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[Federal Register: January 2, 2002 (Volume 67, Number 1)]
[Notices]
[Page 77-80]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ja02-66]

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FEDERAL DEPOSIT INSURANCE CORPORATION


Policy Statement Regarding Minority-Owned Depository Institutions

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Policy statement.

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SUMMARY: The FDIC is proposing to revise its Policy Statement Regarding
Minority-Owned Depository Institutions. Section 308 of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (``FIRREA'')
requires the Secretary of the Treasury to consult with the Director of
the Office of Thrift Supervision and the Chairperson of the Board of
Directors of the FDIC to determine the best methods for preserving and
encouraging minority ownership of depository institutions. The FDIC has
long recognized the unique role and importance of minority-owned
depository institutions and has historically taken steps to preserve
and encourage minority ownership of financial institutions. The revised
Policy Statement updates, expands, and clarifies the agency's policies
and procedures related to minority-owned institutions.

DATES: Written comments must be received on or before March 4, 2002.

ADDRESSES: All comments should be addressed to Robert E. Feldman,
Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance
Corporation, 550 17th Street, NW., Washington, DC 20429. Comments may
be hand delivered to the guard station at the rear of the 550 17th
Street Building (located on F Street) on business days between 7 a.m.
and 5 p.m. (fax number (202) 898-3838; Internet address:
comments@fdic.gov). Comments may be posted on the FDIC Internet site at
http://www.fdic.gov/regulations/laws/federal/propose.html and may be
inspected and photocopied in the FDIC Public Information Center, Room
100, 801 17th Street, NW., Washington, DC 20429, between 9 a.m. and
4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: Brett A. McCallister, Risk Management
and Applications Section, Division of Supervision (202) 898-3803 or
Grovetta N. Gardineer, Counsel, Legal Division, (202) 898-3728, Federal
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC
20429.

SUPPLEMENTARY INFORMATION: On April 3, 1990, the Board of Directors of
the FDIC adopted a Policy Statement on Encouragement and Preservation
of Minority Ownership of Financial Institutions. The framework for the
original Policy Statement resulted from several key provisions
contained in Section 308 of FIRREA, which enumerated several goals as
follows: (1) Preserving the number of minority depository institutions;
(2) preserving the minority character in cases of merger or
acquisition; (3) providing technical assistance to prevent insolvency
of institutions not now insolvent; (4) promoting and encouraging
creation of new minority depository institutions; and (5) providing for
training, technical assistance, and education programs.
The original Policy Statement provided guidance to the industry
regarding the agency's efforts in achieving the goals of Section 308.
The revised Policy Statement attempts to provide a more structured
framework that sets forth initiatives of the FDIC to promote the
preservation of, as well as to provide technical assistance, training
and educational programs to, minority-owned institutions by working
with

[[Page 78]]

