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FIL-25-97 Attachment

[Federal Register: March 17, 1997 (Volume 62, Number 51)]

[Proposed Rules]

[Page 12729-12738]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr17mr97-44]


 

[[Page 12729]]


 

_______________________________________________________________________


 

Part IV


 

Department of the Treasury


 

_______________________________________________________________________


 

Office of the Comptroller of the Currency


 

_______________________________________________________________________

Federal Reserve System

_______________________________________________________________________

Federal Deposit Insurance Corporation

_______________________________________________________________________


 

12 CFR Part 25, et al.


 

Prohibition Against Use of Interstate Branches Primarily for Deposit

Production; Proposed Rule


 

[[Page 12730]]


 

DEPARTMENT OF THE TREASURY


 

Office of the Comptroller of the Currency


 

12 CFR Part 25


 

[Docket No. 97-04]

RIN 1557-AB50


 

FEDERAL RESERVE SYSTEM


 

12 CFR Parts 208 and 211


 

[Regulations H and K; Docket No. R-0962]


 

FEDERAL DEPOSIT INSURANCE CORPORATION


 

12 CFR Part 369


 

RIN 3064-AB97



 

Prohibition Against Use of Interstate Branches Primarily for

Deposit Production


 

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC);

Board of Governors of the Federal Reserve System (Board); and Federal

Deposit Insurance Corporation (FDIC).


 

ACTION: Joint notice of proposed rulemaking.


 

-----------------------------------------------------------------------


 

SUMMARY: The OCC, Board, and FDIC (collectively, agencies) propose to

adopt uniform regulations to implement section 109 (section 109) of the

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994

(Interstate Act). As required by section 109, the proposed rule would

prohibit any bank from establishing or acquiring a branch or branches

outside of its home state under the Interstate Act primarily for the

purpose of deposit production, and would provide guidelines for

determining whether such bank is reasonably helping to meet the credit

needs of the communities served by the interstate branches.


 

DATES: Comments must be received on or before May 2, 1997.


 

ADDRESSES:


 

OCC: Comments should be directed to Docket No. 97-04,

Communications Division, First Floor, Office of the Comptroller of the

Currency, 250 E Street, SW., Washington, DC 20219. Comments will be

available for inspection and photocopying at that address. In addition,

comments may be sent by facsimile transmission to FAX number (202) 874-

5274, or by electronic mail to REGS.COMMENTS@OCC.TREAS.GOV.

Board: Comments should refer to Docket No. R-0962, and may be

mailed to William W. Wiles, Secretary, Board of Governors of the

Federal Reserve System, 20th Street and Constitution Avenue, NW.,

Washington, DC 20551. Comments also may be delivered to the Board's

mail room between 8:45 and 5:15 p.m. on weekdays, and to the security

control room at all other times. The mail room and the security control

room are accessible from the courtyard entrance on 20th Street between

Constitution Avenue and C Street, NW., Comments may be inspected in

Room MP-500 of the Martin Building between 9:00 a.m. and 5:00 p.m.

weekdays, except as provided in 12 CFR 261.8 of the Board's Rules

Regarding Availability of Information.

FDIC: Written comments should be directed to Jerry L. Langley,

Executive Secretary, Attention: Room F-400, Federal Deposit Insurance

Corporation, 550 17th Street NW., Washington, DC 20429. Comments may be

hand delivered to Room F-400, 1776 F Street NW., Washington, DC 20429

on business days between 8:30 a.m. and 5 p.m. (Fax number (202) 898-

3838; Internet address: comments@fdic.gov). Comments will be available

for inspection and photocopying in Room 7118, 550 17th Street, NW.,

Washington, DC 20429, between 9 a.m. and 4:30 p.m. on business days.


 

FOR FURTHER INFORMATION CONTACT:


 

OCC: Neil M. Robinson, Senior Attorney, or Kevin L. Lee, Senior

Attorney, Community & Consumer Law Division (202) 874-5750; or Andrew

T. Gutierrez, Attorney, Legislative and Regulatory Activities Division

(202) 874-5090.

Board: Diane Koonjy, Senior Attorney, (202) 452-3274, Lawranne

Stewart, Senior Attorney, (202) 452-3513, or, with respect to foreign

banks, Christopher Clubb, Senior Attorney, (202) 452-3778, Legal

Division; or Shawn McNulty, Assistant Director, (202) 452-3946,

Division of Consumer and Community Affairs.

FDIC: Louise Kotoshirodo, Review Examiner, Division of Consumer

Affairs (202) 942-3599; Doris L. Marsh, Examination Specialist,

Division of Supervision (202) 898-8905; or Gladys Cruz Gallagher,

Counsel, Legal Division (202) 898-3833.


 

SUPPLEMENTARY INFORMATION:


 

Background


 

The Interstate Act 1 provides expanded authority for a

domestic or foreign bank to establish or acquire a branch in a state

other than the bank's home state (host state). Section 109 requires the

agencies to prescribe uniform rules that prohibit the use of the

authority under the Interstate Act to engage in interstate branching

primarily for the purpose of deposit production.2 The agencies

must also provide guidelines to ensure that banks that operate such

branches are reasonably helping to meet the credit needs of the

communities served by the branches. Congress enacted section 109 to

ensure that the new interstate branching authority provided by the

Interstate Act would not result in the taking of deposits from a

community without concern for the credit needs of that community. See

H.R. Rep. No. 651, 103d Cong., 2d Sess. 62 (1994).

---------------------------------------------------------------------------


 

\1\ Pub. L. 103-328, 108 Stat. 2338, 12 U.S.C. 1835a.

\2\ Before the Interstate Act, foreign banks were permitted to

establish agencies and limited branches outside their home state

under the International Banking Act (IBA) (12 U.S.C. 3101 et seq.).

Since this authority was not conferred by the Interstate Act, or any

amendment by the Interstate Act to any other provision of law, banks

that only establish interstate agencies and limited branches under

the IBA are not covered by section 109. Domestic banks may also have

branches located outside a bank's home state that are not within the

scope of section 109 because they are not established or acquired

pursuant to authority in the Interstate Act. For example, domestic

banks may have branches grandfathered under the McFadden Act (12

U.S.C. 36) and branches retained following an interstate relocation

under 12 U.S.C. 30.

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The agencies' proposed uniform rules apply to any bank that

establishes or acquires, directly or indirectly, a branch under the

authority of the Interstate Act or amendments made by the Interstate

Act. These branches are referred to as ``covered interstate branches.''

The proposed rules provide that, beginning no earlier than one year

after a bank establishes or acquires a covered interstate branch, the

appropriate agency will determine whether reasonably available data

exist that will enable the agency to perform a ``loan-to-deposit ratio

screen.''

