not covering communications made at a time that is distant from or after the agreement, the final rule substantially reduces the potential that communications that are unrelated to an agreement will be covered without excluding communications that have the most direct effect on the agreement. Moreover, a temporal relationship focuses on the fact that in nearly all, if not all, cases CRA communications are made during the period in which the potential for an agreement is discussed and the agreement is negotiated. Thus, a temporal relationship supports the purpose of the CRA Sunshine provisions, including the exemption in section 48(e)(1)(B)(iii), of identifying and exempting NGEPs that have not made CRA communications in an effort to obtain or negotiate a CRA agreement. For these reasons, the final rule provides a time frame designed to recognize the connection between the communication and the agreement. To be deemed not to have had a CRA communication under section 48(e)(1)(B)(iii), a NGEP must not have had a CRA communication within 3 years prior to entering into the agreement in the case of oral or written communications with a Federal banking agency. The NGEP also must not have

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had within the 3 years prior to the agreement any written CRA communication with the relevant insured depository institution or any of its affiliates. In addition, the NGEP must not have had within the 3 years prior to the agreement any oral communication with the relevant insured depository institution or any of its affiliates about providing (or refraining from providing) comments or testimony to a Federal banking agency or comments to the institution's CRA public file where such communications occur in connection with a request to, or agreement by, the institution or affiliate to take any action that is in fulfillment of the CRA. Finally, the NGEP must not have had any other oral CRA communication with the relevant insured depository institution or any of its affiliates concerning the adequacy of the institution's CRA performance within one year prior to entering into the agreement. The agencies selected the three year period for communications with an agency, certain types of discussions with an institution or affiliate about providing testimony or comments to an agency, and other written contacts with an institution or affiliate based on several considerations. In this regard, existing regulations generally require an insured depository institution to maintain written comments in its CRA public file for a period of three years.\13\ The agencies' examination schedules also generally call for the agencies to evaluate the CRA performance of large insured depository institutions every 3 years. Regulations issued by the Office of Management and Budget and applicable to Federal agencies also discourage any collection of information that would require regulated entities to retain records for more than three years.\14\ ---------------------------------------------------------------------------

\13\ See 12 CFR 25.43(a)(1) (OCC); 12 CFR 228.43(a)(1) (Board); 12 CFR 345.43(a)(1) (FDIC); and 12 CFR 563e.43(a)(1)(OTS). \14\ See 5 CFR 1320.5(d)(2)(iv). ---------------------------------------------------------------------------

The agencies selected the one year period for oral communications with an insured depository or affiliate (other than those relating to agency comments or testimony under the circumstances described above) based on several other considerations. One consideration was that many commenters suggested a time period in the one year range. Also, a shorter time period for oral communications with an insured depository institution or affiliate recognizes that, as a practical matter, oral communications are harder to monitor and remember than written communications. The agencies believe, however, that insured depository institutions and affiliates are more likely to document and remember oral communications with a NGEP that concern providing comments or testimony to a Federal banking agency where such communications also involve a request to, or agreement by, the institution or affiliate to take additional actions in fulfillment of the CRA. Accordingly, the agencies have included such oral communications in the three year period described above. The agencies believe these time frames provide reasonable assurance that the communication and the agreement are not connected and would not impose an undue burden on the parties. Moreover, commenters indicated that where a CRA communication occurs it is most often occurs immediately before the parties enter into an agreement. This contact period is well within the time periods adopted by the rule. d. Additional Exemptions. A number of commenters requested that the Board exercise the authority granted by the CRA Sunshine provisions to provide exemptions for certain types of agreements that may involve a CRA communication.\15\ In particular, commenters requested exemptions for law firms and consulting firms, trade associations, owners of real estate that enter into sale or lease agreements with banks, community development financial institutions (CDFIs), and participants in the secondary loan market such as government-sponsored enterprises. ---------------------------------------------------------------------------

\15\ See 12 U.S.C. 48(h)(3)(B). ---------------------------------------------------------------------------

