FEDERAL DEPOSIT INSURANCE CORPORATION
Policy Statement Regarding Minority Depository Institutions
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final policy statement.
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SUMMARY: The FDIC is adopting a final Policy Statement Regarding
Minority Depository Institutions. The final Policy Statement recognizes
the importance of minority depository institutions and the unique
challenges they often face in serving their communities. This FDIC
Policy Statement complies with the requirements of Section 308 of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989
(``FIRREA'') by implementing an outreach program designed to preserve
and encourage minority ownership of financial institutions. Based on
comments received by the agency, the final Policy Statement amends the
proposed definition of minority-owned institution, clarifies the types
of technical assistance available from the FDIC, improves interagency
coordination and enhances communications between the FDIC and minority
institutions.
EFFECTIVE DATE: April 16, 2002.
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:
I. Background
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 original Policy Statement
provided guidance to the industry regarding the agency's efforts in
achieving the goals of Section 308 of FIRREA. On December 20, 2001, the
FDIC Board of Directors approved a new proposed Policy Statement
Regarding Minority-Owned Depository Institutions for public comment.
The revised Policy Statement attempts to provide a more structured
framework that sets forth initiatives of the FDIC to promote and
preserve the minority ownership of depository institutions, and to
provide technical assistance, training and educational programs to
minority depository institutions by working with those institutions,
their trade associations and the other Federal financial regulatory
agencies. The proposed Policy Statement was published on January 2,
2002, and the comment period ended on March 4, 2002.
II. Comments Received
The FDIC received eleven comment letters in response to the
proposed Policy Statement that raised 23 issues. The comments came from
seven insured financial institutions and four trade associations. All
of the commenters expressed support for the FDIC's proposed Policy
Statement; however, each of the commenters recommended specific changes
to the final Policy Statement. These comments and the changes and
additions made to the final Policy Statement are discussed in detail
below. It should be noted that several commenters raised issues that
are not related to the proposed Policy Statement (i.e., CRA credit for
assistance to minority- and women-owned financial institutions). These
issues are being addressed in other projects of the FDIC and the other
Federal financial institution regulators. Since the issues raised by
those comments relate to other initiatives, they are not specifically
discussed herein.
Four commenters suggested that the FDIC develop a definition of
``minority-owned institution'' consistent with that used by other
Federal agencies. Two commenters suggested that the FDIC change the
term Black American to African American. Another commenter suggested
that the definition of minority include multi-racial individuals. One
commenter suggested that the definition of minority-owned include
institutions owned by women. Three comments suggested that the FDIC
expand the program to include legal residents of the United States as
opposed to only citizens of the United States. The FDIC received a
number of comments relating to whether an institution should continue
to be considered minority-owned if it is merged with an institution
that is publicly traded and/or widely held if the board of directors,
account holders and community that it serves are predominantly
minority. One commenter vehemently disagreed with expanding the
definition to include publicly traded and widely held institutions
under these circumstances, stating that the expanded definition would
contradict the language and intent of Section 308 of FIRREA. Two
commenters recommended expanding the definition of minority-owned to
include any institution if a majority of its board of directors,
account holders, and the community that it serves is predominantly
minority. Another commenter suggested changing the requirement to allow
publicly traded and widely held institutions to be considered minority-
owned if any one of the three specified criteria were met. Two
commenters suggested the definition of minority-owned be based on
ownership or control by minority individuals. Another commenter
preferred eliminating the ownership requirement entirely and basing the
definition on the customers and community served. Several commenters
suggested that the FDIC be more proactive and expeditious in
identifying and notifying qualified bidders in the event a minority-
owned institution failed. The agency also received several comments
seeking further clarification as to the level of technical assistance
the FDIC would provide. One commenter suggested that the FDIC consider
hosting an annual conference designed to promote and encourage the
creation of new minority-owned depository institutions. One commenter
suggested that the return visit after examinations to provide technical
assistance be available upon request rather than routinely offered to
the institutions. One commenter recommended that the FDIC's national
coordinator evaluate the training needs of individual minority-owned
institutions. Two commenters recommended that the FDIC form an advisory
board of minority-owned institution bankers to provide additional
guidance in administering the program. Two commenters suggested that
the content of the FDIC's Webpage contain information determined
relevant by conducting a survey of all the minority-owned depository
institutions and contain information regarding the FDIC's rules and
regulations. Finally, three commenters suggested that the FDIC reduce
the reporting burden on
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minority institutions as a result of the program. The FDIC has
responded to these comments by defining the term minority depository
institution, expanding the definition for purposes of this policy
statement to include those institutions where its board of directors
and community that it serves are predominantly minority, and providing
a better explanation of technical assistance under the FDIC's outreach
program. More specific discussions of the FDIC's particular responses
to the comments are found in the section-by-section analysis.