The loan-to-deposit ratio screen compares the bank's loan-to-

deposit ratio within the state where the bank's covered interstate

branch is located (covered interstate branch loan-to-deposit ratio)

with the loan-to-deposit ratio of banks whose home state is that state

(host state loan-to-deposit ratio). If the loan-to deposit ratio screen

indicates that the bank's covered interstate branch loan-to-deposit

ratio is at least 50 percent of the host state loan-to-deposit ratio,

no further analysis is required. However, if the appropriate agency

determines that the bank's covered interstate branch loan-to-deposit

ratio is less than 50 percent of the host state loan-to-deposit ratio,

or determines that reasonably available data do not exist that will

permit the agency to determine the bank's covered interstate branch


 

[[Page 12731]]


 

loan-to-deposit ratio, the agency will perform a ``credit needs

determination.''

Under the credit needs determination, the appropriate agency will

review the loan portfolio of the bank and determine whether the bank is

reasonably helping to meet the credit needs of the communities served

by the bank in the host state. Consistent with section 109, the

agencies will consider the following in making a credit needs

determination: (1) Whether the covered interstate branches were

formerly part of a failed or failing depository institution; (2)

whether the covered interstate branches were acquired under

circumstances where there was a low loan-to-deposit ratio because of

the nature of the acquired institution's business; (3) whether the

covered interstate branches have a higher concentration of commercial

or credit card lending, trust services, or other specialized

activities; (4) the ratings received by the bank under the Community

Reinvestment Act of 1977 (CRA)(12 U.S.C. 2901 et seq.); (5) economic

conditions, including the level of loan demand, within the communities

served by the covered interstate branches; and (6) the safe and sound

operation and condition of the bank.

If the appropriate agency concludes after taking these

considerations into account that the bank is not reasonably helping to

meet the credit needs of the communities served by the bank in the host

state: (1) The appropriate agency may order that covered interstate

branches in the host state be closed unless the bank provides

reasonable assurances to the satisfaction of the appropriate agency

that the bank has an acceptable plan that will reasonably help to meet

the credit needs of the communities served by the bank in the host

state; and (2) the bank may not open a new covered interstate branch in

the host state unless the bank provides reasonable assurances to the

satisfaction of the appropriate agency that the bank will reasonably

help to meet the credit needs of the community that the new branch will

serve.

Before exercising the authority to order closure of branches, the

agencies will issue a notice of intent to close covered interstate

branches to the bank and schedule a hearing under the provisions of

section 8(h) of the Federal Deposit Insurance Act (12 U.S.C. 1818(h)).


 

Regulatory Burden and Limitations on Available Data


 

The language of section 109 and its legislative history indicate

that Congress intended that the provision not impose any additional

regulatory or paperwork burdens on any institution. See H. Rep. No.

651, 103d Cong., 2nd Sess. 62 (1994). Section 109 directs the agencies

to calculate the covered interstate branch loan-to-deposit ratio from

available information, including an agency's sampling of the bank's

loan files during an examination, or such data as are otherwise

available. The agencies are also required by section 109 to calculate

the host state loan-to-deposit ratio as determinable from relevant

sources.

As discussed in greater detail later, data that are currently

required to be reported by banks have significant limitations for

purposes of making the calculations described in section 109. In

addition, the agencies' supervisory experience indicates that data

collection and availability vary substantially from bank to bank.

Although sampling during an examination may produce relevant data, the

extent and duration of an examination to gather complete information

could impose significant regulatory burdens on the bank.

To address these concerns in a manner consistent with section 109's

intent not to impose additional regulatory burdens on banks, the

agencies propose to determine the covered interstate branch loan-to-

deposit ratio by reviewing the relevant data reasonably available for

each bank covered by the proposed rule. These data would include

deposit and loan data that are readily available and provided by the

bank, and data already required to be reported by the bank or

reasonably available to the agencies during an examination. If these

data are sufficient to determine that a bank's covered interstate

branch loan-to-deposit ratio is less than 50 percent of the host state

loan-to-deposit ratio, or if reasonably available data are insufficient

to calculate the bank's covered interstate branch loan-to-deposit

ratio, the agencies would make a credit needs determination for the

bank. During the credit needs determination, the bank may provide the

agencies with any relevant information, including deposit and loan

data.

The agencies believe that this approach will accomplish the purpose

of section 109 while minimizing regulatory burden on the bank to

produce or to assist the agencies in obtaining data to calculate the

bank's covered interstate branch loan-to-deposit ratio. In this regard,

the ratios required to be calculated provide a screen to identify when

the appropriate agency is required to make a more comprehensive credit

needs determination under section 109. The proposed rule ensures that

the credit needs determination will be made in all cases in which the

appropriate agency is unable to readily verify compliance by means of

the section 109 loan-to-deposit ratio screen.

The agencies seek comment on all aspects of the proposal,

particularly data availability issues as they relate to the required

calculations of the loan-to-deposit ratios for banks with covered

interstate branches and the host states, and the agencies' proposed

resolutions of these issues. The agencies also seek comment on all

other aspects of the proposed rule.


 

Available Deposit and Loan Data


 

The most relevant data for calculating the ratios required under

section 109 are data that provide the geographic location of the

depositor or borrower. As discussed later, currently available data

have significant limitations with respect to depositor or borrower

location.


 

Deposit Data


 

Domestic banks report deposit data to the agencies primarily

through three submissions: (1) The annual Summary of Deposits, (2) the

quarterly Consolidated Reports of Condition and Income (Call Reports),

and (3) the Report of Transaction Accounts, Other Deposits, and Vault

Cash (FR 2900). The Summary of Deposits collects deposit data on a

branch-by-branch basis and can be aggregated by state or other

geographical region. The data in this report reflect the location where

deposits are booked, however, and not the location of the depositor.

Deposits may be booked at centralized locations and may include

deposits from sources in other states. The Summary of Deposits

therefore has limitations as a source of deposit data for calculating

loan-to-deposit ratios in a particular area or state. The Call Report

and the FR 2900 also provide deposit data that are of limited value in

making the necessary calculations. The data in these reports are

collected for each institution on a consolidated basis and are not

segregated by geographic area.

