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FDIC Federal Register Citations

March 4, 2002

Mr. Robert E. Feldman, Executive Secretary
Attention: Comments/OES
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

Re: FDIC Policy Statement on Minority-Owned Depository Institutions

Dear Mr. Feldman:

The National Bankers Association, founded in 1827, represents the interests of the nation's 103 minority and women-owned banks. Our members include banks owned by African-Americans, Native Americans, American Indians, East Indians, Hispanic Americans, Asian Americans and Women. Our member banks are located in 60 cities and the District of Columbia in 29 states and two territories.

Minority & Women owned banks serve the general public but their location finds that with few exceptions, they provide most of those services directly to distressed communities plagued by many social and economic problems. Our institutions are deeply committed to providing employment opportunities, entrepreneurial capital and economic revitalization in neighborhoods which often have little or no access to alternative chartered and regulated financial services.

The guiding policy of our members is to be a primary source of job creation and the capital needed by small business to create opportunity in predominately minority neighborhoods. Our members maintain a positive approach to lending without regard to the loan applicant's race, sex or national origin. Our members understand the problems faced in their communities and know how to partner with other lenders, businesses, the nation's major corporations and local, state and federal government to accomplish there objectives.

It is with this background that our association looks toward the FDIC reassessment of its Policy Statement on Minority-Owned Depository Institutions ("Policy")with anticipation and hope that a stronger, more forward looking approach will be forged by the FDIC with our member financial institutions.

Our comments follow the outline of the proposed Policy and discusses separately our concerns with regard to the impact of theAdarand decision on the Policy and its implementation. We also note that a number of our members have also provided their comments directly to the FDIC. We echo the concerns and comments they have expressed.

Definition of Minority and Minority-Owned Institution

We recognize that the Policy incorporates and repeats the definition in Section 308 of FIRREA. We greatly appreciate the somewhat more flexible approach permitted under the Policy where it includes within the scope of the Policy institutions in which "a majority of the Board of Directors, account holders and the community which the institution serves are predominately minority...."

We suggest that notwithstanding the statutory approach in Section 308 of FIRREA, it is unduly, and unnecessarily restrictive. We would suggest that consideration be given to defining a minority bank in terms of "control" using the definition found in the Bank Holding Company Act and FRB Regulation Y, e.g., 12 C.F.R. § 225.2 (e). And that if the FDIC feels constrained to observe the limits of Section 308 of FIRREA in revising its Policy, that it consider supporting legislation that would allow it to expand the concept of minority bank to more accurately mirror the corporate control concepts in the Bank Holding Company Act and other corporate law.

In similar vein, we note that the flexibility introduced in the Policy for mutual, publicly traded and widely held institutions uses the conjunctive construction to require that a majority of the Board of Directors AND account holders AND the community which the institution serves are predominately minority.... The FDIC again may feel constrained to follow the statutory construction, but, we suggest that no financial institution will be able to qualify under this test because none keeps the race or national origin of its account holders on a file that is accessible, if the data is kept at all. The only federal requirement that the race be noted is the home lending rules of the Equal Credit Opportunity Act found in 12 C.F.R. § 202.13. Those rules do not require the applicant to provide the information and telephone, mail and Internet applications do not require the capture of the information at all.

We suggest that in addition to removing the conjunctive, particularly as it applies to the composition of the institution's account holders, the FDIC clarify that the institution is not required to track the race of its account holders to qualify for status as a Minority-Owned institution. Greater emphasis should be placed on the community served, perhaps allowing census data to be used in lieu of a bold requirement based on the racial or national origin of its account holders.

Our association serves women-owned financial institutions as well as those identified as minority-owned. The FDIC may wish to consider expanding the availability of its programs under the Policy to include this group as well. Whether it would require legislation is unclear, but, certainly the presence of women-owned financial services providers is consistent with the intent of the Policy.