those institutions, their trade associations and the other federal
financial regulatory agencies.
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 it services 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-U.S. 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-U.S. citizens is not counted in
determining minority-owned status. The FDIC invites the public to
comment on the proposed definition of ``minority-owned institution''.
The FDIC specifically seeks comment on the proposed treatment of
mutual, publicly traded and widely held institutions, as to the
feasibility of collecting information regarding the account holders and
the community in making a determination regarding its status as a
minority-owned institution.
The proposed Policy Statement also provides for the FDIC to
maintain a list of minority-owned institutions to ensure that all
eligible minority-owned depository institutions are able to participate
in the program. If not already identified as minority-owned, an
institution can be added to the list by self-certifying that the
institution meets the above definition. FDIC examiners will review the
accuracy of the list during regular examinations, and case managers
will incorporate any changes due to mergers, acquisitions, and changes
in control. The FDIC will also work with the other Federal regulatory
agencies to make certain that the minority-owned institutions that they
supervise are included on the list. The revised Policy Statement makes
it clear, however, that inclusion on the list is voluntary and any
institution that does not want to be included will be removed from the
official list. The FDIC invites comments on this approach to compile a
list of minority-owned institutions.
The revised Policy Statement also proposes to designate a national
coordinator for the FDIC's minority-owned institution program. The
national coordinator will be located at the FDIC's Washington, DC
headquarters. That person will act as a liaison between the Division of
Supervision and officials from the Division of Compliance and Consumer
Affairs, the Office of Diversity and Economic Opportunity and the
Division of Resolutions and Receiverships and the other federal
financial regulators. The national coordinator will regularly contact
the various minority-owned institution trade associations to obtain
feedback on the FDIC's efforts under the program. The national
coordinator will be responsible for contacting the other Federal
financial regulatory agencies to discuss their outreach efforts and to
identify opportunities for the agencies to work together to assist
minority-owned institutions. The national coordinator will also guide
subject matter experts in each of the FDIC's eight regional offices who
will oversee their region's efforts under the program. The FDIC
believes that the more formalized structure within the Division of
Supervision will facilitate more meaningful and helpful communications
between the FDIC and minority-owned institutions since these employees
will be available to answer questions or provide assistance on issues
presented by minority-owned institutions. The FDIC specifically seeks
comment on this proposed organizational structure.
The revised Policy Statement also discusses the types of technical
assistance that will be provided by the FDIC to minority-owned
institutions. The Policy Statement sets forth examples of ways that
FDIC staff will be able to provide assistance to minority-owned
institutions while making it clear that staff will not perform duties
and tasks reserved for management of a minority-owned institution. In
addition to being available to answer questions and provide guidance to
a minority-owned institution, the FDIC is also proposing to have staff
return to any minority-owned institution approximately 90 to 120 days
after the conclusion of an examination to review any areas of concern
identified during the examination or any issues of particular interest
to the institution. The minority-owned institution may accept or
decline this offer of assistance. The FDIC invites comments on the
scope of technical assistance that would be provided by the FDIC and
the optional return visit at the conclusion of an examination of a
minority-owned institution.
The revised Policy Statement also proposes that the FDIC work with
trade associations representing minority-owned institutions, as well as
other regulatory agencies, to discuss and provide for training
opportunities for minority-owned institutions. The proposed Policy
Statement provides that the FDIC will partner with certain trade
associations to offer training programs during their annual conferences
and regional meetings. The FDIC solicits comments on other methods to
identify and provide training and educational programs that would be
beneficial to minority-owned institutions.
The revised Policy Statement also discusses the issue of failing
institutions. The revised Policy Statement states that the Division of
Resolutions and Receiverships is the appropriate division in the FDIC
to deal with issues regarding failing institutions. While the original
Policy Statement provided for certain preferences to be given to
minority-owned institutions in the resolution of failed institutions
pursuant to Sections 13(k) and 13(f)(12) of the FDI Act, the revised
Policy Statement takes into account both the decision of the United
States Supreme Court in Adarand Constructors, Inc. v. Pena, 115 S. Ct.
2097 (1995) and the statutory requirement under Section 13(c)(4)
enacted in 1991 that failed institutions be resolved in a manner that
results in the least cost to the insurance fund. The Adarand decision
held that federal affirmative action programs that use racial and
ethnic criteria as a basis for decisionmaking are subject to strict
judicial scrutiny. The decision set forth a two-prong test to determine
whether federally administered affirmative action programs are
constitutional. The first prong of the test requires the government to
demonstrate a compelling interest in remedying past or persistent
continuing or lingering discrimination against minorities and the
second prong requires that any remedy be narrowly tailored to cure a
specific identified problem. While Adarand was a contracts case, the
strict scrutiny standard of review will apply whenever the federal
government voluntarily adopts a racial or ethnic

[[Page 79]]