The data reported by foreign banks have similar limitations. The

principal source of deposit data for U.S. branches of foreign banks is

the Report of Assets and Liabilities of United States Branches and

Agencies of a Foreign Bank (FFIEC 002). While this form separately

identifies U.S. and non-U.S. depositors, it does not otherwise

segregate depositors by location. Moreover, since foreign banks

generally compete in wholesale deposit markets, the location where

deposits are booked is likely to bear little relation to the


 

[[Page 12732]]


 

location of the depositors. Other sources of deposit data for foreign

banks are the FDIC's Summary of Deposits (for insured U.S. branches of

foreign banks, which are relatively few in number) and the FR 2900--

Report of Transaction Accounts, Other Deposits, and Vault Cash (for

U.S. branches of foreign banks with consolidated worldwide assets in

excess of $1 billion) which, for the reasons previously discussed, are

of limited use in the loan-to-deposit calculations required under

section 109.


 

Loan data


 

The quarterly Call Reports provide information about the lending

activity of domestic banks on a consolidated basis and do not require

this information to be segregated by state or branch. Moreover, the

Call Reports reflect only those loans actually held on the books of the

bank as of the end of the reporting period, and do not reflect loans

that have been originated and sold or that have been booked through

affiliates.

Certain types of loans by domestic banks are required to be

reported under the Home Mortgage Disclosure Act (12 U.S.C. 2801 et

seq.) (HMDA) and the new CRA regulations promulgated by the Federal

financial supervisory agencies (60 FR 22156). An institution that is

subject to HMDA reporting requirements must report annually the number

of home-purchase and home-improvement loans originated or purchased,

and refinancings of both, by geographic location of the property

subject to the mortgage.3 Additionally, large institutions are

required under the new CRA regulations to report the following

information annually on loans to small businesses and small farms,

aggregated for each census tract or block numbering area: (1) Number

and amount of loans with an original amount of $100,000 or less, more

than $100,000 and less than or equal to $250,000, and more than

$250,000; and (2) number and amount of loans to small businesses and

small farms with gross annual revenues of $1 million or less (using the

revenues the institution considered in making the credit

decision).4 While these sources contain lending data broken down

by geographical location, the limited nature of the types of loans

reported and of the lenders required to report significantly limit the

usefulness of these data for purposes of calculating the ratios

required under section 109.

---------------------------------------------------------------------------


 

\3\ HMDA imposes reporting requirements on federally insured

depository institutions that in any year make at least one first-

lien home-purchase loan secured by a one- to four-family dwelling,

other than institutions that did not have a home or branch office in

an MSA or that had assets of $28 million or less at the end of the

previous calendar year. The reporting requirements also are imposed

on certain mortgage lending subsidiaries and affiliates of

depository institutions and independent mortgage companies, unless

the subsidiary, affiliate, or independent company did not have a

home or branch office in an MSA at the end of the previous calendar

year, or had, together with its parent, assets of $28 million or

less and originated less than 100 mortgages in the previous calendar

year.

\4\ These reporting requirements do not apply to a bank that, as

of December 31 of either of the prior two calendar years, had total

assets of less than $250 million and was independent or an affiliate

of a holding company that, as of December 31 of either of the prior

two calendar years, had total banking and thrift assets of less than

$1 billion.

---------------------------------------------------------------------------


 

Loan data for U.S. branches of foreign banks are also reported on

an aggregate basis in the FFIEC 002, which distinguishes only between

U.S. and non-U.S. borrowers for some types of loans. These branches

typically make very few loans that are subject to HMDA reporting

requirements.


 

The Section 109 Loan-to-Deposit Ratio Screen


 

Covered Interstate Branch Loan-to-Deposit Ratio


 

Section 109 indicates that in calculating the covered interstate

branch loan-to-deposit ratio, the agencies should consider available

information, including information from the agency's sampling of the

bank's loan files during an examination. As discussed later, sampling

loan files to calculate this loan-to-deposit ratio could result in

significantly increased regulatory burden.

Sampling at a particular branch could produce unreliable data if a

bank books loans or deposits at locations outside the state where the

borrowers or depositors are located. In this regard, many domestic and

foreign institutions consolidate certain types of business at the main

office or other location. For example, commercial loans and deposits

may be consolidated at a bank's main office, while mortgage lending may

be booked at a mortgage lending subsidiary. Although the loans may have

been made through a bank's covered interstate branch, they would not be

booked at that branch. Sampling of loan files also would not provide

information on loans that have been sold. Since practices regarding

loan sales differ from bank to bank, there may be large variations in

the loan-to-deposit ratios for individual banks over time that do not

reflect underlying lending activity. If loans were booked at the

covered interstate branch closest to the borrower, the agencies would

have to expand significantly the extent and duration of their current

examinations in order to obtain this information through sampling of

loan files at the bank's covered interstate branches.

Under the proposed rule, the agencies would take into account all

reasonably available data relevant to calculating the covered

interstate branch loan-to-deposit ratio on a case-by-case basis. The

agencies would consider any deposit and loan data that are readily

available and provided by the bank, and data reasonably available to

the agencies through currently required reports and the examination

process. In determining whether to sample a bank's loan and deposit

records, the agencies would consider whether the information would

accurately reflect the bank's activities in a host state, and whether

the information could be obtained without imposing an undue regulatory

burden on the bank. As previously noted, the agencies would conduct a

credit needs determination in all cases where the agencies concluded

that sufficient data were not available without imposing an additional

regulatory burden on the bank to calculate the covered interstate

branch loan-to-deposit ratio.

The agencies seek comment on this approach and alternative

approaches for accomplishing the purpose of section 109 without

imposing regulatory burden. In particular, the agencies seek comment on

the availability of deposit and lending data broken down by

geographical area, and banking practices for allocating deposits and

loans to branches or particular states. The agencies also seek comment

on the regulatory burden associated with providing data, or permitting

the agencies to obtain data through sampling in the examination

process, that would be necessary to calculate a bank's covered

interstate branch loan-to-deposit ratio.


 

Host State Loan-to-Deposit Ratio


 

The agencies anticipate that the host state loan-to-deposit ratio

would be calculated jointly by the agencies from the data reported by

banks in the Call Reports by dividing the total dollar amount of

outstanding loans held by home state banks by the total dollar amount

of deposits held by such banks. The ratio, which would be periodically

updated, and the methodology used to calculate the ratio would be made

available to the public. Determining the appropriate method of

calculating a ratio that accurately reflects the deposit taking and

lending activities of home state banks raises several issues discussed

later.

Data for specialized banks that do not engage in traditional

deposit taking or lending may distort the host state loan-to-deposit

ratio. Limited purpose banks,


 

[[Page 12733]]


 

such as credit card banks and wholesale banks, could have very large

loan portfolios, but few, if any deposits. In addition, certain loan

and deposit data reported on the Call Report relate to international

banking activities that are not attributable to any state. These data

include loans to banks in foreign countries, commercial and industrial

loans to non-U.S. addresses, loans to foreign governments and official

institutions, deposits from banks in foreign countries, and deposits

from foreign governments and official institutions. The agencies

anticipate that the host state loan-to-deposit ratio would exclude data

from the types of limited purpose banks and the categories of Call

Report data discussed earlier.