Identification of Minority-Owned Institutions

The National Bankers Association is pleased to cooperate with the FDIC in the identification of Minority-Owned Institutions. We echo the comment of our member, the Albina Community Bank, that to the extent possible, the criteria for qualification, reporting and identification ofminority-owned financial institutions should parallel to the extent practicable, the requirements for the U. S. Treasury's Minority Bank Deposit Program (MBDP). It certainly stands to reason that certification by the Department of the Treasury under the MBDP should qualify the institution under the FDIC Policy without further verification or scrutiny by the FDIC.

We support the effort by the FDIC to note the status as a Minority-Owned Institution when processing mergers, changes in control, applications for insurance and other regulatory actions initiated or participated in by the FDIC.

Organizational Structure

No single step outlined in the revised Policy is more welcome than that of designating a national coordinator and a contact person in each regional office. We will work with the FDIC to see that the member institutions routinely contact these individuals to keep abreast of legal, regulatory and other developments which may affect our member's operations and provide opportunities for growth and additional service. The addition of this level of responsibility to the existing case manager structure is very promising.

Technical Assistance - Training and Educational Programs

Our members understand that the FDIC examiners, case managers and regional designated Minority-Owned Institution representatives will offer assistance but not substitute their judgment or expertise for that expected of the institution's management and staff. Our members do look for and appreciate information on resources that are available to the institution that will enable it to overcome challenges or provide services more efficiently or in a more cost effective manner. We especially welcome the information that the examiner or other FDIC contact may provide about training opportunities and programs. Most promotional material is written to attract attendance and it is very difficult to sort out those programs which convey information that would be useful to the Institution. Given the case manager and regional office representatives familiarity with each Minority-Owned Institution, their recommendations are likely to carry great weight.


Highlighting the progress of Minority-Owned Institutions in reports to the Chairman and the FDIC Annual Report is an important recognition of the contribution that our members make to their communities and the nation. One can but hope as part ofthe process, the FDIC will identify and seek to pursue both legislatively and through its continuing commitment to the Policy opportunities to advance the formation and development of Minority-Owned Institutions. To that end, we look forward to the creation of a Minority-Owned Institutions Advisory B oard with periodic meetings with the FDIC and other federal financial institution regulatory agencies and boards. This would provide an opportunity to become involved at the national level with that which is most certainly essentially local. The Advisory Board could be charged with a review of the regulatory burden that is absorbed by Minority-Owned Institutions and the search for ways to simplify that burden.

Internet Site

Again, the access to information, already greatly enhanced by the Internet, can be channeled effectively by a thoughtful use on the FDIC web-site.

In addition to links to other sites, we suggest that consideration be given to direct access to sources of information on FDIC rules, compliance questions and related assistance to Minority-Owned Institutions could be tested, modified and made responsive to the peculiar needs of these institutions. This access is not a substitute for the Institution's own counsel or auditors, merely a source of information that, if not overly burdensome to the FDIC, would be directly responsive to the specific questions of members that may not be answered by any other source. We recognize that the FDIC already provides some guidance in the form of legal opinions from its Office of General Counsel, but, as a practical matter, the time and detail required to obtain that type of response is beyond that which most of our members seek or need. We envision something more responsive, less legalistic and more practical.

Adarand Constructors, Inc. v. Pena

It is clear from the Policy that the FDIC proposed that it feels constrained by both the case and the statutory duty to provide a resolution of a failing bank situation at the least cost to the Insurance Fund. The National Bankers Association appreciates the concerns expressed by the FDIC in the proposed Policy. We note, however, that the Congress has specifically mandated that actions be taken to preserve the number of Minority-Owned Institutions and encourage the formation of new ones. We see no inconsistency with the holding in Adarand and the duty to preserve the assets of the FDIC and the duty to identify potential problems that may lead to insolvency at an early stage, provide assistance and when appropriate work with other Minority-Owned Institutions to provide assistance, merger approval and related steps to maintain a strong, vibrant group of Minority-Owned Institutions. Again, we suggest the Advisory Board may be very useful to the FDIC in accomplishing these objectives.
Thank you for the opportunity to comment on the proposed Policy. We would be delighted to meet with representatives of the FDIC to discuss our recommendations further.

Norma Alexander Hart
National Bankers Association
Washington, DC
Last Updated 03/08/2002

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