The agencies believe that many of the concerns raised by these commenters are addressed by modifications made to the fulfillment, CRA communication and other sections of the rule. In addition, a wide range of agreements between insured depository institutions and affiliates and law firms will not be covered under the final rule because the definition of ``nongovernmental entity or person'' in the final rule excludes any person or entity that is acting as a representative of an insured depository institution or affiliate. (See section ____.11.) Accordingly, many agreements between law firms and insured depository institutions and affiliates would not be considered covered agreements because the agreement provides that the law firm will be acting as a representative of the institution or affiliate. In order for agreements to be covered agreements, the NGEP must have had a CRA communication with an insured depository institution or affiliate that is a party to the agreement or an affiliate of a party to the agreement and the agreement must be made pursuant to, or in connection with, the fulfillment of the CRA, as described below. The agencies believe that most traditional consulting agreements that insured depository institutions and affiliates enter into will not meet both of these requirements. CDFIs that are insured depository institutions or affiliates of insured depository institutions are not covered by the CRA Sunshine provisions to the extent that they have agreements with other insured depository institutions or affiliates. CDFIs that are not insured depository institutions or affiliates thereof are considered NGEPs under the rule (see section ____.11.), and there appears to be no reason to provide a special exemption for this class of NGEPs. In light of the other changes and clarifications incorporated in the final rule, the Board also has not adopted any additional exceptions. The Board retains the authority to grant exemptions from the CRA communication provisions if experience in administering these provisions demonstrate that such action is appropriate. 4. Fulfillment of the CRA for Purposes of the CRA Sunshine Provisions The CRA Sunshine requirements of section 48 of the FDI Act apply only to covered agreements. To be a covered agreement, section 48(e)(1) requires that the agreement be made pursuant to, or in connection with, ``the fulfillment of the Community Reinvestment Act.'' Section 48(e)(2) defines ``fulfillment'' for this purpose as ``a list of factors that the appropriate Federal banking agency determines have a material impact on the agency's decision'' to approve or disapprove an application for a deposit facility under section 803 of the CRA or to assign a rating to an insured depository institution under section 807 of the CRA. In defining fulfillment for purposes of the CRA Sunshine provisions, the agencies proposed the lending, investment, and service activities enumerated in the agencies' CRA Regulations as the list of factors that have a material impact on the relevant agency decisions.\16\ This list of factors is: ---------------------------------------------------------------------------

\16\ 12 CFR 25.21-25.29 (OCC); 12 CFR 228.21-228.29 (Board); 12 CFR 345.21-345.29 (FDIC); 12 CFR 563e.21-563e.29 (OTS). ---------------------------------------------------------------------------

(1) Home purchase, home improvement, small business, small farm, community development, and consumer lending as described in the lending test portion of the CRA

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Regulations, including loan purchases, loan commitments and letters of credit; (2) Making investments, deposits, or grants, or acquiring membership shares that have as their primary purpose community development, as described in the investment test portion of the CRA regulations; (3) Delivering retail banking services, as described in the service test portion of the CRA Regulations; (4) Providing community development services as described in the service test portion of the CRA Regulations; (5) For a wholesale or limited-purpose insured depository institution, community development lending, qualified investments, and community development services, as described in the community development test portion of the CRA Regulations for wholesale or limited-purpose insured depository institutions; (6) For a small insured depository institution, the lending and other activities described in the small insured depository institution performance standard of the CRA Regulations; and (7) For an insured depository institution whose CRA performance is evaluated on the basis of a strategic plan, any element of that plan as described in the strategic plan portion of the CRA Regulations. The proposed rule also provided that an agreement was in fulfillment of the CRA if it called for any NGEP to provide or refrain from providing written or oral comments or testimony to any Federal banking agency concerning the performance under the CRA of an insured depository institution or CRA affiliate that is a party to the agreement or an affiliate of a party to the agreement, or written comments that are required to be included in the CRA public file of any such insured depository institution.\17\ ---------------------------------------------------------------------------

