[Federal Register: January 10, 2001 (Volume 66, Number 7)]
[Rules and Regulations]
[Page 2051-2113]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10ja01-22]
[[Page 2051]]
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Part II
Department of the Treasury
Federal Reserve System
Federal Deposit Insurance Corporation
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Office of the Comptroller of the Currency
Office of Thrift Supervision
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12 CFR Parts 35, 207, 346, 533
Disclosure and Reporting of CRA-Related Agreements; Final Rules
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 35
[Docket No. 00-34]
RIN 1557-AB85
FEDERAL RESERVE SYSTEM
12 CFR Part 207
[Regulation G; Docket No. R-1069]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 346
RIN 3064-AC33
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 533
[Docket No. 2000-107]
RIN 1550-AB32
Disclosure and Reporting of CRA-Related Agreements
AGENCIES: Office of the Comptroller of the Currency (OCC); Board of
Governors of the Federal Reserve System (Board); Federal Deposit
Insurance Corporation (FDIC); Office of Thrift Supervision (OTS).
ACTION: Joint final rule.
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SUMMARY: The OCC, Board, FDIC, and OTS (collectively, the agencies) are
publishing final rules to implement the CRA sunshine provisions of
section 48 of the Federal Deposit Insurance Act. These provisions
require nongovernmental entities or persons (NGEPs), insured depository
institutions, and affiliates of insured depository institutions that
are parties to certain agreements that are in fulfillment of the
Community Reinvestment Act of 1977 to make the agreements available to
the public and the appropriate agency and file annual reports
concerning the agreements with the appropriate agency. These provisions
were contained in section 711 of the Gramm-Leach-Bliley Act.
The rule identifies the types of written agreements that are
covered by section 48 (referred to as covered agreements) and defines
many of the terms used in the statute. The rule also describes how the
parties to a covered agreement must make the agreement available to the
public and the appropriate agencies and explains the type of
information that must be included in the annual report filed by a party
to a covered agreement.
EFFECTIVE DATE: This joint rule is effective April 1, 2001.
FOR FURTHER INFORMATION CONTACT:
OCC: Michael S. Bylsma, Director, Community and Consumer Law (202)
874-5750; or Karen O. Solomon, Director, Legislative and Regulatory
Activities (202) 874-5090, Office of the Comptroller of the Currency,
250 E Street, SW, Washington, DC 20219.
BOARD: Scott G. Alvarez, Associate General Counsel (202) 452-3583,
Kieran J. Fallon, Senior Counsel (202) 452-5270, or Andrew Miller,
Senior Attorney (202) 452-3428, Legal Division; Glenn E. Loney, Deputy
Director (202) 452-3585, James H. Mann, Senior Attorney (202) 452-2412,
or Kathleen C. Ryan, Senior Attorney (202) 452-3667, Division of
Consumer and Community Affairs; For users of Telecommunications Device
for the Deaf (*TDD*) only, contact Janice Simms at (202) 452-4984;
Board of Governors of the Federal Reserve System, 20th Street and
Constitution Avenue, NW, Washington, DC 20551.
FDIC: Deanna Caldwell, Senior Policy Analyst (202) 942-3366, or
Robert Mooney, Assistant Director (202) 942-3378, Division of
Compliance and Consumer Affairs; or A. Ann Johnson, Counsel, Regulation
and Legislation Section (202) 898-3573, Federal Deposit Insurance
Corporation, 550 17th Street, NW, Washington, DC 20429.
OTS: Richard Bennett, Counsel (Banking and Finance), (202) 906-
7409; or Karen Osterloh, Assistant Chief Counsel, (202) 906-6639;
Office of Thrift Supervision, 1700 G Street, NW, Washington, DC 20552.
SUPPLEMENTARY INFORMATION: The contents of this preamble are listed in
the following outline:
I. Background
II. Overview of Comments Received
III. Detailed Explanation of Final Rule
A. Definition of Covered Agreement
B. Disclosure of Covered Agreements
C. Annual Reports
D. Effective Dates of Disclosure and Reporting Requirements
E. Compliance Provisions
F. Other Definitions and Rules of Construction
IV. Regulatory Flexibility Act Analysis
V. Executive Order 12866 Determination
VI. Paperwork Reduction Act
VII. Comments Regarding the Use of "Plain Language''
VIII. Unfunded Mandates Act of 1995
IX. Compliance Chart
I. Background
Section 711 of the GLB Act (Pub. L. 106-102, 113 Stat. 1338 (1999))
added a new section 48 to the Federal Deposit Insurance Act (12 U.S.C.
1831y) (FDI Act) entitled "CRA Sunshine Requirements.'' Section 48
applies to written agreements that (1) are made in fulfillment of the
Community Reinvestment Act of 1977 (CRA),\1\\ \ (2) involve funds or
other resources of an insured depository institution or affiliate with
an aggregate value of more than $10,000 in a year, or loans with an
aggregate principal value of more than $50,000 in a year, and (3) are
entered into by an insured depository institution or affiliate of an
insured depository institution and a nongovernmental entity or person.
Section 48 does not, however, cover any agreement with a
nongovernmental entity or person that has not had a CRA contact with an
insured depository institution or affiliate or a banking agency, such
as agreements entered into by entities or persons that solicit
charitable contributions or other funds without regard to the CRA.
Under section 48, the parties to a covered agreement must make the
agreement available to the public and the appropriate agency. The
parties also must file a report annually with the appropriate agency
concerning the disbursement, receipt and use of funds or other
resources under the agreement.
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\1\ 12 U.S.C. 2901 et seq.
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On May 19, 2000, the agencies published a joint notice of proposed
rulemaking in the Federal Register (65 FR 31962, May 19, 2000) to
implement section 48. The joint notice requested comment on all aspects
of the proposed rule and on a wide variety of specific topics
identified in the Supplementary Information accompanying the proposal.
II. Overview of Comments Received
The agencies collectively received more than 800 comments from the
public on the proposed rule, although many commenters submitted copies
of the same comments to each of the agencies. Comments were received
from a wide variety of sources including members of Congress; state and
local government officials; banks, savings associations and their
holding companies and other affiliates; community-based and non-profit
organizations, including national and regional associations whose
membership is composed of such organizations; trade associations; other
businesses; and individuals.
[[Page 2053]]
These comments addressed to some degree nearly all aspects of the
proposed rule. A number of these comments are described in more detail
in the description of the final rule below. This section provides a
brief overview of the comments and is not intended to represent a
detailed summary of all of the comments. The agencies have carefully
reviewed and considered the information and views provided by all
commenters.
Commenters generally requested additional guidance on the types of
actions that would constitute a written arrangement or understanding
between an insured depository institution or affiliate and a NGEP. Many
commenters supported the proposed rule's definition of "fulfillment of
the CRA,'' while others asserted that the proposed definition was too
broad.\2\ In this regard, a number of commenters expressed concern that
the proposed rule could require the disclosure of, and reporting on, a
wide range of agreements between banking organizations and NGEPs that
are not directly related to or affected by the CRA. They also expressed
concern that the proposed rule could discourage banking organizations
from entering into agreements with NGEPs to provide loans, investments
or banking services in their local communities.
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\2\ The proposed rule generally defined "fulfillment of the
CRA'' by reference to the full list of factors that the agencies
consider in evaluating the CRA performance of an insured depository
institution or in acting on an application for a deposit facility
under the CRA, as described in the lending, investment and service
tests set forth in the CRA regulations jointly adopted by the
agencies ("CRA Regulations''). See 12 CFR Part 25 (OCC); 12 CFR
Part 228 (Board); 12 CFR Part 345 (FDIC); 12 CFR Part 563e (OTS).
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Many commenters addressed the exemption included in the statute and
the proposed rule for agreements that are entered into by an insured
depository institution or affiliate with a NGEP that has not
"commented on, testified about, or discussed with the institution, or
otherwise contacted the institution, concerning the Community
Reinvestment Act.'' \3\ Most commenters that addressed this issue
requested that the agencies clarify the types of actions by a NGEP that
would constitute a CRA contact as described in the statutory exemption.
Some commenters recommended that the agencies define a CRA contact to
include only CRA-related contacts by a NGEP with a Federal banking
agency or discussions with an insured depository institution or
affiliate about such contacts. Commenters also urged that the agencies
clarify that certain types of discussions with an institution or
affiliate, such as a general discussion by a NGEP with an institution
concerning the eligibility of products or services for consideration
under the CRA, were not CRA contacts (and were therefore exempt) within
the meaning of the statute. Other commenters asserted that the statute
did not allow the agencies to limit CRA contacts only to those that
occur with a Federal banking agency and that Congress intended a CRA
contact to encompass a broad range of CRA-related contacts including
discussions by a NGEP with an insured depository institution or
affiliate concerning the CRA.
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\3\ See 12 U.S.C. 1831y(e)(1)(B)(iii).