The deposit taking and lending activities of multistate banks also

could distort the host state loan-to-deposit ratio of their home

states. Accounting for these activities, however, is difficult because

consolidated reporting does not allow assignment of a multistate bank's

loans and deposits to particular states. Attributing all loans and

deposits from banks with operations in more than one state to its home

state could materially distort the host state loan-to-deposit ratio,

particularly since multistate banks, which are likely to be large

institutions, generally maintain higher loan-to-deposit ratios than

smaller institutions.5 On the other hand, excluding multistate

banks completely also could distort the host state loan-to-deposit

ratio.

---------------------------------------------------------------------------


 

\5\ See Profit and Balance Sheet Developments at U.S. Commercial

Banks in 1995, Federal Reserve Bulletin, June 1996, table A.2, pgs.

496-505.

---------------------------------------------------------------------------


 

Multistate banks that have more than 50 percent of their branches

outside their home state could be excluded from the host state loan-to-

deposit ratio calculation since these institutions would be more likely

to have more than 50 percent of their deposits and loans originated

outside the host state under consideration. However, any methodology

that excludes multistate banks could eventually result in a host state

with few, if any, banks eligible for calculating the host state loan-

to-deposit ratio as interstate branching becomes more prevalent. Under

these circumstances, the agencies may need to include multistate banks.

The agencies seek comment on the approaches to resolving the issues

discussed earlier, and on any methodology that, using available data,

would most accurately reflect the deposit taking and lending activities

of retail banks in a host state. Commenters should also consider the

extent to which a methodology could calculate a host state loan-to-

deposit ratio that would be roughly comparable to the calculation of

the bank's covered interstate branch loan-to-deposit ratio. In

addition, the agencies anticipate that any methodology used to

calculate the host state loan-to-deposit ratio could be adjusted in the

future to take into account changes in reporting requirements or

additional sources of relevant data. In this light, the agencies have

not included the methodology for calculating the host state loan-to-

deposit ratio in the regulation and seek comment on this approach.


 

Credit Needs Determination


 

As discussed earlier, the proposed rule would require the

appropriate agency to review the loan portfolio of a bank and determine

whether the bank is reasonably helping to meet the credit needs of the

communities served by the bank in the host state if the bank's covered

interstate branch loan-to-deposit ratio is less than 50 percent of the

host state loan-to-deposit ratio, or if reasonably available data are

insufficient to calculate the bank's covered interstate branch loan-to-

deposit ratio.

In making a credit needs determination, the appropriate agency will

consider all of the factors specified in section 109, including the

circumstances under which the branches were acquired, the nature of the

branches' business, economic conditions, safety and soundness

considerations, and the CRA rating of the bank. The agencies also would

consider any information provided by the bank, including loan and

deposit data.

The agencies believe that it is consistent with the language and

intent of section 109 to carefully weigh the CRA rating of the bank in

making a credit needs determination under the factors enumerated in

section 109. Section 109 specifies the bank's CRA rating as a factor to

be considered, and most of the other considerations listed in section

109 are taken into account under the new CRA regulations as part of the

performance context used to rate a bank's CRA performance.6

---------------------------------------------------------------------------


 

\6\ The new CRA regulations permit the agencies to evaluate a

bank's performance in the context of a number of considerations,

including the nature of the bank's product offerings and business

strategy, the lending opportunities within a bank's assessment area,

and any constraints on the bank such as the financial condition of

the bank, the economic climate (national, regional and local), and

safety and soundness limitations. See 12 CFR 25.21(b) (OCC), 12 CFR

228.21(b) (Board) and 12 CFR 345.21(b) (FDIC).

---------------------------------------------------------------------------


 

For a bank with interstate branches, section 110 of the Interstate

Act requires separate written evaluations of the institution's CRA

performance: as a whole; in each state in which it maintains a branch;

and in any multistate metropolitan area in which it maintains a branch

in two or more states. Section 110 also requires that the statewide

written evaluation of a multistate bank must contain separate

discussions of the institution's performance in any metropolitan area

in the state in which it maintains a branch, as well as in the

nonmetropolitan area of the state if a branch is maintained there. Data

considered in evaluating the bank's CRA performance in a particular

state would include information that contains the geographical location

of housing-related, small business and small farm loans that are

required to be reported under HMDA and the new CRA regulations.

Accordingly, the agencies believe that information from a CRA

performance examination is particularly relevant in determining

compliance with section 109 because it directly evaluates a bank's

efforts to assist in meeting the credit needs of its communities.

The agencies would expect that a credit needs determination for a

bank with satisfactory or better ratings for CRA performance in the

host state would be favorable. The agencies would also expect that a

credit needs determination for a bank with less than satisfactory

ratings for CRA performance in the host state would be adverse unless

mitigated by the other factors enumerated in section 109. If the

section 109 review is not performed in connection with the bank's CRA

performance examination, the agencies would also consider any available

information that would indicate an improvement or weakening in a bank's

CRA performance since its most recent performance rating.

Some entities that could be subject to section 109, including

special purpose banks and uninsured branches of foreign banks,7

are not evaluated for CRA performance by the agencies. For these

institutions, the agencies propose to use the new CRA regulations as

guidelines in making a credit needs


 

[[Page 12734]]


 

determination. However, the new CRA regulations would provide guidance

only for determining the relevance of a particular activity to the

credit needs determination, and would not obligate the institution to

have a record of performance under the CRA or require that the bank

pass any performance tests in the new CRA regulations.

---------------------------------------------------------------------------


 

\7\ A special purpose bank does not perform commercial or retail

banking services by granting credit to the public in the ordinary

course of business, and is not evaluated for CRA performance by the

agencies. See 12 CFR 25.11(c)(3) (OCC); 12 CFR 228.11(c)(3) (Board);

and 12 CFR 345.11(c)(3) (FDIC). An uninsured branch of a foreign

bank also is not evaluated for CRA performance unless it results

from an acquisition described in section 5(a)(8) of the IBA (12

U.S.C. 3103(a)(8)). See 12 CFR 25.11(c)(2) (OCC); 12 CFR

228.11(c)(2) (Board); and 12 CFR 345.11(c)(1) (FDIC).