\17\ The CRA Regulations generally require the agencies to consider public comments and comments included in an institution's CRA public file when evaluating an institution's CRA performance. In addition, the CRA Regulations require the agencies to consider written or oral comments submitted to the agency when acting on applications for a deposit facility. ---------------------------------------------------------------------------

Some commenters suggested that this list of factors was too broad and covered normal business arrangements that were not intended to be covered by the CRA Sunshine provisions. In particular, commenters suggested that, by referring to a list of factors that includes all home mortgage loans wherever and to whomever made, the proposal could cover activities for which no CRA performance credit would ordinarily be granted to the lending institution. A number of commenters also argued that the agencies should only consider an activity to be in fulfillment of CRA if the activity is itself ``material'' to the CRA performance rating of an insured depository institution or to an evaluation of its CRA performance in an application for a deposit facility. These commenters suggested, among other options, that an agreement be considered to be in fulfillment of CRA only if it involved loans in more than one of the assessment areas served by the insured depository institution, loans of significant amounts based on the size of the institution, or activities that would change the CRA rating of the institution. The CRA Sunshine statute specifically defines ``fulfillment'' to mean ``a list of factors that the appropriate Federal banking agency determines have a material impact on the agency's decision'' to act on an application for a deposit facility or assign a CRA rating. Under the terms of the statute, the agency must identify factors that have a material impact. The statute determines the threshold of amounts of resources that are sufficient to trigger the CRA Sunshine requirements. For this reason, the agencies did not adopt the suggestion of commenters that the agencies modify the list of factors to include a measure of the size of an activity. The agencies recognize, on the other hand, that the list of factors in the original proposal was very broad and could be read to cover activities that do not implicate the purposes of the CRA Sunshine provisions. To address this, the final rule has been amended to provide that performance of a listed activity, other than providing or refraining from providing CRA-related comments to an agency or providing comments that must be included in the institution's CRA public file, is considered to be in fulfillment of the CRA for purposes of the CRA Sunshine provisions only if the activity is of the type that is likely to receive favorable consideration by a Federal banking agency in evaluating the performance under the CRA of the insured depository institution that is a party or an affiliate of a party to the agreement. This is intended as a general test that does not turn on whether or not the activity in fact receives credit at the next CRA performance examination or is considered as part of a review of CRA performance in a future application for a deposit facility. Instead, an insured depository institution or NGEP can make this judgment on the basis of general experience with the CRA performance review process for the particular type of insured depository institution. An insured depository institution is likely to receive favorable consideration for an activity if the activity (1) received favorable consideration at the institution's previous CRA performance examination, (2) would address a deficiency that an agency cited in the most recent public evaluation of the CRA performance of the institution, or (3) is of the type that is favorably considered by the agencies in reviewing the CRA performance of comparable insured depository institutions. For example, under item (3), an activity conducted by a small, wholesale or limited-purpose insured depository institution (as defined in the CRA Regulations) would likely receive favorable consideration if the agencies favorably consider such an activity when reviewing the CRA performance of other small, wholesale or limited-purpose institutions, respectively. Home mortgage lending in low- and moderate-income neighborhoods in an insured depository institution's assessment area typically is considered favorably. On the other hand, home mortgage lending in middle- and upper-income neighborhoods, while taken into account in determining the size and scope of an institution's lending activities under the CRA Regulations, generally does not receive favorable consideration. However, the context in which the insured depository institution operates may dictate otherwise. For example, this would be the case if the institution operates only in middle- and upper-income areas or makes loans only in high cost areas. In focusing on activities that are likely to receive favorable consideration, the agencies recognize that there is a difference between the purpose of the CRA Regulations, which must broadly take account of the context in which an insured depository institution operates, and the purpose of the CRA Sunshine provisions. The agencies do not intend the list of factors under the CRA Sunshine provisions in any way to indicate any change in the information that the agencies review under the CRA Regulations or to affect in any way the manner in which examinations are conducted or CRA performance ratings given. Accordingly, section ____.4 specifically provides that the term ``fulfillment of the CRA'' is only defined for purposes of the CRA Sunshine regulation. In addition, as discussed above, section ____.1(c) provides that the final rule does not affect in any way the CRA, the CRA Regulations or any agency's interpretations or