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A number of commenters also argued that a CRA contact must be with
an appropriate official or representative of the insured depository
institution or affiliate. A significant number of commenters also urged
that a CRA contact be recognized only if the contact occurred within a
specified period of time before the parties entered into the agreement.
Some commenters expressed concern that, without these or other
limitations, the statute or proposed rule would impose a substantial
burden on persons claiming the exemption and make the exemption
virtually meaningless. Other commenters asserted that the agencies
lacked the authority to require that a CRA contact be temporally
related to a CRA-related agreement.
A number of commenters argued that the statute or the proposed rule
imposed a substantial burden on persons who engage in discussions with
banking organizations concerning the CRA or petition the Federal
banking agencies for action related to the CRA. These commenters argued
that these burdens could chill the public's exercise of free speech or
right to petition the government as protected by the Constitution.
Commenters generally supported the provisions of the proposed rule
that sought to streamline the disclosure and annual reporting
obligations of the parties to a covered agreement to the extent
consistent with the statute. For example, commenters widely supported
the proposed rule's provisions giving insured depository institutions,
affiliates and NGEPs flexibility in making covered agreements available
to the public and allowing insured depository institutions, affiliates
and NGEPs that are party to a number of covered agreements the ability
to file a single, consolidated annual report relating to all of the
agreements.
Commenters also generally supported the provisions of the proposed
rule that required a NGEP to make its covered agreements available to
an agency only upon request. Some commenters requested that insured
depository institutions and affiliates also be permitted to make
covered agreements available to the appropriate agency upon request, or
that the agencies further streamline the agency disclosure obligations
applicable to institutions and affiliates. Commenters requested that
the agencies streamline the process for determining what information
contained in a covered agreement may be withheld from public
disclosure, such as by identifying categories of information that could
be withheld from public disclosure without prior agency review.
Commenters overwhelmingly supported the proposed rule's provisions
allowing NGEPs to use Federal tax forms and other reports to fulfill
the reporting requirements of the rule. Comments were mixed concerning
the proposed rule's provisions governing the reporting of specific
purpose funds received by a NGEP, with some commenters supporting this
reporting method and others asserting that the method was burdensome or
not authorized by the statute.
Commenters also supported the provisions of the rule that provided
that a NGEP is not required to file an annual report for any year in
which NGEP did not receive funds under a covered agreement. Several
commenters requested that the agencies provide a similar exemption from
the annual reporting requirements to insured depository institutions
and affiliates.
III. Detailed Explanation of Final Rule
This section provides a more detailed discussion of the comments
received on the proposal, the changes made by the agencies in response
to comments, and the other provisions of the final rule. As with the
proposal, the final rule uses the term "insured depository
institution,'' rather than "bank'' or "savings associations,'' to
facilitate compliance and consistency among the agencies' rules. As
discussed below, the rule identifies the specific agency or agencies
with whom a covered agreement and its related annual reports should be
filed, and the agency or agencies that would be considered a relevant
supervisory agency for a covered agreement.
The final rule and the remaining portions of this preamble also
refer to a "nongovernmental'' entity or person'' as a "NGEP.'' The
final rule uses this term, rather than the term "person,'' to avoid
confusion over the scope of the rule. The term "nongovernmental entity
or person'' or "NGEP'' is defined in section ____.11 of the rule
generally to include
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any company or individual other than the Federal government; a state,
local or tribal government; an insured depository institution or
affiliate; or a representative of any of the foregoing.
The Supplementary Information accompanying the proposed rule
included examples illustrating the scope and application of the
proposed rule. Commenters generally favored having examples that
provide additional guidance concerning the rule's provisions. Some
commenters requested that the agencies clarify or amend certain
examples, and commenters were divided on whether the agencies should
incorporate all examples into the final rule.
The final rule includes examples illustrating some of the key
provisions of the rule, including the definition of a "CRA
communication,'' the scope of the exemptions for qualifying loan
agreements, and the information required to be provided in the annual
report of an NGEP. The examples included in the rule are part of the
rule and compliance with an example, to the extent applicable,
constitutes compliance with the rule. (See section ____.1(d).) The
examples included in the rule illustrate only the scope and application
of the particular topic addressed by the example and do not illustrate
any other topic or issue that may arise under the rule.
The agencies also have included in this preamble examples that
illustrate other provisions of the rule. The agencies have not included
these other examples in the final rule because fewer questions appear
to arise in connection with these provisions and, thus, including the
examples in the rule could make the rule longer without providing a
commensurate level of benefit. The agencies, however, have included
these examples in the preamble to illustrate the manner in which the
agencies expect to interpret the rule in these areas. To further assist
members of the public in complying with the rule, the agencies have
included in this preamble a chart that summarizes the disclosure and
reporting requirements of the rule. This chart, which is not part of
the rule, is located at Part IX of this preamble.
By operation of law, the regulations of the agencies implementing
section 48 shall take effect on the first day of the calendar quarter
which begins on or after the date on which the regulations are
published in final form, which is April 1, 2001.\4\
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\4\ 12 U.S.C. 4802(b).
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The agencies requested comment on whether the rule should remain,
as proposed, in a separate part of each agency's regulations or be
incorporated into the agencies' existing CRA Regulations. Commenters
generally favored keeping the rule separate from the CRA Regulations.
In addition, section 48 amended the FDI Act, and not the CRA, and is
independent of the CRA and the CRA Regulations. Accordingly, the final
rule is promulgated as a new part to each agency's regulations. Section
____.1(c) of the final rule provides that nothing in the final rule
affects in any way the CRA, the agencies' CRA Regulations, or any
agency's interpretations or administration of the CRA or the CRA
Regulations.
The following description applies to the rule of each agency. Since
each agency's rule will be codified at a different part of the Code of
Federal Regulations, the following description references the rule
using only the section numbers used in the rule.
A. Definition of Covered Agreement
Section ____.2 of the rule defines which agreements are covered by
the rule and includes the Act's exemptions from the definition of a
covered agreement for qualified loan agreements.
1. Covered Agreements
The proposed rule defined a covered agreement as any contract,
arrangement, or understanding that meets all of the following four
criteria:
The agreement is in writing;
The agreement is made pursuant to, or in connection with,
the fulfillment of the CRA, as defined by the rule (see section __.4);
The parties to the agreement include (1) one or more
insured depository institutions or affiliates of an insured depository
institution, and (2) one or more NGEPs; and
The agreement provides for the insured depository
institution or affiliate to provide cash payments, grants, or other
consideration (except loans) having an aggregate value of more than
$10,000 in any calendar year, or to make loans in an aggregate
principal amount of more than $50,000 in any calendar year.
The final rule retains these four criteria for coverage. The final
rule also provides that, in order for an agreement to be covered, one
of the NGEPs that is a party to the agreement must have had a CRA
communication (as defined in section __.3) prior to the time the
parties entered into the agreement. As noted above, section 48
specifically exempts from coverage any agreement entered into by an
institution or affiliate with a NGEP who has not had a CRA
communication. The agencies believe that structuring this statutory
exemption as an affirmative requirement for coverage makes the rule
easier to understand without affecting the scope of the rule. The scope
of the exemption for agreements with a NGEP that has not had a CRA
communication is discussed in detail below.
A covered agreement may be with an insured depository institution
or any affiliate of an insured depository institution, including a bank
holding company or a nonbank affiliate. Section 48 and the rule apply
only to written contracts, arrangements or understandings, and do not
apply to oral contracts or agreements.
Some commenters requested that the agencies provide additional
guidance concerning when written communications between a NGEP and an
insured depository institution or affiliate would constitute a
"contract, arrangement or understanding.'' In addition, some
commenters asserted that the rule should apply only to legally
enforceable contracts, while comments were mixed on whether the rule
should apply to unilateral lending or investment pledges made by an
insured depository institution or affiliate in response to previous
actions by a NGEP.
As noted above, section 48 by its terms applies not only to written
contracts, but also to written arrangements and written understandings
that are entered into by an insured depository institution or affiliate
with a NGEP and that otherwise meet the statutory criteria to be a
covered agreement. For this reason, the agencies have not limited the
final rule to legally binding written contracts. Other written
agreements that do not constitute a legally binding contract, but that
reflect a mutual arrangement or understanding between an insured
depository institution or affiliate and a NGEP would be a covered
agreement if they meet the other criteria set forth in the rule.\5\ A
written arrangement or understanding may be reflected by one or more
documents.
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\5\ 12 U.S.C. 1831y(a) and (e)(1).
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The agencies have included three examples in the final rule that
illustrate when a written arrangement or understanding would and would
not exist. (See section ____.2(b).) Example 1 involves a NGEP that
meets with an insured depository institution and states that the
institution needs to make more community development investments in the
NGEP's community. The NGEP and institution, however, do not reach an
agreement concerning the community
[[Page 2055]]
development investments the institution should make in the community,
and the parties do not reach any mutual arrangement or understanding.
