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Home > Regulation & Examinations > Laws & Regulations > FDIC Federal Register Citations |
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FDIC Federal Register Citations |
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March 4, 2002 Mr. Robert E. Feldman Executive Secretary Attention: Comments/ OES Federal Deposit Insurance Corporation 550 17th Street N.W. Washington, D.C. 20429 RE. Proposed FDIC Revision of Policy Statement Regarding Minority-Owned Depository Institutions Dear Sir/ Madam: Boston Bank of Commerce (BBoC) is pleased to offer this letter of comment on the above mentioned proposed policy statement. We think the issues contained herein are of critical importance. As background, BBoC is a $260 million African-.American owned commercial bank operating in minority communities in three states: Massachusetts, Florida and California. African-Americans own over 80% of our voting stock and comprise 13 of our 15 Directors. BBoC was the first minority-owned institution to operate across state borders and is also a certified CDFI, Community Development Financial Institution. We support the FDIC in determining the best methods for preserving and encouraging minority ownership of depository institutions. We agree that minority-owned depository institutions have a unique role in our economy by promoting banking services to an under-served market. Boson Bank of Commerce has several comments presented below: Policy Statement/ Existing and Proposed Section 308 (b) of FIRREA provides that "minority" means any Black American, Native American, Hispanic American or Asian American. The FDIC adopts this definition of minority in the revised Policy Statement. Section 308 (b) of FIRREA defines the term "minority depository institution" as: any depository institution that-- (A) If a privately owned institution, 51 percent is owned by one or more socially and economically disadvantaged individuals; (B) if publicly owned, 51 percent of the stock is owned by one or more socially and economically disadvantaged individuals; and (C) in the case of a mutual institution where the majority of the Board of Directors, account holders and the community which the institution serves is predominantly minority. The revised Policy Statement defines the term "minority owned institution" as any federally insured depository institution where 51 percent or more of the voting stock is owned by minority individuals. Additionally mutual, publicly traded, and widely held institutions will be considered minority owned if a majority of the Board of Directors, account holders, and the community which the institution serves are predominantly minority, regardless of non-minority or non- US citizen ownership of the capital stock. The proposed Policy Statement also clarifies that the FDIC's program is targeted at institutions owned by U.S. citizens, and ownership by non-US citizens is not counted in determining minority -owned status. BBoC Comments: Boston Bank of Commerce is not in disagreement with the first part of the revised Policy Statement that defines a "minority-owned institution as any federally insured depository institution where 51 percent or more of the voting stock is owned by minority individuals." This statement simply clarifies the intention of Section 308 (b) of FIRREA by providing a more concrete definition. In addition, the Bank believes that maintaining minority ownership, as defined by control of voting stock, is paramount to the preservation of these unique institutions in minority communities. Boston Bank of Commerce disagrees vehemently with the second part of the definition, concerning "mutual, publicly traded and widely held institutions to be considered minority, if a majority of the Board of Directors, account holders, and the community which the institution serves are predominantly minority regardless of non-minority or non U.S. citizen ownership of capital stock". The Bank believes that there; must be minority-ownership and control in order to: 1) ensure accountability to minority communities; 2) preserve these unique institutions; and 3) maintain consistency with the legislative intention of Section 308 (b) of FIRREA. By "watering down" the definition of minority in Section 308 (b) of FIRREA, the FDIC dilutes the unique position of minority-owned banks. These institutions have historically served and continue to serve the needs of an under-served market. Minorities continue to hold fewer banking accounts, own few businesses and have lower percentages of home ownership than the majority population. Minority-owned institutions continue to be one of the few hopes for closing this gap. The proposed policy not only changes the definition of the term but, in fact, changes the very essence of the concept of minority-ownership. Such a change guts the intent and spirit of the legislative provision. Minority-owned must mean owned by minorities. The power-base, the control and the true decision-making of any entity lies with its controlling shareholders. There can be no other purpose for designating an entity as minority-owned except to ensure final decision-making by such a group. While on its face the proposed policy seems to facilitate growth of the minority owned bank by allowing a broader ownership base, in reality it actually harms minority-owned banks that will now have to compete with publicly-held, larger and more established institutions to receive the benefits of minority status. There has already been a situation in California where the FDIC's revised policy statement was used to promote the purchase of a minority-owned financial institution by a majority bank. (See enclosed article). The majority bank, FBOP Corp., stated that their purchase of Family Savings Bank would not result in the bank losing its minority status under the "proposed FDIC's guidelines" because they would retain the same minority board and continue to serve the same minority community - albeit at the total discretion of the parent company, FBOP, who is majority owned and managed. Although we do not believe Family Savings Bank would qualify as minority-owned even under the revised policy statement because it would be a wholly owned subsidiary of FBOP and therefore would not be a "mutual, publicly traded and widely held institution", we believe this example indicates how the watering down of the definition represents a "slippery slope" that needs to be avoided. BBoC Suggestions: The Policy statement also requests the best methods for preserving and encouraging minority ownership of depository institutions. The FDIC should promote and foster the capital raising efforts of minority-owned institutions. Minority institutions would be benefit from more flexible capital standards and incentives for investments in such institutions. Specific examples include: o Waiver of the Federally mandated limits on the percentage of preferred stock in a capital structure that qualifies as regulatory capital (currently 25%). Preferred stock is an ideal investment vehicle for institutions seeking to maintain minority ownership and support its growth. o Incentives, in the form of tax credits for institutions that invest in minority-owned institutions. Such incentives would assist minority institutions in providing a market return for prospective investors. o Including US Treasury Department's Community Development Financial Institutions (CDFI) program investments in minority-owned institutions regulatory capital. Presently, these investments are excluded from capital due to a US Department of Treasury mandated "put option" that must accompany each CDFI investment. o Equity investments by a minority-owned institution into another minority institution should be included in regulatory capital. Such treatment would be consistent with the FDIC's policy objectives. Boston Bank of Commerce thanks the FDIC for the opportunity to make these comments and appreciates the opportunity to be heard in the arena in which we live, work and strive for accomplishment and prosperity. Very truly yours, Kevin Cohee Chairman and CEO Boston Bank of Commerce Attachment from LATimes.com not included on FDIC's website. |
| Last Updated 03/07/2002 | regs@fdic.gov |