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administration of the CRA or CRA Regulations. As noted above, the final rule also provides that the list of factors representing fulfillment of the CRA for purposes of the CRA Sunshine provisions includes providing or refraining from providing oral or written comments or testimony to an agency concerning the performance under the CRA of an insured depository institution that is a party to an agreement or that is an affiliate of a party to an agreement. Providing or refraining from providing written comments concerning the performance under the CRA of an insured depository institution that is a party to an agreement or that is an affiliate of a party to an agreement where the comments must be included in the institution's CRA public file also is always a factor that represents fulfillment of the CRA. Providing oral or written comments or testimony to an agency concerning the adequacy of an institution's CRA performance or providing written comments that must be included in the institution's CRA public file are activities that are always considered to be in fulfillment of the CRA under the final rule, without regard to whether the communication comments favorably or unfavorably on the CRA performance of the institution. The terms of a written agreement generally determine whether the contract, arrangement or understanding is in fulfillment of the CRA. However, the parties to a written agreement may not avoid coverage under the Act by reaching an oral understanding, such as, for example, an understanding that a party will submit (or refrain from submitting) oral or written CRA-related comments or testimony to an agency or written comments to an insured depository institution that would have to be included in the institution's CRA public file, and excluding this understanding from the terms of the written agreement. Commenters generally supported the original proposal to exclude from the list of factors activities designed to ensure compliance with the Federal laws that prohibit discriminatory or other illegal credit practices, such as the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) and the Fair Housing Act (42 U.S.C. 3601 et seq.). Commenters generally agreed that inclusion of these activities in the list of factors could have an unintended and detrimental impact on compliance with and enforcement of the fair lending laws by, for example, discouraging agreements to hire ``mystery shoppers'' to test the institution's compliance with the fair lending laws or agreements to settle a fair lending complaint and improve fair lending performance. Accordingly, the list of factors has not been changed to include these or other activities. 5. Value An agreement is subject to the CRA Sunshine provisions only if it calls for an insured depository institution or affiliate to provide to one or more persons cash payments, grants, or other consideration of more than $10,000 in any calendar year, or to make loans that have an aggregate principal amount of more than $50,000 in any calendar year. The statutory threshold is based on the total value of payments and loans provided for under the agreement and does not require that these payments or loans actually be made to a party to the agreement.\18\ ---------------------------------------------------------------------------

\18\ See 12 U.S.C. 1831y(e)(1)(A)(i). ---------------------------------------------------------------------------

The final rule follows the proposed rule in providing that all cash payments, grants, consideration or loans provided by an insured depository institution or affiliate under the agreement, including amounts provided to individuals or entities that are not parties to the agreement, will be considered in determining whether an agreement meets the rule's dollar thresholds. However, the rule provides that if an agreement includes a loan, extension of credit or loan commitment that, if done separately, would be exempt from coverage and also provides for the institution or affiliate to provide other funds or resources, the parties may exclude the exempt loan, extension of credit or loan commitment when determining if the agreement meets the dollar thresholds of the rule. (See section ____.2(e)(2) of the rule and the discussion under section III.A.2.b. above concerning qualifying loans). Under the final rule, an agreement that provides for payments to be made in any calendar year in excess of the dollar thresholds established by the statute is a covered agreement for its entire term. The agencies believe that using a calendar year period for these calculations should facilitate compliance with the rule by providing all parties to a covered agreement a uniform basis for determining whether the agreement is covered by the rule and because the terms of an agreement may not coincide with the parties' fiscal years. The final rule provides that the annual value of an agreement that does not have a fixed schedule of payments is considered to be the entire value of the agreement. (See section ____.2(e)(1).) Commenters were mixed in their view of how to determine the value of a multi-year agreement that does not specify when payments should be made. Some commenters believed that the annual value of these agreements should be determined by amortizing the total value over the life of the agreement, or by reference to actual disbursements, while others suggested that the entire value be credited to the first year of the agreement. The final rule credits the entire value of this type of agreement to the first year of the agreement. This approach is the easiest to calculate and is the least likely to cause an agreement unexpectedly to become a covered agreement. The agencies requested comment on how to value an agreement that does not specify the amount of payments, grants, loans or other consideration to be provided under the agreement, such as an agreement for an insured depository institution to open a branch or to begin offering a new loan product. Commenters that addressed this issue suggested allowing the parties to estimate the value of the agreement in these cases or to assume that the agreement had no value. In circumstances where an agreement does not specify the amount of payments, grants, loans or other consideration to be provided under the agreement, the agencies believe that the parties must reasonably estimate the value of the agreement. The final rule allows insured depository institutions that choose to report a list of covered agreements to report the estimated value of the agreement at that time (see section III.B.3. below). The following are examples of the value provisions of the rule. These examples, which are not included in the rule, illustrate only the application of the dollar thresholds of the rule, and assume that the agreement otherwise qualifies as a covered agreement.