The institution later unilaterally issues a press release that
announces the institution has established a general goal of making $100
million of community grants in low- and moderate-income neighborhoods
in the institution's community over the next 5 years and does not
identify the NGEP. Since there was no agreement or understanding
between the institution and NGEP, and the institution acted
unilaterally to establish its investment goal, Example 1 states that
the press release issued by the institution is not a written
arrangement or understanding.
In Example 2, a NGEP meets with an insured depository institution
and states that the institution needs to offer new loan programs in the
NGEP's community. The NGEP and the insured depository institution reach
a mutual understanding that the institution will provide $10 million in
additional loans in low- and moderate-income neighborhoods in the
NGEP's community. The insured depository institution tells the NGEP
that it will issue a press release announcing the program and
subsequently issues a press release that incorporates the key terms of
the mutual understanding between the institution and NGEP. The press
release reflects the mutual arrangement or understanding between the
NGEP and the insured depository institution and is, therefore, a
written arrangement or understanding.
In Example 3, a NGEP sends a letter to an insured depository
institution requesting that the institution provide a $15,000 grant to
the NGEP. The insured depository institution responds in writing and
agrees to provide the grant to the NGEP in connection with its annual
grant program. Since the exchange of letters reflects an understanding
or arrangement between the insured depository institution and the NGEP,
the agreement would be a covered agreement if it meets the other
criteria set forth in the rule including, in particular, the
requirement that the NGEP have had a CRA communication.
These examples are not exclusive and other written exchanges may or
may not constitute a written arrangement or understanding depending on
the facts and circumstances of the particular situation.
2. Loan Agreements That Are Not Covered Agreements
Section 48(e)(1)(B) specifically exempts certain types of loan
agreements from coverage even if they otherwise meet the definition of
a covered agreement. Section ____.2(c) of the final rule implements
these exemptions.
a. Mortgage Loans. The first statutory exemption is for any
individual mortgage loan. Under this exemption, any mortgage loan made
by an insured depository institution or affiliate to any individual or
entity is exempt from the requirements of section 48. This exemption is
available for any mortgage loan, regardless of the identity of the
borrower or the rate charged on the loan.
The agencies requested comment on what types of loans would qualify
as a "mortgage loan'' for purposes of this statutory exemption. A
number of commenters addressed this issue, with the vast majority
stating that the exemption should be available for any loan that is
secured by real estate. A few commenters asserted that the agencies
should define a mortgage loan to include any loan the proceeds of which
are used for real estate-related purposes, even if the loan was not
secured by real estate. Some commenters also contended that investments
in mortgage-backed securities or other types of real estate investments
should be exempt under this provision.
The final rule provides that this statutory exemption is available
to any individual loan that is secured by real estate. The real estate
securing the loan may be used for residential or commercial purposes,
and the loan does not need to have been obtained for purposes of
purchasing or improving the real estate. Since section 48 specifically
provides that this exemption is available only to mortgage loans, an
agreement to make a real-estate related investment (including an
investment in mortgage-backed securities) or to make a loan that is not
secured by real estate is not exempt under this provision, although
such agreements may be exempt from coverage under other provisions of
the rule.
Section ____.2(d) of the final rule provides examples illustrating
the rule's exemptions for qualifying loan agreements. The first example
(Example 1) illustrates the exemption for any individual mortgage loan.
In this example, an insured depository institution provides an
organization with a $1 million loan pursuant to a written agreement.
The loan is secured by real estate that is owned or to-be-acquired by
the organization. Accordingly, Example 1 states that the agreement is
exempt from coverage regardless of the interest rate on the loan or
whether the loan was made for purposes of re-lending.
b. Specific Contracts or Commitments for Qualifying Loans. The
statute also exempts from coverage "any specific contract or
commitment for a loan or extension of credit to individuals,
businesses, farms, or other entities, if the funds are loaned at rates
[that are] not substantially below market rates and if the purpose of
the loan or extension of credit does not include any re-lending of the
borrowed funds to other parties." \6\ Under the statute, this
exemption is available for any type of loan to any individual or entity
if the loan meets the market rate and re-lending restrictions of the
statute.
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\6\ 12 U.S.C. 1831y(e)(1)(B)(ii).
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The agencies requested comment on whether this exemption covers
only a specific commitment to make a qualifying loan or extension of
credit (such as a loan commitment typically made in the course of
providing a line of credit to a small business), or also would provide
an exemption for a commitment to make multiple loans that meet the
Act's restrictions. The agencies also requested comment on whether the
agencies should define when a loan is made at "substantially below
market rates'' or for purposes of re-lending. Most commenters that
addressed these issues requested that the agencies provide additional
guidance concerning the phrases "substantially below market rates''
and "for purposes of re-lending,'' and some of these commenters
suggested definitions for these phrases. Comments were mixed on whether
the exemption was available only to a specific contract or commitment
for an individual loan or if it also would cover a general commitment
by an insured depository institution to make multiple loans over a
period of time.
After carefully reviewing the language and purposes of section 48
and the comments received, the agencies have determined that the
exemption in section ____.2(c)(2) is available only with respect to a
specific contract or commitment by an insured depository institution to
make a single loan or extension of credit that meets the Act's market-
rate and re-lending restrictions, and does not cover an agreement or
commitment by an institution or affiliate to make multiple loans or
extensions of credit. The agencies also have amended the rule to
provide that a loan is made for "purposes of re-lending'' only if the
loan application or other loan documents indicate that the borrower
intends or is authorized to use the borrowed funds to make a loan or
[[Page 2056]]
extension of credit to one or more third parties.
The final rule retains the statute's restriction that the loan or
extension of credit may not be made at a rate that is substantially
below market rates. In determining whether a loan or extension of
credit is made at "substantially below market rates,'' an institution
should compare the rate charged on the loan or extension of credit to
the rate the institution has or would charge a comparable borrower
(e.g., a NGEP with similar financial resources and credit history) on a
comparable type of transaction (e.g., a construction loan, permanent
financing, small business loan, or unsecured consumer loan). Since the
rates charged on particular types of loans vary over time and may vary
depending on the location of the lender and borrower, the agencies have
not included in the rule a fixed formula for determining whether a loan
or extension is made at "substantially below market rates.''
Examples 2, 3 and 4 in section ____.2(c) of the rule illustrate the
scope and application of this exemption. In Example 2, an insured
depository institution commits to provide a $500,000 line of credit to
a small business pursuant to a written agreement. The example provides
that the loan is made at a rate within the range of rates offered by
the institution to other similarly situated small businesses in the
market and the loan documentation does not indicate that the borrower
intends or is authorized to re-lend the borrowed funds. Accordingly,
the example states that this commitment for an individual loan is
exempt under section ____.2(c)(2) of the rule.
In Example 3, a small business obtains a $75,000 small business
loan, documented in writing, from an insured depository institution.
The institution offers its borrowers small business loans that are
guaranteed by the Small Business Administration (SBA) and the loan is
made under this loan program. The loan documentation does not indicate
that the borrower intends or is authorized to re-lend the funds to any
third-party. Although the rate charged by the institution on the loan
is well below that charged by the institution on commercial loans, the
rate is within the range of rates that the institution would charge a
similarly situated small business for a similar loan under the
institution's SBA loan program. Accordingly, the example states that
the loan is not made at substantially below market rates and is exempt
from coverage under section ____.2(c)(2) of the rule.
Example 4 involves a bank holding company that enters into a
written agreement with a community development organization. The
agreement provides for the insured depository institutions owned by the
bank holding company to make $250 million in small business loans in
their communities over the next 5 years. Since the agreement provides
for the institutions to make multiple loans, the agreement is not a
specific contract or commitment for a loan or extension of credit and,
thus, is not exempt from coverage under section ____.2(c)(2) of the
rule. The example notes, however, that each small business loan made
pursuant to this general commitment would be exempt from coverage if
the loan separately meets market rate and re-lending restrictions of
the exemption.
To be entirely exempt from coverage under section ____.2(c)(1) or
(2) of the rule, an agreement must be exclusively a loan, extension of
credit or loan commitment that meets the requirements of the relevant
exemption. The rule provides, however, that if an agreement includes a
loan, extension of credit or loan commitment that, if documented
separately, would meet the rule's requirements to be exempt and also
provides for the insured depository institution or affiliate to provide
other funds or resources, the exempt loan, extension of credit or loan
commitment may be excluded for purpose of determining whether the
agreement meets the Act's dollar thresholds or is in fulfillment of the
CRA. (See section ____.2(e).)\7\
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\7\ The agencies note, however, that if the other consideration
would reduce the effective interest rate paid on the loan or
extension of credit to a rate that is substantially below the market
rate, the loan or extension of credit would not itself be exempt
from coverage.