---------------------------------------------------------------------------


 

The agencies also intend to give substantial weight to the factor

in section 109 relating to specialized activities in making a credit

needs determination for institutions not evaluated under the CRA. For

example, most branches of foreign banks derive substantially all of

their deposits from the wholesale deposit markets that are generally

national or international in scope.8 The agencies believe that

this approach is consistent with section 109's overall purpose of

preventing banks from using the Interstate Act to establish branches

primarily to gather deposits in their host state without engaging in

activities designed to reasonably help meet the credit needs of the

communities served by the bank in the host state.

---------------------------------------------------------------------------


 

\8\ U.S. branches of foreign banks generally accept only

uninsured wholesale deposits. In 1991, the Federal Deposit Insurance

Corporation Improvement Act amended the IBA to prohibit U.S.

branches of foreign banks from taking deposits in amounts of less

than $100,000, other than through the relatively few branches that

were already insured by the FDIC in 1991. 12 U.S.C. 3104(d).

Congress reaffirmed this prohibition in the Interstate Act,

directing the OCC and the FDIC to revise their regulations to reduce

further the opportunities for retail deposit-taking available to

these branches. See section 107(b) of the Interstate Act. As a

result, interstate branches of foreign banks established under the

Interstate Act cannot take retail deposits or draw a significant

level of deposits from the community, retail-oriented deposit

markets where the branches are located.

---------------------------------------------------------------------------


 

Before a bank could be sanctioned under section 109, the

appropriate agency would be required to demonstrate that the bank

failed to comply with the section 109 loan-to-deposit ratio screen as

well as failed to reasonably help in meeting the credit needs of the

communities served by the bank in the host state. Accordingly, the

proposed rule would require the agencies to determine a bank's

compliance with the section 109 loan-to-deposit ratio screen, even if

the agencies previously determined that the data are not reasonably

available.

The agencies seek comment on the proposed approach for making

credit needs determinations, particularly the proposal to make credit

needs determinations when data are insufficient to calculate the

covered interstate branch loan-to-deposit ratio, and alternative

approaches for accomplishing the purpose of section 109 without

imposing regulatory burden. The agencies also solicit comments on

whether the agencies should carefully weigh the extent to which banks

receive deposits from the host state if they are evaluated by the

agencies under the CRA but engage in specialized activities.


 

Timing of Review and Agency Consultation


 

The agencies anticipate that they will conduct a review under

section 109 for all banks evaluated for CRA performance when the

agencies initially rate the CRA performance of an interstate bank in a

particular state as required by section 110 of the Interstate Act.

Subsequent reviews, and reviews of banks not subject to CRA

evaluations, would be conducted as deemed appropriate by the agencies.

The agencies also intend to coordinate and consult in applying section

109 to banks that are subject to regulation by more than one agency.

The agencies seek comment on these proposals for conducting section 109

reviews.


 

Regulatory Flexibility Act Analysis


 

Consistent with the requirement in section 109 that the agencies

use only available information to conduct the relevant analyses, the

proposed rule does not impose any burden on banks beyond what is

required by statute. Thus, the agencies reasonably believe that the

rule, if promulgated, will not have a significant economic impact on a

substantial number of small entities. However, in light of the issues

discussed previously in the preamble to the proposed rule relating to

data availability, the agencies seek the views of interested parties on

whether they believe that the proposed rule would have a significant

impact on a substantial number of small business entities in accord

with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The

agencies note that the proposal affects only banks that have branches

in more than one state, which are likely to be primarily larger banks.

Consistent with Congressional intent, the proposal would not require

any additional paperwork or regulatory reporting. As discussed earlier,

however, the agencies are concerned that the proposal would create

additional regulatory burden for some institutions with covered

interstate branches, as some institutions may be subject to more

extensive examinations or requests for information necessary to obtain

the data required under the proposed rule. In practice, institutions

subject to the rule may need to provide additional data to examiners to

avoid prolonged examinations. The agencies have requested comment on

alternatives for reducing regulatory burden under the proposed rule.


 

Paperwork Reduction Act


 

The agencies have determined that this proposal would not increase

the regulatory paperwork burden of banking organizations pursuant to

the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).


 

OCC Executive Order 12866 Determination


 

The Office of Management and Budget has concurred with the OCC's

determination that this proposal is not a significant regulatory action

under Executive Order 12866.


 

OCC Unfunded Mandates Reform Act of 1995 Determination


 

The OCC has determined that this proposal would not result in

expenditures by State, local, and tribal governments, or by the private

sector, of $100 million or more in any one year. Accordingly, a

budgetary impact statement is not required under section 202 of the

Unfunded Mandates Reform Act of 1995.


 

List of Subjects


 

12 CFR Part 25


 

Community development, Credit, Investments, National banks,

Reporting and recordkeeping requirements.


 

12 CFR Part 208


 

Accounting, Agriculture, Banks, banking, Confidential business

information, Crime, Currency, Federal Reserve System, Mortgages,

Reporting and recordkeeping requirements, Securities.


 

12 CFR Part 211


 

Exports, Federal Reserve System, Foreign banking, Holding

companies, Investments, Reporting and recordkeeping requirements.


 

12 CFR Part 369


 

Banks, banking, Community development.


 

Office of the Comptroller of the Currency


 

12 CFR CHAPTER I


 

Authority and Issuance


 

For the reasons set forth in the joint preamble, the Office of the

Comptroller of the Currency proposes to amend part 25 of chapter I of

title 12 of the Code of Federal Regulations as follows:


 

[[Page 12735]]


 

PART 25--COMMUNITY REINVESTMENT ACT REGULATIONS


 

1. The authority citation for part 25 is revised to read as

follows:


 

Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215,

215a, 481, 1814, 1816, 1828(c), 1835a, 2901 through 2907, and 3101

through 3111.


 

2. Part 25 is amended by adding a new subpart E to read as follows:


 

Subpart E--Prohibition Against Use of Interstate Branches Primarily

for Deposit Production


 

Sec.

25.61 Authority, purpose, and scope.

25.62 Definitions.

25.63 Loan-to-deposit ratio screen.

25.64 Credit needs determination.

25.65 Sanctions.


 

Subpart E--Prohibition Against Use of Interstate Branches Primarily

for Deposit Production


 

Sec. 25.61 Authority, purpose, and scope.


 

(a) Authority. The authority for this part is 12 U.S.C. 21, 22, 26,

27, 30, 36, 93a, 161, 215, 215a, 481, 1814, 1816, 1828(c), 1835a, 2901

through 2907, and 3101 through 3111.

(b) Purpose. The purpose of this section is to implement section

109 (12 U.S.C. 1835a) of the Riegle-Neal Interstate Banking and

Branching Efficiency Act of 1994 (Pub. L. 103-328, 108 Stat. 2338)

(Interstate Act).