III. Final Policy Statement--Section-by-Section Analysis
Title
The FDIC is changing the title of the statement to Policy Statement
Regarding Minority Depository Institutions to reflect the change in the
definition of minority depository institution for purposes of this
policy statement.
Definition
The FDIC made a few technical amendments to this section of the
Policy Statement. We reviewed the comments relating to a change in the
definition of minority for purposes of this Policy Statement. The FDIC
used the definition of minority as that term is defined in section 308
of the Financial Institutions Reform, Recovery, and Enforcement Act
(``FIRREA''). While we understand and appreciate the sensitivity
surrounding the suggested changes to the definition of minority, the
FDIC has no authority to change the statutory language, and therefore
the agency is using the exact definition provided in the law.
Accordingly, the definition of minority is unchanged in the Final
Policy Statement.
Three commenters suggested that the FDIC expand its program under
the Policy Statement to include legal residents of the United States.
Section 308 of FIRREA does not address the citizenship issue. Permanent
legal residents are legally accorded the privilege of residing
permanently in the United States. The FDIC's Minority Depository
Institutions Program is centered on outreach, and institutions do not
receive any direct economic benefit from participation. Therefore, the
Policy Statement has been changed to include ownership by minority
individuals that are permanent legal residents of the United States.
Several commenters discussed the suggested criteria relating to board
membership, account holders and the community served being
predominantly minority to determine whether mutual institutions,
publicly traded and widely held institutions should be considered
minority-owned institutions. Based on the comments received, the FDIC
is defining the term ``minority depository institution'' as any
Federally insured depository institution where 51 percent or more of
the voting stock is owned by minority individuals. In addition, for
purposes of this Policy Statement, the FDIC is including in the
definition of minority depository institution, institutions are not
minority-owned but a majority of its Board of Directors and the
community that it serves are predominantly minority. The FDIC is not
including for consideration a criterion that the majority of account
holders of an institution be predominantly minority. The FDIC does not
intend to suggest that institutions should collect information
regarding the race and national origin of their account holders in
order to be considered minority depository institutions.
As a result, the term minority depository institution is being used
throughout the policy statement in place of the term minority-owned
institution.
Identification of Minority Depository Institutions
There are no changes to this section of the Policy Statement.
Organizational Structure
A technical change to this section that eliminates the requirement
for the national coordinator to consult with officials from the FDIC's
Division of Compliance and Consumer Affairs merely reflects an internal
change in the FDIC's organizational structure. The FDIC is further
clarifying the scope of its program under the Policy Statement by
changing the final Policy Statement to reflect that the agency's
regional coordinators will contact minority depository institutions
directly supervised by the FDIC on an annual basis.
Technical Assistance
The proposed Policy Statement clarified the meaning of technical
assistance and provided examples as to the types of assistance that
FDIC employees could provide to minority depository institutions. While
the Policy Statement cannot address every possible action by which the
FDIC could assist an institution, the final Policy Statement further
clarifies that FDIC employees can advise on risk management procedures,
accounting practices, recruiting techniques, etc., but will not
actually perform tasks expected of bank personnel. The final Policy
Statement also emphasizes that the return visits are optional, and to
be proactive, we feel the return visits should be offered rather than
available upon request.
Training and Educational Programs
One of the goals specified in Section 308 of FIRREA is ``promoting
and encouraging creation of new minority depository institutions.''
Therefore, the final Policy Statement has been amended to state that
the national and regional coordinators will work with trade
associations and other organizations to attempt to identify groups that
may be interested in establishing new minority depository institutions.
FDIC representatives will be available to address such groups to
discuss the application process, the requirements of becoming FDIC
insured, and the various programs geared toward minority depository
institutions. In response to those comments regarding the FDIC's
training and educational programs, the final Policy Statement
emphasizes that we will work with trade associations representing
minority depository institutions and other regulatory agencies to
periodically assess the need for, and provide for, training and
educational opportunities. The FDIC will partner with the trade
associations to offer these types of programs during their annual
conferences and other regional meetings. To address the specific needs
of each institution, the agency will offer to have staff members return
after examinations of minority depository institutions directly
supervised by the FDIC to provide technical assistance.