classification as a basis for decisionmaking. As a result, this ruling
has had a significant impact on the FDIC's ability to give preference
to minority institutions in a resolutions context. In October of 2001,
the U.S. Supreme Court heard another case involving Adarand
Constructors. While the FDIC had hoped to gain additional guidance on
what actions may be permissible regarding the minority preference
statutes, the Supreme Court declined to render a decision in the case
citing procedural problems with the case that prevented the Court from
addressing the merits of the affirmative action complaint.
Additionally, the least-cost resolution requirement also
significantly reduced the ability of the FDIC to give preference to
minority institutions in the resolution of failed institutions.
However, the Division of Resolutions and Receiverships will work with
the Division of Supervision and the Office of Diversity and Economic
Opportunity to ensure that all qualified minority institutions and
individuals that have expressed an interest in acquiring a minority-
owned institution are notified of any potential failure. The FDIC
invites the public to comment on the methodology to be used to ensure
that all qualified minority-owned institutions will be made aware of
situations involving the failure of a minority-owned institution.
To ensure that the regional coordinators are meeting the goals
associated with the revised Policy Statement, the proposed Policy
Statement requires them to provide quarterly reports to the national
coordinator on their region's activities relating to minority-owned
institutions. The national coordinator, in turn, will compile the
results of the eight regional reports and provide a quarterly summary
to the Office of the Chairman. The FDIC's Annual Report will also
contain information relating to the agency's efforts to promote and
preserve minority-owned financial institutions. The proposed Policy
Statement also provides for the FDIC to create a Webpage on its
Internet site (www.fdic.gov) to promote the minority-owned institution
program. It is anticipated that the Webpage will describe the program,
contain information regarding the national coordinator and the regional
coordinators and provide links to the list of minority-owned
institutions, their trade associations and other programs that
specifically affect minority-owned institutions. The FDIC invites the
public to comment on the types of information that would be helpful and
beneficial to include on the agency's Web page regarding the minority-
owned institution program.
The text of the proposed Policy Statement follows:

Federal Deposit Insurance Corporation

Policy Statement Regarding Minority-Owned Depository Institutions

Minority-owned depository institutions often promote the economic
viability of minority and under-served communities. The FDIC has long
recognized the importance of minority-owned institutions and has
historically taken steps to preserve and encourage minority ownership
of insured financial institutions.

Statutory Framework

In August 1989, Congress enacted the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (``FIRREA''). Section 308 of
FIRREA established the following goals:
Preserve the number of minority-owned depository
institutions;
Preserve the minority character in cases of merger or
acquisition;
Provide technical assistance to prevent insolvency of
institutions not now insolvent;
Promote and encourage creation of new minority-owned
depository institutions; and
Provide for training, technical assistance, and
educational programs.

Definition

``Minority'' as defined by Section 308 of FIRREA means any Black
American, Asian American, Hispanic American, or Native American. For
the purposes of this Policy Statement, the term ``minority-owned
institution'' means any Federally insured depository institution where
51 percent or more of the voting stock is owned by minority
individuals. This includes institutions collectively owned by a group
of minority individuals, such as a Native American Tribe. However,
ownership by non-U.S. citizens will not be counted in determining
minority-owned status. 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-U.S. citizen ownership.

Identification of Minority-Owned Institutions

To ensure that all minority-owned depository institutions are able
to participate in the program, the FDIC will maintain a list of
federally insured minority-owned institutions. Institutions that are
not already identified as minority-owned by the FDIC can request to be
designated as such by certifying that they meet the above definition.
For institutions supervised directly by the FDIC, our examiners will
review the accuracy of the list during the examination process. In
addition, case managers in our regional offices will note changes to
the list while processing deposit insurance applications, merger
applications, change of control notices, or failures of minority-owned
institutions. The FDIC will work closely with the other Federal
regulatory agencies to ensure that institutions not directly supervised
by the FDIC are accurately captured on our list. In addition, the FDIC
will periodically provide the list to relevant trade associations and
seek input regarding its accuracy. Inclusion in the FDIC's minority-
owned institution program is voluntary. Any minority-owned institution
not wishing to participate in this program will be removed from the
official list upon request.

Organizational Structure

The Division of Supervision has designated a national coordinator
for the FDIC's minority-owned institutions program in the Washington
Office and a regional coordinator in each Regional Office. The national
coordinator will consult with officials from the Division of Compliance
and Consumer Affairs, the Office of Diversity and Economic Opportunity,
the Legal Division, and the Division of Resolutions and Receiverships
to ensure appropriate personnel are involved in program initiatives.
The national coordinator will regularly contact the various minority-
owned institution trade associations to seek feedback on the FDIC's
efforts under this program, discuss possible training initiatives, and
explore options for preserving and promoting minority ownership of
depository institutions. As the primary Federal regulator for State
nonmember banks, the FDIC will focus its efforts on these institutions.
However, the national coordinator will meet with the other Federal
regulators periodically to discuss each agency's outreach efforts, to
share ideas, and to identify opportunities where the agencies can work
together to assist minority-owned institutions. Representatives of
other divisions and offices may participate in these meetings.
The regional coordinators are knowledgeable about minority-owned
bank issues and are available to answer questions or to direct
inquiries to the