(c) Scope. (1) This subpart applies to any national bank that has

operated a covered interstate branch for a period of at least one year,

and any foreign bank that has operated a covered interstate branch that

is a Federal branch for a period of at least one year.

(2) This subpart describes the requirements imposed under 12 U.S.C.

1835a, which prohibits a bank from using any authority to engage in

interstate branching pursuant to the Interstate Act, or any amendment

made by the Interstate Act to any other provision of law, primarily for

the purpose of deposit production.


 

Sec. 25.62 Definitions.


 

For purposes of this subpart, the following definitions apply:

(a) Bank means, unless the context indicates otherwise:

(1) A national bank; and

(2) A foreign bank as that term is defined in 12 U.S.C. 3101(7) and

12 CFR 28.11(j).

(b) Covered interstate branch means any branch of a national bank

and any Federal branch of a foreign bank, that:

(1) Is established or acquired outside the bank's home state under

the interstate branching authority granted by the Interstate Act, or

any amendment made by the Interstate Act to any other provision of law;

or

(2) Could not have been established or acquired outside of the

bank's home state but for the establishment or acquisition of a branch

described in paragraph (b)(1) of this section.

(c) Covered interstate branch loan-to-deposit ratio means the ratio

of a bank's loans to its deposits in a state in which the bank has a

covered interstate branch, as determined by the OCC.

(d) Federal branch means federal branch as that term is defined in

12 U.S.C. 3101(7) and 12 CFR 28.11(i).

(e) Home state means:

(1) With respect to a state bank, the state that chartered the

bank;

(2) With respect to a national bank, the state in which the main

office of the bank is located; and

(3) With respect to a foreign bank, the home state of the foreign

bank as determined in accordance with 12 U.S.C. 3103(c) and 12 CFR

28.11(o).

(f) Host state means a state in which a bank establishes or

acquires a covered interstate branch.

(g) Host state loan-to-deposit ratio means, with respect to a

particular host state, the ratio of total loans in the host state

relative to total deposits from the host state for all banks (including

all institutions covered under the definition of ``bank'' in 12 U.S.C.

1813(a)(1)) that have that state as their home state, as updated

periodically and made available to the public.

(h) State means state as that term is defined in 12 U.S.C.

1813(a)(3).


 

Sec. 25.63 Loan-to-deposit ratio screen.


 

(a) Application of screen. Beginning no earlier than one year after

a bank establishes or acquires a covered interstate branch, the OCC

will consider whether the bank's covered interstate branch loan-to-

deposit ratio is less than 50 percent of the relevant host state loan-

to-deposit ratio.

(b) Results of screen. (1) If the OCC determines that the bank's

covered interstate branch loan-to-deposit ratio is 50 percent or more

of the host state loan-to-deposit ratio, no further consideration under

this subpart is required.

(2) If the OCC determines that the bank's covered interstate branch

loan-to-deposit ratio is less than 50 percent of the host state loan-

to-deposit ratio, or if reasonably available data are insufficient to

calculate the bank's covered interstate branch loan-to-deposit ratio,

the OCC will make a credit needs determination for the bank as provided

in Sec. 25.64.


 

Sec. 25.64 Credit needs determination.


 

(a) In general. The OCC will review the loan portfolio of the bank

and determine whether the bank is reasonably helping to meet the credit

needs of the communities served by the bank in the host state.

(b) Guidelines. The OCC will use the following considerations as

guidelines when making the determination pursuant to paragraph (a) of

this section:

(1) Whether covered interstate branches were formerly part of a

failed or failing depository institution;

(2) Whether covered interstate branches were acquired under

circumstances where there was a low loan-to-deposit ratio because of

the nature of the acquired institution's business or loan portfolio;

(3) Whether covered interstate branches have a high concentration

of commercial or credit card lending, trust services, or other

specialized activities, including the extent to which the covered

interstate branches accept deposits in the host state;

(4) The CRA ratings received by the bank, if any, and if the credit

needs determination is not made concurrently with a CRA evaluation,

available information that would indicate an improvement or weakening

in the bank's CRA performance since its most recent CRA evaluation;

(5) Economic conditions, including the level of loan demand, within

the communities served by the covered interstate branches;

(6) The safe and sound operation and condition of the bank; and

(7) The OCC's Community Reinvestment Act Regulations (subparts A

through D of this part) and interpretations of those regulations.


 

Sec. 25.65 Sanctions.


 

(a) In general. If the OCC determines that a bank is not reasonably

helping to meet the credit needs of the communities served by the bank

in the host state, and that the bank's covered interstate branch loan-

to-deposit ratio is less than 50 percent of the host state loan-to-

deposit ratio, the OCC:

(1) May order that a bank's covered interstate branch or branches

be closed unless the bank provides reasonable assurances to the

satisfaction of the OCC that the bank has an acceptable plan under

which the bank will reasonably help to meet the credit needs of the

communities served by the bank in the host state; and

(2) Will not permit the bank to open a new interstate branch in the

host state that would be considered to be a covered interstate branch

under Sec. 25.62(b) unless the bank provides


 

[[Page 12736]]


 

reasonable assurances to the satisfaction of the OCC that the bank will

reasonably help to meet the credit needs of the community that the new

interstate branch will serve.

(b) Notice prior to closure of covered interstate branches. Before

exercising the OCC's authority to order the bank to close a covered

interstate branch or branches, the OCC will issue to the bank notice of

the OCC's intent to order the closure and will schedule a hearing

within 60 days of issuing the notice.

(c) Hearing. A hearing scheduled under paragraph (b) of this

section will be conducted under the provisions of 12 U.S.C. 1818(h) and

12 CFR part 19.


 

Dated: March 11, 1997.

Eugene A. Ludwig,

Comptroller of the Currency.


 

Federal Reserve System


 

12 CFR CHAPTER II


 

Authority and Issuance


 

For the reasons set forth in the joint preamble, the Board of

Governors of the Federal Reserve System proposes to amend parts 208 and

211 of chapter II of title 12 of the Code of Federal Regulations as

follows:


 

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL

RESERVE SYSTEM (REGULATION H)


 

1. The authority citation for part 208 is revised to read as

follows:


 

Authority: 12 U.S.C. 24, 248(a), 248(c), 321-338a, 371d, 461,

481-486, 601, 611, 1814, 1820(d)(9), 1823(j), 1828(o), 1831o, 1831p-

1, 1835a, 3105, 3310, 3331-3351, and 3906-3909; 15 U.S.C. 78b,

781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q-1, and 78w; 31 U.S.C.

5318.


 

2. A new Sec. 208.28 is added to subpart A to read as follows:


 

Sec. 208.28 Prohibition against use of interstate branches primarily

for deposit production.