Failing Institutions
Several commenters suggested the FDIC be proactive and expeditious
in identifying qualified interested bidders in the case of a failing
minority-owned institution. The process of notifying qualified minority
depository institutions is handled by the FDIC's Division of
Resolutions and Receiverships (``DRR''). This Division already contacts
all qualified minority-owned institutions nationwide in the case of a
failing minority-owned institution. The process is handled as quickly
as possible considering that the FDIC must be relatively certain that
an institution will actually fail before soliciting the interest of
other institutions. A technical amendment to this section is being made
to ensure that the FDIC consults with all trade associations that
represent minority depository institutions in maintaining a list of
qualified and interested bidders.
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Reporting Requirements
No changes are being made to this section of the Final Policy
Statement since the program does not impose any reporting burden on
minority depository institutions participating in the program.
Internet Site
A technical change is being made to this section based on comments
aimed at making the site more beneficial. The final Policy Statement is
being changed to indicate that the Webpage will provide links to
various FDIC resources of information available to the public such as
the FDIC's Rules and Regulations. The final Policy Statement also
provides a general description of the proposed Webpage and states that
visitors will have the opportunity to provide feedback regarding the
FDIC's program and the usefulness of the Webpage.
For the reasons set forth above, the final Policy Statement is
amended to read as follows:
Federal Deposit Insurance Corporation
Policy Statement Regarding Minority Depository Institutions
Minority depository institutions often promote the economic
viability of minority and under-served communities. The FDIC has long
recognized the importance of minority depository 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 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 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.''
Section 308 of FIRREA defines ``minority depository institution'' as
any Federally insured depository institution where 51 percent or more
of the voting stock is owned by one or more ``socially and economically
disadvantaged individuals.'' Given the ambiguous nature of the phrase
``socially and economically disadvantaged individuals,'' for the
purposes of this Policy Statement, minority depository institution is
defined as 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. Ownership must be by U.S.
citizens or permanent legal U.S. residents to be counted in determining
minority ownership. In addition to the institutions that meet the
ownership test, for the purposes of this Policy Statement, institutions
will be considered minority depository institutions if a majority of
the Board of Directors is minority and the community that the
institution serves is predominantly minority.
Identification of Minority Depository Institutions
To ensure that all minority depository institutions are able to
participate in the program, the FDIC will maintain a list of Federally
insured minority depository institutions. Institutions that are not
already identified as minority depository institutions 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 appropriateness of an institution being on
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 depository 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 depository institution
program is voluntary. Any minority depository institution not wishing
to participate in this program will be removed from the official list
upon request.
Organizational Structure
The FDIC has designated a national coordinator for the FDIC's
minority depository institutions program in the Washington Office and a
regional coordinator in each Regional Office. The national coordinator
will consult with officials from 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 depository 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 depository
institutions. Representatives of other divisions and offices may
participate in these meetings.
The regional coordinators are knowledgeable about minority bank
issues and are available to answer questions or to direct inquiries to
the 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 depository institution directly supervised by the
FDIC in their respective regions to discuss the FDIC's efforts to
promote and preserve minority ownership of financial institutions and
to 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 State
nonmember banks identified through insurance applications, merger
applications, or change in control notices to familiarize the
institutions with the FDIC's minority depository institution program.
Technical Assistance
The FDIC can provide technical assistance to minority depository
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
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recommendations and should offer to help management understand
satisfactory methods to address such recommendations.
At the conclusion of each examination of a minority depository
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 visits will be to assist
management in understanding and implementing examination
recommendations, not to identify new problems. The level of technical
assistance provided should be commensurate with the issues facing the
institution. As such, institutions where more examination
recommendations are made would generally be offered more detailed
technical assistance in implementing those recommendations.
FDIC employees can advise on risk management procedures, accounting
practices, recruiting techniques, etc., but will not actually 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 recommend a specific transaction.
Training and Educational Programs
The FDIC will work with trade associations representing minority
depository 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.
The national coordinator and the regional coordinators will also
work with trade associations and other organizations to attempt to
identify groups that may be interested in establishing new minority
depository institutions. FDIC representatives will be available to
address such groups to discuss the application process, the
requirements of becoming FDIC insured, and the various programs geared
toward minority depository institutions.
Failing Institutions
The FDIC will attempt to preserve the minority character of failing
institutions during the resolution process. In the event of a potential
failure of a minority depository institution, the Division of
Resolutions and Receiverships will contact all minority depository
institutions nationwide that qualify to bid on failing institutions.
The Division of Resolutions and Receiverships will solicit qualified
minority depository 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 depository institutions 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 Depository 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
depository 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 depository institutions.
Visitors will have the opportunity to provide feedback regarding the
FDIC's program and the usefulness of the Webpage.
By order of the Board of Directors.
Dated at Washington, DC, this 9th day of April, 2002.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 02-9155 Filed 4-15-02; 8:45 am]
BILLING CODE 6714-01-P