[[Page 80]]

appropriate office. However, each FDIC insured institution has
previously been assigned a specific case manager in their regional
office who will continue to be the institution's central point of
contact at the FDIC. At least annually, regional coordinators will
contact each minority-owned, State nonmember bank in their respective
regions to discuss the FDIC's efforts to promote and preserve minority
ownership of financial institutions and will offer to have a member of
regional management meet with the institution's board of directors to
discuss issues of interest. Finally, the regional coordinators will
contact all new minority-owned State nonmember banks identified through
insurance applications, merger applications, or change in control
notices to familiarize the institutions with the FDIC's minority-owned
institution program.

Technical Assistance

The FDIC can provide technical assistance to minority-owned
institutions in several ways on a variety of issues. An institution can
contact its case manager for assistance in understanding bank
regulations, FDIC policies, examination procedures, etc. Case managers
can also explain the application process and the type of analysis and
information required for different applications. During examinations,
examiners are expected to fully explain any supervisory recommendations
and should offer to help management understand satisfactory methods to
address such recommendations.
At the conclusion of each examination of a minority-owned
institution directly supervised by the FDIC, the FDIC will offer to
have representatives return to the institution approximately 90 to 120
days later to review areas of concern or topics of interest to the
institution. The purpose of the return visit will be to provide
technical assistance, not to identify new problems. The level of
technical assistance provided should be commensurate with the issues
facing the institution, but FDIC employees will not perform tasks
expected of an institution's management or employees. For example, FDIC
employees may explain Call Report instructions as they relate to
specific accounts, but will not assist in the preparation of an
institution's Call Report. As another example, FDIC employees may
provide information on community reinvestment opportunities, but will
not participate in a specific transaction.

Training and Educational Programs

The FDIC will work with trade associations representing minority-
owned institutions and other regulatory agencies to periodically assess
the need for, and provide for, training opportunities and educational
opportunities. We will partner with the trade associations to offer
training programs during their annual conferences and other regional
meetings.

Failing Institutions

In the event of a potential failure of a minority-owned
institution, the Division of Resolutions and Receiverships will contact
all minority-owned institutions nationwide that qualify to bid on
failing institutions. The Division of Resolutions and Receiverships
will solicit qualified minority-owned institutions' interest in the
failing institution, discuss the bidding process, and upon request,
offer to provide technical assistance regarding completion of the bid
forms. In addition, the Division of Resolutions and Receiverships, with
assistance from the Office of Diversity and Economic Opportunity, will
maintain a list of minority individuals and nonbank entities that have
expressed an interest in acquiring failing minority-owned institutions.
Trade associations that represent minority-owned institutions (the
National Bankers Association, the American League of Financial
Institutions, and the North American Native Bankers Association) will
also be contacted periodically to help identify possible interested
parties.

Reporting

The regional coordinators will report their region's activities
related to this Policy Statement to the national coordinator quarterly.
The national coordinator will compile the results of the regional
offices' reports and submit a quarterly summary to the Office of the
Chairman. Our efforts to preserve and promote minority ownership of
depository institutions will also be highlighted in the FDIC's Annual
Report.

Internet Site

The FDIC will create a Webpage on its Internet site (www.fdic.gov)
to promote the minority-owned institution program. Among other things,
the page will describe the program and include the name, phone number,
and email address of the national coordinator and each regional
coordinator. The page will also contain links to the list of minority-
owned institutions, pertinent trade associations, and other regulatory
agency programs. We will also explore the feasibility and usefulness of
posting other items to the page, such as statistical information and
comparative data for minority-owned institutions. Visitors will have
the opportunity to provide feedback regarding the program on the Web
page.

By order of the Board of Directors.

Dated at Washington, DC., this 20th day of December, 2001.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 01-32155 Filed 12-31-01; 8:45 am]
BILLING CODE 6714-01-P


Federal Register:

Last Updated 11/21/2001 regs@fdic.gov