 

(a) Purpose and scope--(1) Purpose. The purpose of this section is

to implement section 109 (12 U.S.C. 1835a) of the Riegle-Neal

Interstate Banking and Branching Efficiency Act of 1994 (Pub. L. 103-

328, 108 Stat. 2338) (Interstate Act).

(2) Scope. (i) This section applies to any State member bank that

has operated a covered interstate branch for a period of at least one

year, and any foreign bank that has operated a covered interstate

branch licensed by a State for a period of at least one year.

(ii) This section describes the requirements imposed under 12

U.S.C. 1835a, which prohibits a bank from using any authority to engage

in interstate branching pursuant to the Interstate Act, or any

amendment made by the Interstate Act to any other provision of law,

primarily for the purpose of deposit production.

(b) Definitions. For purposes of this section, the following

definitions apply:

(1) Bank means, unless the context indicates otherwise:

(i) A State member bank as that term is defined in 12 U.S.C.

1813(d)(2); and

(ii) A foreign bank as that term is defined in 12 U.S.C. 3101 (7)

and 12 CFR 211.21.

(2) Covered interstate branch means any branch of a State member

bank and any branch of a foreign bank licensed by a State, that:

(i) Is established or acquired outside the bank's home state under

the interstate branching authority granted by the Interstate Act, or

any amendment made by the Interstate Act to any other provision of law;

or

(ii) Could not have been established or acquired outside of the

bank's home state but for the establishment or acquisition of a branch

described in paragraph (b)(2)(i) of this section.

(3) Home state means:

(i) With respect to a state bank, the state that chartered the

bank;

(ii) With respect to a national bank, the state in which the main

office of the bank is located; and

(iii) With respect to a foreign bank, the home state of the foreign

bank as determined in accordance with 12 U.S.C. 3103(c) and 12 CFR

211.22.

(4) Host state means a state in which a bank establishes or

acquires a covered interstate branch.

(5) Host state loan-to-deposit ratio means, with respect to a

particular host state, the ratio of total loans in the host state

relative to total deposits from the host state for all banks (including

all institutions covered under the definition of ``bank'' in 12 U.S.C.

1813(a)(1)) that have that state as their home state, as updated

periodically and made available to the public.

(6) Covered interstate branch loan-to-deposit ratio means the ratio

of a bank's loans to its deposits in a state in which the bank has a

covered interstate branch, as determined by the Board.

(7) State means state as that term is defined in 12 U.S.C.

1813(a)(3).

(c) Loan-to-deposit ratio screen--(1) Application of screen.

Beginning no earlier than one year after a bank establishes or acquires

a covered interstate branch, the Board will consider whether the bank's

covered interstate branch loan-to-deposit ratio is less than 50 percent

of the relevant host state loan-to-deposit ratio.

(2) Results of screen. (i) If the Board determines that the bank's

covered interstate branch loan-to-deposit ratio is 50 percent or more

of the host state loan-to-deposit ratio, no further consideration under

this section is required.

(ii) If the Board determines that the bank's covered interstate

branch loan-to-deposit ratio is less than 50 percent of the host state

loan-to-deposit ratio, or if reasonably available data are insufficient

to calculate the bank's covered interstate branch loan-to-deposit

ratio, the Board will make a credit needs determination for the bank as

provided in paragraph (d) of this section.

(d) Credit needs determination--(1) In general. The Board will

review the loan portfolio of the bank and determine whether the bank is

reasonably helping to meet the credit needs of the communities served

by the bank in the host state.

(2) Guidelines. The Board will use the following considerations as

guidelines when making the determination pursuant to paragraph (a) of

this section:

(i) Whether covered interstate branches were formerly part of a

failed or failing depository institution;

(ii) Whether covered interstate branches were acquired under

circumstances where there was a low loan-to-deposit ratio because of

the nature of the acquired institution's business or loan portfolio;

(iii) Whether covered interstate branches have a high concentration

of commercial or credit card lending, trust services, or other

specialized activities, including the extent to which the covered

interstate branches accept deposits in the host state;

(iv) The Community Reinvestment Act (CRA) ratings received by the

bank, if any, under 12 U.S.C. 2901 et seq. and, if the credit needs

determination is not made concurrently with a CRA evaluation, available

information that would indicate an improvement or weakening in the

bank's CRA performance since its most recent CRA evaluation;

(v) Economic conditions, including the level of loan demand, within

the communities served by the covered interstate branches;

(vi) The safe and sound operation and condition of the bank; and

(vii) The Board's Regulation BB--Community Reinvestment (12 CFR

part 228) and interpretations of that regulation.

(e) Sanctions--(1) In general. If the Board determines that a bank

is not reasonably helping to meet the credit needs of the communities

served by the


 

[[Page 12737]]


 

bank in the host state, and that the bank's covered interstate branch

loan-to-deposit ratio is less than 50 percent of the host state loan-

to-deposit ratio, the Board:

(i) May order that a bank's covered interstate branch or branches

be closed unless the bank provides reasonable assurances to the

satisfaction of the Board that the bank has an acceptable plan under

which the bank will reasonably help to meet the credit needs of the

communities served by the bank in the host state; and

(ii) Will not permit the bank to open a new interstate branch in

the host state that would be considered to be a covered interstate

branch under paragraph (b)(2) of this section unless the bank provides

reasonable assurances to the satisfaction of the Board that the bank

will reasonably help to meet the credit needs of the community that the

new interstate branch will serve.

(2) Notice prior to closure of covered interstate branches. Before

exercising the Board's authority to order the bank to close a covered

interstate branch or branches, the Board will issue to the bank notice

of the Board's intent to order the closure and will schedule a hearing

within 60 days of issuing the notice.

(3) Hearing. A hearing scheduled under paragraph (e)(2) of this

section will be conducted under the provisions of 12 U.S.C. 1818(h) and

12 CFR part 263.


 

PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)


 

1. The authority citation for part 211 is revised to read as

follows:


 

Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq.,

3101 et seq., and 3901 et seq.


 

2. In Sec. 211.22, a new paragraph (d) is added to read as follows:


 

Sec. 211.22 Interstate banking operations of foreign banking

organizations.


 

* * * * *

(d) Prohibition against interstate deposit production offices. A

covered interstate branch of a foreign bank may not be used as a

deposit production office in accordance with the provisions in

Sec. 208.28 of the Board's Regulation H (12 CFR 208.28).


 

By order of the Board of Governors of the Federal Reserve

System, March 11, 1997.

Jennifer J. Johnson,

Deputy Secretary of the Board.