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3. CRA Communication
Section 48(e)(1)(B)(iii) provides a statutory exemption from the
CRA Sunshine provisions for "any agreement entered into by an insured
depository institution or affiliate with a [NGEP] who has not commented
on, testified about, or discussed with the institution, or otherwise
contacted the institution, concerning the Community Reinvestment Act of
1977.'' This exemption for agreements with persons who have not had a
CRA contact was included in section ____.2(b)(2) of the proposed rule,
which contained an exemption that restated the statutory language in
section 48(e)(1)(B)(iii). Section ____.2(b)(2) also provided examples
of actions that would constitute a CRA contact and other examples of
actions that would not be considered a CRA contact.
The preamble invited comment on this aspect of the proposal,
including comment on whether the agencies should provide a more
detailed definition of the exemption and on several alternative
approaches to defining CRA contact. Nearly all commenters requested
that the agencies change the definition of CRA contact in the proposed
rule to explain the breadth of the exemption, to provide additional
clarity regarding what constitutes a CRA contact, or to exempt
specifically certain types of contacts. Many commenters underscored the
importance of a rule that allowed persons to determine before entering
into an agreement whether or not they have had a CRA contact and
qualify for the exemption. While many commenters expressed concern
about various aspects of the proposal on CRA contact, commenters were
divided on how to address these concerns.
A significant number of commenters argued that the agencies should
define a CRA contact to cover only providing CRA-related comments or
testimony to an agency and discussions with an insured depository
institution or affiliate about providing (or refraining from providing)
such comments or testimony. There was also significant support for an
alternative that would have excluded discussions with an insured
depository institution or affiliate concerning whether particular
loans, services, investment or community development activities are
generally eligible for consideration by an agency under the CRA
Regulations. Others argued that only conversations related specifically
to the CRA performance record of an institution should be covered.
A significant number of commenters advocated exempting contacts
that are incidental to ordinary business dealings, which were perceived
as outside the intended scope of the statute. Others advocated
exempting certain types of "routine inquiries,'' such as inquiries
about what an institution's CRA rating is or about the CRA statute or
rule.
Some commenters, on the other hand, supported a broad
interpretation of CRA contact that would cover general discussions of
the CRA. A small number of commenters supported a broad interpretation
of CRA contact while also advocating that the agencies narrow other
aspects of the definition of a covered agreement, such as the
definition of fulfillment.
In addition to these issues regarding the scope of the exemption,
many commenters urged the agencies to
[[Page 2057]]
address other issues raised by the CRA contact definition. In
particular, a number of commenters suggested that the agencies indicate
who at the relevant institution or affiliate and who at the NGEP must
have a CRA contact or have knowledge that a CRA contact has occurred,
or require a temporal or other connection between the CRA contact and
negotiation of a CRA agreement.
As explained more fully below, the final rule incorporates changes
in three areas to address comments regarding the definition of CRA
contact. In summary, in order to identify contacts that have a
relationship to an agreement and to avoid imposing substantial burden
on parties entitled to claim the exemption, the final rule adopts a
definition of "CRA communication'' that has three parts. First, the
rule adds clarity regarding the type of communication that is
considered to concern the CRA; second, the rule provides that the
institution and the NGEP must have knowledge of the CRA communication
and specifies who must have that knowledge; third, the rule recognizes
a temporal relationship between the communication and the agreement.
In addition, the final rule relocates and rewords the CRA
communication provision from an exemption for NGEPs that have not had a
CRA communication to a requirement in the definition of a covered
agreement that the agreement be with a NGEP that has had a CRA
communication. The final rule also refers to a CRA contact as a "CRA
communication.'' This relocation and rewording makes the final rule
easier to read and understand and does not have any substantive effect.
a. Definition of CRA Communication. In considering the scope of the
exemption in section 48(e)(1)(B)(iii) for NGEPs that have not had a
contact concerning the CRA, the agencies have carefully considered the
words of the statute and the purpose of the exemption as well as the
comments received by the agencies. The Conference Report for the Act
indicates that this exemption was designed to provide an exemption from
the requirements of the CRA Sunshine provisions for a wide range of
organizations that solicit funds without regard to the CRA. The
Conference Report lists as examples of the types of groups that might
qualify for this exemption civil rights groups, community groups
providing housing or other services in low-income neighborhoods,
veterans groups, and community theater groups.\8\
---------------------------------------------------------------------------
\8\ See H.R. Conf. Rep. No. 106-434 at 179 (1999).
---------------------------------------------------------------------------
The final rule clarifies the definition of a CRA communication by
adding specificity that was drawn from the examples published in the
original proposal and in the preamble to the original proposal. Under
the final rule, a CRA communication is defined to include any of the
following five types of contacts:
Any written or oral comment or testimony provided to a
Federal banking agency concerning the adequacy of the performance under
the CRA of the insured depository institution, any affiliated insured
depository institution or any CRA affiliate;\9\
---------------------------------------------------------------------------
\9\ As discussed more fully below, a "CRA affiliate'' is an
affiliate of an insured depository institution whose activities are
considered in evaluating the CRA performance of the institution.
Accordingly, it is viewed as part of the insured depository
institution for these purposes.
---------------------------------------------------------------------------
Any written comment submitted to the insured depository
institution that discusses the adequacy of the performance under the
CRA of the institution and that must be included in the institution's
CRA public file;
Any discussion or other contact with an insured depository
institution or any affiliate about providing or refraining from
providing written or oral comments or testimony to any Federal banking
agency concerning the adequacy of the performance under the CRA of the
insured depository institution, any affiliated insured depository
institution or any CRA affiliate;
Any discussion or other contact with an insured depository
institution or any affiliate about providing or refraining from
providing written comments that concern the adequacy of the
institution's CRA performance and that must be included in the
institution's CRA public file; and
Any discussion or other contact with an insured depository
institution or affiliate about the adequacy of the performance under
the CRA of the insured depository institution, any affiliated insured
depository institution, or any CRA affiliate.
The first four types of contacts include contacts with a Federal
banking agency or with an institution or affiliate about contacting a
Federal banking agency, as well as written communications that, under
existing rules, must be retained by an institution in its CRA public
file. The final rule includes a fifth type of contact that relates to
any discussion or other contact with an institution or affiliate about
the adequacy of the institution's performance under the CRA.
In adopting this fifth type of contact, the agencies have carefully
considered the suggestion of a number of commenters that CRA
communications be limited to the first four types of agency contacts or
to discussions with an institution regarding agency contacts. The
agencies note that the exemption in section 48(e) for a NGEP that has
not had a CRA communication, by its terms, is available only if the
NGEP has not "discussed with the institution, or otherwise contacted
the institution, concerning the CRA.'' By its terms, the exemption
appears to contemplate that, in order to qualify for the exemption, the
NGEP not have had discussions or contacts "concerning the CRA.''
Contacts "concerning the CRA'' would cover discussions that are not
limited to discussions regarding providing testimony or comments to an
agency.
In order to explain what type of contact is covered by the words
"concerning the CRA,'' the final rule includes the fifth category for
discussions or other contacts about the "adequacy'' of the
institution's performance under the CRA. This reference was included to
indicate that a contact that is related to how well or how poorly an
institution is fulfilling its obligation to help meet the credit needs
of the institution's community as evaluated under the CRA is one of the
types of contacts that would be most likely to influence a CRA
agreement, and, consequently, would be a CRA communication that
disqualifies a NGEP from claiming the exemption in section
48(e)(1)(B)(iii).
To help illustrate when a discussion or contact relates to the
adequacy of an institution's CRA performance, the final rule contains
several examples of contacts that would be covered and several examples
of contacts that would be exempt.\10\ These examples address only the
content of a CRA communication and assume that all other requirements
regarding the communication (and agreement) are otherwise satisfied.
---------------------------------------------------------------------------
\10\ Some commenters argued that the examples in the proposed
rule were helpful in illustrating the scope of the CRA contact
exemption and requested additional examples. Other commenters argued
that the examples would broadly discourage certain kinds of contacts
and should be eliminated. Section ____.1(d) of the final rule states
that the examples included in the rule are not exclusive, and the
agencies believe that, on this basis, the examples are a useful
illustration of the scope of the rule.
---------------------------------------------------------------------------
Three examples address contacts that are CRA communications and,
consequently, would cause a written agreement involving the NGEP to be
a covered agreement. In the first example, a NGEP files a written
comment with a Federal banking agency in response to a general agency
request for comments on an application to open a new branch.
[[Page 2058]]
The comment filed by the NGEP states that the applicant insured
depository institution has successfully addressed the credit needs of
its community. In the second example, a NGEP states to an executive
officer of an insured depository institution that the institution must
improve its CRA performance. Both of these examples illustrate a
contact in which the CRA performance record of the institution is
specifically mentioned.