Example 1: An insured depository institution enters into a written agreement with a small business investment company pursuant to which the institution will invest $25,000 in the company. Since the agreement does not establish a schedule of payments, the entire $25,000 is deemed to be provided in the first year. Accordingly, the agreement meets the dollar threshold criterion to be a covered agreement. Example 2: An insured depository institution and a community organization enter into a written agreement pursuant to which the institution will invest $1 million in a state-sponsored investment fund that supports affordable housing initiatives for low- and moderate-income individuals during the next year. The community organization will not receive any funds or other resources from the insured depository institution or its affiliates under the

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agreement. The agreement meets the value threshold criterion for a covered agreement under the proposed rule because the value of the agreement for purposes of the CRA Sunshine provisions does not depend on who receives payments or resources under the agreement. Example 3: An affiliate of an insured depository institution provides a $100,000 loan to an association of small businesses pursuant to a written agreement. The loan is on market terms and not for purposes of re-lending. The agreement also provides for the affiliate to make a $5,000 grant to the local chamber of commerce's small business incubator. Because the loan is made on market terms and not for purposes of re-lending, the loan would be an exempt agreement under the rule if it were a separate agreement (see section ____.2(c)(2)). Accordingly, the value of the loan may be excluded in determining the value of the agreement. After excluding the loan, the agreement would not meet the dollar criterion of the rule. Example 4: An insured depository institution and a NGEP enter into a written agreement that requires an affiliate of the insured depository institution to provide the organization with a grant of $5,000 in 2001, $8,000 in 2002, and $11,000 in 2003. The agreement exceeds the dollar threshold criterion of the rule because the agreement provides for payments in excess of $10,000 during 2003. Assuming the agreement meets the other requirements of the rule and is not otherwise exempt, the agreement is a covered agreement for its entire term. 6. Related Agreements Considered a Single Agreement In two circumstances, section 48(e) requires that separate agreements or contracts be aggregated for purposes of determining whether the agreements--taken as a whole--meet the definition of a covered agreement.\19\ The agencies received very few comments concerning the aggregation provisions of the proposed rule. Some commenters stated that the aggregation rules should be deleted or should apply only when necessary to prevent circumvention of the CRA Sunshine provisions. The agencies have retained the aggregation rules included in the final rule because the CRA Sunshine provisions require the aggregation of agreements in certain circumstances, and excluding the aggregation principles from the final rule would require institutions and NGEPs to consult both the statute and the rule to determine compliance with those provisions. ---------------------------------------------------------------------------

\19\ See 12 U.S.C.1831y(e)(1) and (2). ---------------------------------------------------------------------------

Other commenters requested clarification of certain aspects of the aggregation rules. Those matters are addressed below. a. Agreements entered into by the same parties. Under the final rule, all written contracts, arrangements, or understandings that are entered into by an insured depository institution or affiliate of an insured depository institution will be considered to be part of a single agreement if the contracts, arrangements, or understandings are entered into with the same NGEP within a 12-month period and each agreement is in fulfillment of the CRA. This aggregation rule applies to all written agreements entered into during the 12-month period by the same NGEP on the one hand, and any part of the same organization, including an insured depository institution and any of its affiliates, on the other hand. The following examples illustrate this aggregation principle and assume that a CRA communication has occurred before each agreement.