 

Federal Deposit Insurance Corporation


 

12 CFR CHAPTER III


 

Authority and Issuance


 

For the reasons set forth in the joint preamble, the Board of

Directors of the Federal Deposit Insurance Corporation proposes to add

part 369 to chapter III of title 12 of the Code of Federal Regulations

to read as follows:


 

PART 369--PROHIBITION AGAINST USE OF INTERSTATE BRANCHES PRIMARILY

FOR DEPOSIT PRODUCTION


 

Sec.

369.1 Purpose and scope.

369.2 Definitions.

369.3 Loan-to-deposit ratio screen.

369.4 Credit needs determination.

369.5 Sanctions.


 

Authority: 12 U.S.C. 1819 (Tenth) and 1835a.


 

Sec. 369.1 Purpose and scope.


 

(a) Purpose. The purpose of this part is to implement section 109

(12 U.S.C. 1835a) of the Riegle-Neal Interstate Banking and Branching

Efficiency Act of 1994 (Pub. L. 103-328, 108 Stat. 2338) (Interstate

Act).

(b) Scope. (1) This part applies to any State nonmember bank that

has operated a covered interstate branch for a period of at least one

year.

(2) This part describes the requirements imposed under 12 U.S.C.

1835a, which prohibits a bank from using any authority to engage in

interstate branching pursuant to the Interstate Act, or any amendment

made by the Interstate Act to any other provision of law, primarily for

the purpose of deposit production.


 

Sec. 369.2 Definitions.


 

For purposes of this part, the following definitions apply:

(a) Bank means, unless the context indicates otherwise, a State

nonmember bank.

(b) Covered interstate branch means any branch of a State nonmember

bank, that:

(1) Is established or acquired outside the bank's home state under

the interstate branching authority granted by the Interstate Act, or

any amendment made by the Interstate Act to any other provision of law;

or

(2) Could not have been established or acquired outside of the

bank's home state but for the establishment or acquisition of a branch

described in paragraph (b)(1) of this section.

(c) Covered interstate branch loan-to-deposit ratio means the ratio

of a bank's loans to its deposits in a state in which the bank has a

covered interstate branch, as determined by the FDIC.

(d) Home state means:

(1) With respect to a state bank, the state that chartered the

bank;

(2) With respect to a national bank, the state in which the main

office of the bank is located; and

(3) With respect to a foreign bank, the home state of the foreign

bank as determined in accordance with 12 U.S.C. 3103(c).

(e) Host state means a state in which a bank establishes or

acquires a covered interstate branch.

(f) Host state loan-to-deposit ratio means, with respect to a

particular host state, the ratio of total loans in the host state

relative to total deposits from the host state for all banks (including

all institutions covered under the definition of ``bank'' in 12 U.S.C.

1813(a)(1)) that have that state as their home state, as updated

periodically and made available to the public.

(g) State means state as that term is defined in 12 U.S.C.

1813(a)(3).


 

Sec. 369.3 Loan-to-deposit ratio screen.


 

(a) Application of screen. Beginning no earlier than one year after

a bank establishes or acquires a covered interstate branch, the FDIC

will consider whether the bank's covered interstate branch loan-to-

deposit ratio is less than 50 percent of the relevant host state loan-

to-deposit ratio.

(b) Results of screen. (1) If the FDIC determines that the bank's

covered interstate branch loan-to-deposit ratio is 50 percent or more

of the host state loan-to-deposit ratio, no further consideration under

this part is required.

(2) If the FDIC determines that the bank's covered interstate

branch loan-to-deposit ratio is less than 50 percent of the host state

loan-to-deposit ratio, or if reasonably available data are insufficient

to calculate the bank's covered interstate branch loan-to-deposit

ratio, the FDIC will make a credit needs determination for the bank as

provided in Sec. 369.4.


 

Sec. 369.4 Credit needs determination.


 

(a) In general. The FDIC will review the loan portfolio of the bank

and determine whether the bank is reasonably helping to meet the credit

needs of the communities served by the bank in the host state.

(b) Guidelines. The FDIC will use the following considerations as

guidelines when making the determination pursuant to paragraph (a) of

this section:


 

[[Page 12738]]


 

(1) Whether covered interstate branches were formerly part of a

failed or failing depository institution;

(2) Whether covered interstate branches were acquired under

circumstances where there was a low loan-to-deposit ratio because of

the nature of the acquired institution's business or loan portfolio;

(3) Whether covered interstate branches have a high concentration

of commercial or credit card lending, trust services, or other

specialized activities, including the extent to which the covered

interstate branches accept deposits in the host state;

(4) The Community Reinvestment Act (CRA) ratings received by the

bank, if any, under 12 U.S.C. 2901 et seq. and, if the credit needs

determination is not made concurrently with a CRA evaluation, available

information that would indicate an improvement or weakening in the

bank's CRA performance since its most recent CRA evaluation;

(5) Economic conditions, including the level of loan demand, within

the communities served by the covered interstate branches;

(6) The safe and sound operation and condition of the bank; and

(7) The FDIC's Community Reinvestment Act Regulations (12 CFR Part

345) and interpretations of those regulations.


 

Sec. 369.5 Sanctions.


 

(a) In general. If the FDIC determines that a bank is not

reasonably helping to meet the credit needs of the communities served

by the bank in the host state, and that the bank's covered interstate

branch loan-to-deposit ratio is less than 50 percent of the host state

loan-to-deposit ratio, the FDIC:

(1) May order that a bank's covered interstate branch or branches

be closed unless the bank provides reasonable assurances to the

satisfaction of the FDIC that the bank has an acceptable plan under

which the bank will reasonably help to meet the credit needs of the

communities served by the bank in the host state; and

(2) Will not permit the bank to open a new interstate branch in the

host state that would be considered to be a covered interstate branch

under Sec. 369.2(b) unless the bank provides reasonable assurances to

the satisfaction of the FDIC that the bank will reasonably help to meet

the credit needs of the community that the new interstate branch will

serve.

(b) Notice prior to closure of covered interstate branches. Before

exercising the FDIC's authority to order the bank to close a covered

interstate branch or branches, the FDIC will issue to the bank notice

of the FDIC's intent to order the closure and will schedule a hearing

within 60 days of issuing the notice.

(c) Hearing. A hearing scheduled under paragraph (b) of this

section will be conducted under the provisions of 12 U.S.C. 1818(h) and

12 CFR part 308.


 

By order of the Board of Directors.


 

Dated at Washington, D.C., this 11th day of March, 1997.


 

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Deputy Executive Secretary.

[FR Doc. 97-6599 Filed 3-14-97; 8:45 am]

BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P

Last Updated: March 24, 2024