The statute does not require that a specific reference to the
Community Reinvestment Act of 1977 be made in order to represent a CRA
communication, and, in fact, a number of commenters indicated that
discussions leading to agreements often do not include a specific
reference to the CRA because the context of the negotiation makes clear
that the agreement is intended to address CRA performance. To
illustrate this, an example of a CRA communication has been included
that involves an oral discussion in which the NGEP claims that the
institution needs to make more mortgage loans in low- and moderate-
income neighborhoods. The connection with the CRA is indicated by the
reference to the action requested, which involves activities that are
often the focus of CRA performance evaluations, along with a statement
indicating an obligation that the institution take this action, an
obligation that is considered to arise out of CRA evaluations.
The final rule also includes several examples of contacts that are
not considered to be CRA communications. One example involves a fund-
raising letter sent by a NGEP to an insured depository institution and
to other businesses in the community encouraging all businesses in the
community to meet their obligation to make the community a better place
to live by supporting the fund-raising efforts of the NGEP. This
example illustrates that a fund-raising letter that is widely
distributed in a way that does not imply an obligation under the CRA is
not itself considered to be a CRA communication. Similarly, a contact
by a NGEP with an insured depository institution to simply determine
what rating the institution received at its most recent CRA performance
examination would not, by itself, constitute a discussion concerning
the adequacy of the institution's performance.
A number of commenters advocated clarifying that the definition of
CRA communication would not include marketing efforts for products or
services that might relate to CRA activities. The rule contains two
examples that illustrate that general marketing efforts and general
discussions regarding the eligibility of products and services for CRA
consideration are not considered to be CRA communications unless the
communication includes a discussion concerning the adequacy of the
particular institution's CRA performance.
One example involves a discussion by a NGEP with an insured
depository institution regarding whether particular loans, services,
investments, community development activities or other activities are
generally eligible for consideration by a Federal banking agency under
the CRA, without any discussion of the adequacy of the CRA performance
of the insured depository institution or affiliate.
Another example illustrates a situation in which the NGEP combines
a general marketing discussion with a discussion of the eligibility of
particular loans for consideration under the CRA, but without any
discussion of the adequacy of the CRA performance record of the
institution or obligation of the institution to take any action related
to the CRA. In this example, the NGEP engages in the sale or purchase
of loans in the secondary market and sends a general offering circular
to financial institutions offering to sell or purchase a portfolio of
loans. The NGEP then meets with the institution and discusses whether
specific loans are generally eligible for consideration under the CRA,
including which loans are made in the institution's community, without
discussing the CRA performance or obligations of the institution. The
agencies believe that purchases and sales of loans in the secondary
market are typically done in the manner illustrated in the example and,
therefore, generally do not involve a CRA communication.
The final rule also retains two examples contained in the proposed
rule regarding other matters. One illustrates that statements made at a
widely attended conference on a general topic (but not a meeting or
hearing regarding a specific institution, affiliate or transaction) are
not considered to be CRA communications. Statements made at widely
attended conferences on general topics are not likely to be effective
in influencing CRA agreements and cannot be effectively monitored.
The other example illustrates that statements made in response to a
direct request to the specific NGEP from a Federal banking agency (but
not a general request for comment in connection with an application for
approval of a transaction or an examination) are not considered to be
CRA communications. Some commenters suggested that this example be
deleted because it suggested a preference for statements made by NGEPs
that have been directly contacted by a banking agency over NGEPs that
provide information to the agency in the course of a general
solicitation of public comment. The final rule retains the example
because the agencies believe that it is important to the agencies'
ability to meet their statutory obligations under the CRA that the
agencies obtain information regarding the credit needs of the community
from sources that include NGEPs that may enter into agreements with
insured depository institutions. In these circumstances, the contact
results due to an action by the agency, not an attempt by the NGEP to
influence the agency or obtain a CRA agreement. Imposing the rule's
requirements on the NGEP in this context might discourage cooperation
between NGEPs and the agencies and impede the ability of the agencies
to obtain useful information regarding the banking and credit needs of
communities.
b. Knowledge of CRA Communications. To define when a NGEP has had a
CRA communication with an insured depository institution for purposes
of the exemption provided in section 48(e)(1)(B)(iii), it is essential
to know when a communication is "with the [insured depository]
institution'' and when it is by a NGEP. In other words, it is essential
to know who speaks for the institution and for the NGEP. The statute is
silent on this point.
A number of commenters suggested that the rule apply only to CRA
communications that occur with designated officers of the insured
depository institution or affiliate, such as the CRA compliance officer
or persons that negotiate covered agreements. In circumstances where
the individuals involved in or responsible for negotiating agreements
do not know that a CRA communication has occurred, commenters claimed
that it would be difficult, if not impossible, for institutions and
NGEPs to know whether they properly claimed the exemption or were, in
fact, in violation of the CRA Sunshine provisions.
For example, casual conversations between a bank teller and a
customer who is also an employee of a business consulting firm might
involve CRA activities of the bank and meet a broad reading of the
proposed definition of CRA contact. Commenters were concerned that, if
so, the contact could cause a written agreement between the institution
and business consulting firm
[[Page 2059]]
to be a covered agreement even though the conversation had no influence
over the agreement because officials of the institution and of the NGEP
responsible for negotiating the agreement were not aware of the
conversation.
To address this, a number of commenters urged the agencies to
include a requirement that officers of the institution and of the NGEP
responsible for negotiating agreements have knowledge of the CRA
communication. Others suggested that contacts include only
communications with executive officers and the CRA compliance officer
of insured institutions and with senior officers of NGEPs.
As noted above, the CRA Sunshine provisions do not indicate who a
NGEP must contact at an insured depository institution or affiliate in
order to have been considered to have made a CRA contact for purposes
of the exemption in section 48(e). The statute is also silent on who
speaks for a NGEP that is an organization or company, rather than an
individual.
The agencies believe that a CRA communication can only have an
effect on an institution's willingness to enter into an agreement or on
the terms of an agreement if the communication is with or is known to
individuals at the organization who are either involved in negotiating
the agreement or have authority or responsibility for such agreements.
These are the individuals that speak for the institution and represent
the institution in its decision making. Moreover, these are the
individuals that are the most likely to have communications regarding
the CRA that could lead to or affect the types of agreements that the
CRA Sunshine provisions are intended to cover.
There is no evidence in the terms of the CRA Sunshine provisions or
in the legislative history for those provisions that Congress intended
to deny the exemption based on CRA contacts that are not known to the
individuals that are involved with or have the authority to influence
the negotiation of CRA agreements. In fact, the example referred to in
the legislative history of the type of organization the exemption was
designed to protect is a large youth organization with national
membership.\11\ Given the size, scope and nature of the organization,
it is impossible to believe that members of that organization have
not--at some time and in some capacity--had contacts with insured
depository institutions regarding the CRA. Without a requirement in the
rule that attributes CRA communications only to members of the
organization that have authority or responsibility for negotiating
agreements on behalf of that organization, this organization identified
in the legislative history would not be able to claim the exemption.
---------------------------------------------------------------------------
\11\ See H.R. Conf. Rep. No. 106-434 at 179 (1999); 145 Cong.
Rec. S13887 (daily ed. Nov. 4, 1999).
---------------------------------------------------------------------------
Moreover, there would be significant burden imposed on both banking
organizations and NGEPs if organizations and NGEPs are not entitled to
rely on the exemption in section 48(e)(1)(B)(iii) because of a CRA
communication between any employee at the organization with any member
of a NGEP. To assure that no unauthorized contacts occur and that
agreements are properly exempt under section 48(e)(1)(B)(iii), a
banking organization and NGEP would be required to monitor all contacts
by all employees and members of the organization and NGEP. Even in
organizations of only moderate size, this could entail tracking
contacts by thousands of employees at a single banking organization.
The burden from this monitoring effort is likely to be overwhelming
with few benefits because few if any CRA communications that result in
CRA agreements are likely to occur among individuals at the
organization other than those individuals with authority and
responsibility for these agreements.
For these reasons, the final rule modifies the proposed rule to
require that, in order to be a CRA communication that disqualifies a
NGEP from the exemption in section 48(e)(1)(B)(iii), specified
individuals at the institution or affiliate and at the NGEP must have
knowledge of the communication.
Under the final rule, an insured depository institution or
affiliate is considered to have knowledge of a CRA communication with a
NGEP if any of the following representatives of the institution or
affiliate have knowledge of the contact with the NGEP:
An employee who approves, directs, authorizes or
negotiates the agreement with the NGEP;
An employee who is designated with responsibility for
compliance with the CRA and who knows that the institution or any
affiliate of the institution is negotiating, intends to negotiate, or
has been informed by the NGEP that it expects to request that the
institution or affiliate negotiate an agreement with the NGEP; or
An executive officer of the institution or affiliate and
who knows that the institution or any affiliate of the institution is
negotiating, intends to negotiate, or has been informed by the NGEP
that it expects to request that the institution or affiliate negotiate
an agreement with the NGEP.