Example 1: In November, an insured depository institution enters into a written agreement with Community Development Organization, Inc. pursuant to which the institution makes an $8,000 investment in the organization. In April of the next year, an affiliate of the insured depository institution and Community Development Organization, Inc. enter into a written agreement under which the affiliate makes an additional $8,000 investment in the organization. For purposes of this example, both investments are assumed to be qualified investments under the CRA Regulations. The separate agreements must be aggregated under the rule and the combined agreement meets the $10,000 dollar threshold of the rule. Accordingly, the agreements are jointly considered a covered agreement. Example 2: In September, an insured depository institution orally agrees to donate $15,000 of computer equipment to a local housing organization. In January of the following year, the institution and organization enter into a written agreement for the institution to make a $5,000 CRA qualified investment in a local housing project that is eligible for low-income housing tax credits. The agreements do not need to be aggregated under the rule because the September agreement was not in writing. Example 3: In February, an insured depository institution enters into a written agreement with Partnership A for the institution to make a $9,000 grant to Partnership A for the purpose of rehabilitating affordable housing units. In August of the same year, an affiliate of the insured depository institution enters into a written agreement with Partnership A under which the affiliate makes a payment of $9,000 so that its employees may have access to the child care center operated by Partnership A. The August agreement is not in fulfillment of the CRA. Accordingly, the two agreements would not be aggregated under the rule.

b. Substantively Related Contracts. Section 48(e)(1)(A)(ii) requires the aggregation of separate but ``substantively related contracts'' even where the contracts are entered into with different NGEPs. Unlike the aggregation rule discussed above, the rule aggregating ``substantively related contracts'' applies only to separate, written contracts and does not apply to other types of written arrangements or understandings. The rule defines written contracts entered into by an insured depository institution or any of its affiliates as ``substantively related'' if the contracts were negotiated in a coordinated fashion. The rule does not require that the separate contracts each be in fulfillment of the CRA or that the parties to the contracts (other than the banking organization) be the same. Thus, the rule prevents parties from avoiding the disclosure and reporting obligations of the statute by separating out from an agreement payments or grants that may not themselves be in fulfillment of the CRA. The following examples illustrate this aggregation principle and assume that a CRA communication occurred before each contract.

Example 1: Two housing organizations jointly approach an insured depository institution to obtain funding. A representative of the insured depository institution meets with both organizations at the same time to discuss their funding needs. The institution enters into a written contract with one organization to provide it with $9,000 for the purpose of rehabilitating affordable housing units. The institution enters into a separate written contract with the other organization to provide the organization with an unrestricted grant of $9,000. Because the contracts were negotiated in a coordinated fashion, the contracts must be aggregated under the rule. When aggregated, the contracts would meet the statute's $10,000 dollar threshold and each contract would be a covered agreement. Example 2: A bank holding company announces its intention to acquire an insured depository institution. A Florida-based group and a California-based group independently approach the bank holding company to seek funding for specific projects and separately negotiate written contracts with the bank holding company. The contracts would not be aggregated under the rule, and each contract would be a covered agreement only if that contract on its own met the requirements of the rule. 7. Multiparty Agreements The agencies requested comment on how the rule should apply in circumstances where a covered agreement involves several parties and a CRA communication has been made by or concerning only one of the parties. This issue arises where several NGEPs enter into a covered agreement with an insured depository institution and only one of the entities or persons has made a CRA communication or where a NGEP has a CRA communication concerning one insured depository institution and