In addition to contacts between an institution or affiliate and a
NGEP, there are several types of CRA contacts that arise in the agency
review process or the CRA examination process or that involve records
that the institution is responsible for maintaining. These contacts are
of such importance that the institution is deemed by the final rule to
have knowledge of the communication. In particular, an institution or
affiliate is deemed under the final rule to have knowledge of any
testimony provided to a Federal banking agency at a public meeting or
hearing and of any written comment submitted to the insured depository
institution that must be and has been included in the institution's CRA
public file. An institution or affiliate is also considered under the
final rule to have knowledge of any comment (written or oral) that has
been made by a NGEP to a Federal banking agency if the comment is
conveyed in writing by the agency to the insured depository institution
or affiliate.
The rule establishes a parallel knowledge requirement for a NGEP. A
NGEP is considered to have knowledge of a CRA communication if any of
the following have knowledge of the contact:
A director, employee or member of the NGEP who approves,
directs, authorizes or negotiates the agreement with the insured
depository institution of affiliate;
A person who functions as an executive officer of the NGEP
and who knows that the NGEP is negotiating or intends to negotiate an
agreement with the insured depository institution or affiliate; or
Where the NGEP is an individual, the individual.
For purposes of this requirement, an executive officer of an
institution, affiliate or NGEP is defined as provided in Regulation O
to include any person that participates or has authority to participate
in the major policymaking functions of the institution, affiliate or
NGEP, regardless of the person's title (see 12 CFR 215.2(e)). In
addition, persons who serve as counsel to or agent for an insured
depository institution or NGEP are considered to be acting for the
insured depository institution or NGEP for purposes of receiving
written comments or testimony from an agency.
Under the final rule, the designated individuals are not required
personally to have had the CRA communication. Instead, a CRA
communication is
[[Page 2060]]
covered if the communication involved or is known to one of the
designated individuals. The individuals identified in the rule at the
insured depository institution or affiliate and at the NGEP are the
individuals who either are involved in or are responsible for CRA
agreements. A CRA communication with an employee of an insured
depository institution, affiliate or NGEP that is not known to the
individuals that negotiate an agreement or to a person with authority
to intervene in the negotiation of an agreement is unlikely to
influence the agreement in any way. The knowledge requirement also
significantly reduces the burden on insured depository institutions,
affiliates and NGEPs to monitor contacts of employees or members that
play no role or have no influence in the negotiations or decisions
regarding agreements.
c. Timing of CRA Communications. A majority of commenters argued
that the final rules should require a temporal relationship between the
CRA communication and the agreement. These commenters contended that a
communication that occurs long before or anytime after an agreement has
been entered into does not influence the terms of an agreement or
encourage an institution to enter into an agreement. Consequently,
commenters argued that taking account of CRA communications that are
distant in time from the date of an agreement would be contrary to the
purpose of the exemption granted in section 48(e)(1)(B)(iii), which
they argued was to exempt any agreement with an NGEP that has not
attempted to use the CRA to negotiate the agreement. These commenters
argued that only CRA communications that occur during some period prior
to the date of the agreement be considered to be CRA contacts.
Commenters suggested periods that varied from 30 days to 2 years prior
to the agreement, with some arguing that only contacts that occur
during the public comment period for an agency's review of a
transaction or a CRA examination be considered.
Many commenters also contended that failure to adopt a temporal
connection between a CRA communication and a covered agreement would
forever disqualify a NGEP for the exemption based on one CRA
communication, regardless of when it occurred, its influence on a
written agreement or how circumstances may have changed. They argued
that this would significantly chill free speech and the right to
provide comments to a Federal agency.
On the other hand, several commenters argued that section
48(e)(1)(B)(iii) by its terms does not provide any limitation on the
timing of a CRA communication, and that the exemption is available only
to a NGEP that has not had a CRA communication with an agency or
insured depository institution at any time. These commenters believed
that the agencies have no authority to adopt a temporal requirement.
The agencies have taken particular care in considering the views
presented by commenters on this matter. A purpose of the CRA Sunshine
provisions is to provide public disclosure of agreements that are in
fulfillment of the CRA in order to allow the public and Congress to
monitor how resources paid under these agreements are used.\12\ The
exemption in section 48(e)(1)(B)(iii) was included in order to provide
relief from the reporting and disclosure provisions for agreements with
NGEPs that have not had a discussion concerning the CRA. Thus, the
agencies believe that the purposes of the exemption and of the CRA
Sunshine provisions generally assume a connection between the CRA
communication and the covered agreement.
---------------------------------------------------------------------------
\12\ See, e.g., 145 Cong. Rec. S13877-78 (daily ed. Nov. 4,
1999).
---------------------------------------------------------------------------
As a practical matter, in the case of agreements that are intended
to be covered by the CRA Sunshine provisions, CRA communications
normally occur during the period in which the agreement is discussed or
negotiated, which is a relatively short period immediately before the
agreement is reached. Indeed, it is during this negotiating period that
communications regarding the CRA have the most effect on whether a CRA
agreement will be reached and on what will be the purpose and the terms
of the agreement.
This view was supported by commenters representing insured
depository institutions as well as commenters representing NGEPs, most
of whom indicated that CRA communications occurred regularly during the
negotiation period for CRA agreements. This view is also consistent
with one of the purposes of the CRA Sunshine provisions, which was to
allow monitoring of agreements that result from contacts concerning the
CRA.
The exemption provided in section 48(e)(1)(B)(iii) would, over
time, become meaningless if the exemption is lost because of statements
concerning the CRA that are made long before or after an agreement has
been reached. Without a temporal relationship, all persons that
potentially may have agreements with insured depository institutions or
their affiliates regarding activities that receive favorable
consideration under the CRA would likely feel compelled to maintain
records that allow them to determine whether a CRA contact had ever
been made by any person in the organization in order to ensure that the
NGEP is in compliance with the exemption and the CRA Sunshine
provisions. This would represent a significant recordkeeping burden on
persons, including businesses, community organizations and individuals,
that the exemption was intended to benefit. For many of these
organizations, this would mean tracking and reviewing contacts from
numerous employees or members on a continuous and long-term basis.
This heavy burden is inconsistent with the purpose of the
exemption. It is also inconsistent with the directive in the CRA
Sunshine provision that the agencies prescribe regulations designed to
ensure and monitor compliance with the CRA Sunshine provisions without
imposing an undue burden on the parties.
The agencies believe that recognizing a temporal relationship is an
effective and objective method for identifying CRA communications that
are most likely to have influenced the shape or the existence of an
agreement. Conversely, by not covering communications made at a time
that is distant from or after the agreement, the final rule
substantially reduces the potential that communications that are
unrelated to an agreement will be covered without excluding
communications that have the most direct effect on the agreement.
Moreover, a temporal relationship focuses on the fact that in nearly
all, if not all, cases CRA communications are made during the period in
which the potential for an agreement is discussed and the agreement is
negotiated. Thus, a temporal relationship supports the purpose of the
CRA Sunshine provisions, including the exemption in section
48(e)(1)(B)(iii), of identifying and exempting NGEPs that have not made
CRA communications in an effort to obtain or negotiate a CRA agreement.
For these reasons, the final rule provides a time frame designed to
recognize the connection between the communication and the agreement.
To be deemed not to have had a CRA communication under section
48(e)(1)(B)(iii), a NGEP must not have had a CRA communication within 3
years prior to entering into the agreement in the case of oral or
written communications with a Federal banking agency. The NGEP also
must not have
[[Page 2061]]
had within the 3 years prior to the agreement any written CRA
communication with the relevant insured depository institution or any
of its affiliates. In addition, the NGEP must not have had within the 3
years prior to the agreement any oral communication with the relevant
insured depository institution or any of its affiliates about providing
(or refraining from providing) comments or testimony to a Federal
banking agency or comments to the institution's CRA public file where
such communications occur in connection with a request to, or agreement
by, the institution or affiliate to take any action that is in
fulfillment of the CRA. Finally, the NGEP must not have had any other
oral CRA communication with the relevant insured depository institution
or any of its affiliates concerning the adequacy of the institution's
CRA performance within one year prior to entering into the agreement.
The agencies selected the three year period for communications with
an agency, certain types of discussions with an institution or
affiliate about providing testimony or comments to an agency, and other
written contacts with an institution or affiliate based on several
considerations. In this regard, existing regulations generally require
an insured depository institution to maintain written comments in its
CRA public file for a period of three years.\13\ The agencies'
examination schedules also generally call for the agencies to evaluate
the CRA performance of large insured depository institutions every 3
years. Regulations issued by the Office of Management and Budget and
applicable to Federal agencies also discourage any collection of
information that would require regulated entities to retain records for
more than three years.\14\
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\13\ See 12 CFR 25.43(a)(1) (OCC); 12 CFR 228.43(a)(1) (Board);
12 CFR 345.43(a)(1) (FDIC); and 12 CFR 563e.43(a)(1)(OTS).
\14\ See 5 CFR 1320.5(d)(2)(iv).
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The agencies selected the one year period for oral communications
with an insured depository or affiliate (other than those relating to
agency comments or testimony under the circumstances described above)
based on several other considerations. One consideration was that many
commenters suggested a time period in the one year range. Also, a
shorter time period for oral communications with an insured depository
institution or affiliate recognizes that, as a practical matter, oral
communications are harder to monitor and remember than written
communications. The agencies believe, however, that insured depository
institutions and affiliates are more likely to document and remember
oral communications with a NGEP that concern providing comments or
testimony to a Federal banking agency where such communications also
involve a request to, or agreement by, the institution or affiliate to
take additional actions in fulfillment of the CRA. Accordingly, the
agencies have included such oral communications in the three year
period described above.
The agencies believe these time frames provide reasonable assurance
that the communication and the agreement are not connected and would
not impose an undue burden on the parties. Moreover, commenters
indicated that where a CRA communication occurs it is most often occurs
immediately before the parties enter into an agreement. This contact
period is well within the time periods adopted by the rule.
d. Additional Exemptions. A number of commenters requested that the
Board exercise the authority granted by the CRA Sunshine provisions to
provide exemptions for certain types of agreements that may involve a
CRA communication.\15\ In particular, commenters requested exemptions
for law firms and consulting firms, trade associations, owners of real
estate that enter into sale or lease agreements with banks, community
development financial institutions (CDFIs), and participants in the
secondary loan market such as government-sponsored enterprises.
---------------------------------------------------------------------------
\15\ See 12 U.S.C. 48(h)(3)(B).
---------------------------------------------------------------------------
The agencies believe that many of the concerns raised by these
commenters are addressed by modifications made to the fulfillment, CRA
communication and other sections of the rule. In addition, a wide range
of agreements between insured depository institutions and affiliates
and law firms will not be covered under the final rule because the
definition of "nongovernmental entity or person'' in the final rule
excludes any person or entity that is acting as a representative of an
insured depository institution or affiliate. (See section ____.11.)
Accordingly, many agreements between law firms and insured depository
institutions and affiliates would not be considered covered agreements
because the agreement provides that the law firm will be acting as a
representative of the institution or affiliate.
In order for agreements to be covered agreements, the NGEP must
have had a CRA communication with an insured depository institution or
affiliate that is a party to the agreement or an affiliate of a party
to the agreement and the agreement must be made pursuant to, or in
connection with, the fulfillment of the CRA, as described below. The
agencies believe that most traditional consulting agreements that
insured depository institutions and affiliates enter into will not meet
both of these requirements.
CDFIs that are insured depository institutions or affiliates of
insured depository institutions are not covered by the CRA Sunshine
provisions to the extent that they have agreements with other insured
depository institutions or affiliates. CDFIs that are not insured
depository institutions or affiliates thereof are considered NGEPs
under the rule (see section ____.11.), and there appears to be no
reason to provide a special exemption for this class of NGEPs. In light
of the other changes and clarifications incorporated in the final rule,
the Board also has not adopted any additional exceptions. The Board
retains the authority to grant exemptions from the CRA communication
provisions if experience in administering these provisions demonstrate
that such action is appropriate.
4. Fulfillment of the CRA for Purposes of the CRA Sunshine Provisions
The CRA Sunshine requirements of section 48 of the FDI Act apply
only to covered agreements. To be a covered agreement, section 48(e)(1)
requires that the agreement be made pursuant to, or in connection with,
"the fulfillment of the Community Reinvestment Act.'' Section 48(e)(2)
defines "fulfillment'' for this purpose as "a list of factors that
the appropriate Federal banking agency determines have a material
impact on the agency's decision'' to approve or disapprove an
application for a deposit facility under section 803 of the CRA or to
assign a rating to an insured depository institution under section 807
of the CRA.
In defining fulfillment for purposes of the CRA Sunshine
provisions, the agencies proposed the lending, investment, and service
activities enumerated in the agencies' CRA Regulations as the list of
factors that have a material impact on the relevant agency
decisions.\16\ This list of factors is:
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\16\ 12 CFR 25.21-25.29 (OCC); 12 CFR 228.21-228.29 (Board); 12
CFR 345.21-345.29 (FDIC); 12 CFR 563e.21-563e.29 (OTS).
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(1) Home purchase, home improvement, small business, small farm,
community development, and consumer lending as described in the lending
test portion of the CRA
[[Page 2062]]
Regulations, including loan purchases, loan commitments and letters of
credit;
(2) Making investments, deposits, or grants, or acquiring
membership shares that have as their primary purpose community
development, as described in the investment test portion of the CRA
regulations;
(3) Delivering retail banking services, as described in the service
test portion of the CRA Regulations;
(4) Providing community development services as described in the
service test portion of the CRA Regulations;
(5) For a wholesale or limited-purpose insured depository
institution, community development lending, qualified investments, and
community development services, as described in the community
development test portion of the CRA Regulations for wholesale or
limited-purpose insured depository institutions;
(6) For a small insured depository institution, the lending and
other activities described in the small insured depository institution
performance standard of the CRA Regulations; and
(7) For an insured depository institution whose CRA performance is
evaluated on the basis of a strategic plan, any element of that plan as
described in the strategic plan portion of the CRA Regulations.
The proposed rule also provided that an agreement was in
fulfillment of the CRA if it called for any NGEP to provide or refrain
from providing written or oral comments or testimony to any Federal
banking agency concerning the performance under the CRA of an insured
depository institution or CRA affiliate that is a party to the
agreement or an affiliate of a party to the agreement, or written
comments that are required to be included in the CRA public file of any
such insured depository institution.\17\
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\17\ The CRA Regulations generally require the agencies to
consider public comments and comments included in an institution's
CRA public file when evaluating an institution's CRA performance. In
addition, the CRA Regulations require the agencies to consider
written or oral comments submitted to the agency when acting on
applications for a deposit facility.
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Some commenters suggested that this list of factors was too broad
and covered normal business arrangements that were not intended to be
covered by the CRA Sunshine provisions. In particular, commenters
suggested that, by referring to a list of factors that includes all
home mortgage loans wherever and to whomever made, the proposal could
cover activities for which no CRA performance credit would ordinarily
be granted to the lending institution.
A number of commenters also argued that the agencies should only
consider an activity to be in fulfillment of CRA if the activity is
itself "material'' to the CRA performance rating of an insured
depository institution or to an evaluation of its CRA performance in an
application for a deposit facility. These commenters suggested, among
other options, that an agreement be considered to be in fulfillment of
CRA only if it involved loans in more than one of the assessment areas
served by the insured depository institution, loans of significant
amounts based on the size of the institution, or activities that would
change the CRA rating of the institution.
The CRA Sunshine statute specifically defines "fulfillment'' to
mean "a list of factors that the appropriate Federal banking agency
determines have a material impact on the agency's decision'' to act on
an application for a deposit facility or assign a CRA rating. Under the
terms of the statute, the agency must identify factors that have a
material impact. The statute determines the threshold of amounts of
resources that are sufficient to trigger the CRA Sunshine requirements.
For this reason, the agencies did not adopt the suggestion of
commenters that the agencies modify the list of factors to include a
measure of the size of an activity.
The agencies recognize, on the other hand, that the list of factors
in the original proposal was very broad and could be read to cover
activities that do not implicate the purposes of the CRA Sunshine
provisions. To address this, the final rule has been amended to provide
that performance of a listed activity, other than providing or
refraining from providing CRA-related comments to an agency or
providing comments that must be included in the institution's CRA
public file, is considered to be in fulfillment of the CRA for purposes
of the CRA Sunshine provisions only if the activity is of the type that
is likely to receive favorable consideration by a Federal banking
agency in evaluating the performance under the CRA of the insured
depository institution that is a party or an affiliate of a party to
the agreement.
This is intended as a general test that does not turn on whether or
not the activity in fact receives credit at the next CRA performance
examination or is considered as part of a review of CRA performance in
a future application for a deposit facility. Instead, an insured
depository institution or NGEP can make this judgment on the basis of
general experience with the CRA performance review process for the
particular type of insured depository institution. An insured
depository institution is likely to receive favorable consideration for
an activity if the activity (1) received favorable consideration at the
institution's previous CRA performance examination, (2) would address a
deficiency that an agency cited in the most recent public evaluation of
the CRA performance of the institution, or (3) is of the type that is
favorably considered by the agencies in reviewing the CRA performance
of comparable insured depository institutions. For example, under item
(3), an activity conducted by a small, wholesale or limited-purpose
insured depository institution (as defined in the CRA Regulations)
would likely receive favorable consideration if the agencies favorably
consider such an activity when reviewing the CRA performance of other
small, wholesale or limited-purpose institutions, respectively.