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subsequently enters into a covered agreement jointly with the institution and several other unaffiliated insured depository institutions. Several commenters indicated that the disclosure and reporting requirements of the rule should only apply to parties to a covered agreement that have engaged in a CRA communication. The final rule provides that a NGEP that is a party to a covered agreement that involves multiple NGEPs is not required to comply with the requirements of the rule if two requirements are met. (See section ____.3(d).) First, the NGEP must not have had a CRA communication concerning any insured depository institution or affiliate that is a party to, or an affiliate of a party to, the agreement. Second, no officer, employee or representative of the NGEP identified in section ____.3(b)(4) of the rule may have knowledge at the time the agreement is entered into that another NGEP that is a party to the agreement has had a CRA communication. Similarly, an insured depository institution or affiliate that is a party to a covered agreement that involves multiple insured depository institutions or affiliates is not subject to the disclosure and reporting requirements if (1) no NGEP that is a party to the agreement has had a CRA communication with or concerning the institution or affiliate, and (2) no officer or employee of the institution or affiliate identified in section ----.3(b)(3)(i) has knowledge that the NGEP has had a CRA communication with another insured depository institution or affiliate that is a party to the agreement. In the context of multiparty agreements, covering parties that have knowledge of a CRA communication by other parties to the agreement assures that parties do not avoid the requirements of the CRA Sunshine provisions by refraining from making a CRA communication because the party is aware that the communication has already been made by another party.

B. Disclosure of Covered Agreements

Section 48(a) requires that each party to a covered agreement fully disclose the agreement in its entirety and make the full text of the agreement available to the public and the appropriate agency with supervisory responsibility over the relevant insured depository institution.\21\ The disclosure requirements of section 48 apply only to covered agreements entered into after November 12, 1999.\22\ ---------------------------------------------------------------------------

\21\ 12 U.S.C. 1831y(a). \22\ The rule includes special transition provisions governing the disclosure of covered agreements entered into after November 12, 1999, but before the effective date of the rule. See section III.D below. ---------------------------------------------------------------------------

1. Disclosure to the Public Section ____.6 of the final rule requires that each party to a covered agreement make a complete copy of the agreement available to any member of the public upon request. A covered agreement must be made available during the entire term of the agreement and the 12 month period following expiration of the agreement, without regard to whether funds are paid or received under the agreement during the year in which a request for the agreement is made. A party may charge the requestor for the costs of copying and sending an agreement, so long as the fees are reasonable. Commenters generally supported having maximum flexibility to make covered agreements available to the public and to charge requestors reasonable fees to cover the costs of making covered agreements available.\23\ Accordingly, the final rule does not prescribe any particular method a party must employ in making a covered agreement available to the public. The agencies expect that parties to covered agreements will employ methods of making agreements available that will not require requestors to go through unreasonable efforts to obtain the agreements. For example, a party may make a covered agreement available to any individual or entity by mailing it to the requestor. A party also may make an agreement available to an individual or entity with access to the Internet by posting the agreement on a publicly accessible website or to members of the public within a local geographic area by making the agreement available at an office within that area. In addition, a party may choose to publish a list of its covered agreements and provide the full text of an agreement only to any individual or entity that requests a particular agreement identified in the list. ---------------------------------------------------------------------------

\23\ Some commenters questioned whether a party to a covered agreement may also charge a requestor for the cost of searching its records for covered agreements. The final rule, like the provisions of the CFA Regulations governing the public availability of information in an insured depository institution's CRA public file, does not authorize the recovery of search costs. See 12 CFR 25.43 (OCC); 12 CFR 228.43 (Board); 12 CFR 345.43 (FDIC); 12 CFR 563e.43 (OTS). ---------------------------------------------------------------------------

Several commenters requested clarification concerning how a party should comply with the statute's public disclosure requirement when a covered agreement consists of or involves multiple documents. For example, commenters questioned whether all of the supporting documentation relating to a loan or grant must be disclosed. The final rule follows the statute and requires only that the written contract, arrangement, or understanding be disclosed and does not require the disclosure or supporting documentation. When the covered agreement consists of a single document, that document must be disclosed. When the covered agreement consists of or is reflected by multiple documents, the party may disclose all of the written documentation relating to the agreement or only those documents that set forth the primary terms of the agreement, including (1) the names and addresses of the parties to the agreement; (2) the amount of any payments, fees, loans, or other consideration to be made or provided by any party to the agreement; (3) any description of how the funds or other resources provided under the agreement are to be used; and (4) the term of the agreement (if the agreement establishes a term). Several commenters requested that the rule establish a fixed period of time, such as 30 days, within which a party must respond to a request for a covered agreement. The final rule follows the text of section 48 and does not specify a time period for responding to public requests for an agreement. The agencies expect that the parties will promptly respond to requests from the public for covered agreements. As with the proposed rule, the final rule gives discretion to an insured depository institution to fulfill its public disclosure obligation by placing a copy of a covered agreement in its CRA public file and making it available in accordance with the procedures set forth in the CRA Regulations relating to public files. Several commenters recommended that affiliates of insured depository institutions that are parties to covered agreement also be permitted to disclose a covered agreement to the public by placing it in the CRA public file of an affiliated insured depository institution. The final rule allows affiliates to fulfill their disclosure obligations in this manner so long as the affiliated insured depository institution then makes the agreement publicly available in accordance with the rules governing public disclosure of information in the CRA public file. When an affiliate relies on the CRA public file of an insured depository institution affiliate to fulfill the disclosure obligations of the rule, it must refer members of the public that

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request a copy of the affiliate's covered agreements to the affiliated insured depository institution. The proposed rule provided that the parties' obligation to make a covered agreement publicly available terminated 12 months after the end of the term of the agreement, and the agencies requested comment on whether this time period should be shorter or longer. Several commenters stated that the time period proposed was reasonable, while others advocated a shorter time period or no time period at all after the term of an agreement. In order to fulfill the purposes of section 48, the agencies believe that the parties to a covered agreement must make the agreement available to the public for a reasonable period of time. After reviewing the comments received, the final rule continues to require covered agreements to be available to the public for a period of 12 months after the term of the agreement. 2. Treatment of Confidential and Proprietary Information Section 48(h)(2)(A) directs the agencies to ensure that their implementing regulations ``do not impose undue burden on the parties [to a covered agreement] and that proprietary and confidential information is protected.''\24\ This provision must be read in harmony with section 48(a), which requires that a covered agreement ``shall be in its entirety fully disclosed, and the full text thereof made available * * * to the public.''\25\ Other provisions of section 48 require the reporting of the terms and value of covered agreements, the identity of the parties to the agreement, and the uses of funds and resources provided under covered agreements. ---------------------------------------------------------------------------

\24\ 12 U.S.C. 1831y(h)(2)(A). \25\ 12 U.S.C. 1831y(a). ---------------------------------------------------------------------------

The proposed rule provided that a party could withhold information contained in a covered agreement from public disclosure only if the party received a determination from the relevant supervisory agency that such information could be withheld by the agency under the Freedom of Information Act (5 U.S.C. 552) (FOIA). The agencies noted, moreover, that the Act's directive that terms of covered agreements be made available to the public could require disclosure of some types of information that an agency might normally be able to withhold from disclosure under the FOIA. The agencies requested comment on a number of issues associated with the disclosure of potentially confidential and proprietary information in covered agreements, including the likelihood that covered agreements would contain confidential and proprietary information, whether FOIA standards should be applied in determining whether information can be withheld, and whether alternative procedures could be adopted. Commenters indicated that covered agreements may often contain information they ordinarily consider to be confidential or proprietary, such as information about new and innovative programs an insured depository institution is offering, underwriting standards for loans, competitive pricing information, or personal data that would otherwise be protected under applicable privacy rules. Some commenters expressed concern that the requirement to disclose publicly covered agreements could harm their competitive position or dissuade insured depository institutions and their affiliates from entering into agreements with NGEPs that are in fulfillment of the CRA. Many commenters indicated that requesting a determination of whether information can be withheld from disclosure from the relevant supervisory agencies would be burdensome and time consuming. They suggested the agencies streamline the