Home mortgage lending in low- and moderate-income neighborhoods in
an insured depository institution's assessment area typically is
considered favorably. On the other hand, home mortgage lending in
middle- and upper-income neighborhoods, while taken into account in
determining the size and scope of an institution's lending activities
under the CRA Regulations, generally does not receive favorable
consideration. However, the context in which the insured depository
institution operates may dictate otherwise. For example, this would be
the case if the institution operates only in middle- and upper-income
areas or makes loans only in high cost areas.
In focusing on activities that are likely to receive favorable
consideration, the agencies recognize that there is a difference
between the purpose of the CRA Regulations, which must broadly take
account of the context in which an insured depository institution
operates, and the purpose of the CRA Sunshine provisions. The agencies
do not intend the list of factors under the CRA Sunshine provisions in
any way to indicate any change in the information that the agencies
review under the CRA Regulations or to affect in any way the manner in
which examinations are conducted or CRA performance ratings given.
Accordingly, section ____.4 specifically provides that the term
"fulfillment of the CRA'' is only defined for purposes of the CRA
Sunshine regulation. In addition, as discussed above, section ____.1(c)
provides that the final rule does not affect in any way the CRA, the
CRA Regulations or any agency's interpretations or
[[Page 2063]]
administration of the CRA or CRA Regulations.
As noted above, the final rule also provides that the list of
factors representing fulfillment of the CRA for purposes of the CRA
Sunshine provisions includes providing or refraining from providing
oral or written comments or testimony to an agency concerning the
performance under the CRA of an insured depository institution that is
a party to an agreement or that is an affiliate of a party to an
agreement. Providing or refraining from providing written comments
concerning the performance under the CRA of an insured depository
institution that is a party to an agreement or that is an affiliate of
a party to an agreement where the comments must be included in the
institution's CRA public file also is always a factor that represents
fulfillment of the CRA. Providing oral or written comments or testimony
to an agency concerning the adequacy of an institution's CRA
performance or providing written comments that must be included in the
institution's CRA public file are activities that are always considered
to be in fulfillment of the CRA under the final rule, without regard to
whether the communication comments favorably or unfavorably on the CRA
performance of the institution.
The terms of a written agreement generally determine whether the
contract, arrangement or understanding is in fulfillment of the CRA.
However, the parties to a written agreement may not avoid coverage
under the Act by reaching an oral understanding, such as, for example,
an understanding that a party will submit (or refrain from submitting)
oral or written CRA-related comments or testimony to an agency or
written comments to an insured depository institution that would have
to be included in the institution's CRA public file, and excluding this
understanding from the terms of the written agreement.
Commenters generally supported the original proposal to exclude
from the list of factors activities designed to ensure compliance with
the Federal laws that prohibit discriminatory or other illegal credit
practices, such as the Equal Credit Opportunity Act (15 U.S.C. 1691 et
seq.) and the Fair Housing Act (42 U.S.C. 3601 et seq.). Commenters
generally agreed that inclusion of these activities in the list of
factors could have an unintended and detrimental impact on compliance
with and enforcement of the fair lending laws by, for example,
discouraging agreements to hire "mystery shoppers'' to test the
institution's compliance with the fair lending laws or agreements to
settle a fair lending complaint and improve fair lending performance.
Accordingly, the list of factors has not been changed to include these
or other activities.
5. Value
An agreement is subject to the CRA Sunshine provisions only if it
calls for an insured depository institution or affiliate to provide to
one or more persons cash payments, grants, or other consideration of
more than $10,000 in any calendar year, or to make loans that have an
aggregate principal amount of more than $50,000 in any calendar year.
The statutory threshold is based on the total value of payments and
loans provided for under the agreement and does not require that these
payments or loans actually be made to a party to the agreement.\18\
---------------------------------------------------------------------------
\18\ See 12 U.S.C. 1831y(e)(1)(A)(i).
---------------------------------------------------------------------------
The final rule follows the proposed rule in providing that all cash
payments, grants, consideration or loans provided by an insured
depository institution or affiliate under the agreement, including
amounts provided to individuals or entities that are not parties to the
agreement, will be considered in determining whether an agreement meets
the rule's dollar thresholds. However, the rule provides that if an
agreement includes a loan, extension of credit or loan commitment that,
if done separately, would be exempt from coverage and also provides for
the institution or affiliate to provide other funds or resources, the
parties may exclude the exempt loan, extension of credit or loan
commitment when determining if the agreement meets the dollar
thresholds of the rule. (See section ____.2(e)(2) of the rule and the
discussion under section III.A.2.b. above concerning qualifying loans).
Under the final rule, an agreement that provides for payments to be
made in any calendar year in excess of the dollar thresholds
established by the statute is a covered agreement for its entire term.
The agencies believe that using a calendar year period for these
calculations should facilitate compliance with the rule by providing
all parties to a covered agreement a uniform basis for determining
whether the agreement is covered by the rule and because the terms of
an agreement may not coincide with the parties' fiscal years.
The final rule provides that the annual value of an agreement that
does not have a fixed schedule of payments is considered to be the
entire value of the agreement. (See section ____.2(e)(1).) Commenters
were mixed in their view of how to determine the value of a multi-year
agreement that does not specify when payments should be made. Some
commenters believed that the annual value of these agreements should be
determined by amortizing the total value over the life of the
agreement, or by reference to actual disbursements, while others
suggested that the entire value be credited to the first year of the
agreement. The final rule credits the entire value of this type of
agreement to the first year of the agreement. This approach is the
easiest to calculate and is the least likely to cause an agreement
unexpectedly to become a covered agreement.
The agencies requested comment on how to value an agreement that
does not specify the amount of payments, grants, loans or other
consideration to be provided under the agreement, such as an agreement
for an insured depository institution to open a branch or to begin
offering a new loan product. Commenters that addressed this issue
suggested allowing the parties to estimate the value of the agreement
in these cases or to assume that the agreement had no value.
In circumstances where an agreement does not specify the amount of
payments, grants, loans or other consideration to be provided under the
agreement, the agencies believe that the parties must reasonably
estimate the value of the agreement. The final rule allows insured
depository institutions that choose to report a list of covered
agreements to report the estimated value of the agreement at that time
(see section III.B.3. below).
The following are examples of the value provisions of the rule.
These examples, which are not included in the rule, illustrate only the
application of the dollar thresholds of the rule, and assume that the
agreement otherwise qualifies as a covered agreement.
Example 1: An insured depository institution enters into a
written agreement with a small business investment company pursuant
to which the institution will invest $25,000 in the company. Since
the agreement does not establish a schedule of payments, the entire
$25,000 is deemed to be provided in the first year. Accordingly, the
agreement meets the dollar threshold criterion to be a covered
agreement.
Example 2: An insured depository institution and a community
organization enter into a written agreement pursuant to which the
institution will invest $1 million in a state-sponsored investment
fund that supports affordable housing initiatives for low- and
moderate-income individuals during the next year. The community
organization will not receive any funds or other resources from the
insured depository institution or its affiliates under the
[[Page 2064]]
agreement. The agreement meets the value threshold criterion for a
covered agreement under the proposed rule because the value of the
agreement for purposes of the CRA Sunshine provisions does not
depend on who receives payments or resources under the agreement.
Example 3: An affiliate of an insured depository institution
provides a $100,000 loan to an association of small businesses
pursuant to a written agreement. The loan is on market terms and not
for purposes of re-lending. The agreement also provides for the
affiliate to make a $5,000 grant to the local chamber of commerce's
small business incubator. Because the loan is made on market terms
and not for purposes of re-lending, the loan would be an exempt
agreement under the rule if it were a separate agreement (see
section ____.2(c)(2)). Accordingly, the value of the loan may be
excluded in determining the value of the agreement. After excluding
the loan, the agreement would not meet the dollar criterion of the
rule.
Example 4: An insured depository institution and a NGEP enter
into a written agreement that requires an affiliate of the insured
depository institution to provide the organization with a grant of
$5,000 in 2001, $8,000 in 2002, and $11,000 in 2003. The agreement
exceeds the dollar threshold criterion of the rule because the
agreement provides for payments in excess of $10,000 during 2003.
Assuming the agreement meets the other requirements of the rule and
is not otherwise exempt, the agreement is a covered agreement for
its entire term.
6. Related Agreements Considered a Single Agreement
In two circumstances, section 48(e) requires that separate
agreements or contracts be aggregated for purposes of determining
whether the agreements--taken as a whole--meet the definition of a
covered agreement.\19\ The agencies received very few comments
concerning the aggregation provisions of the proposed rule. Some
commenters stated that the aggregation rules should be deleted or
should apply only when necessary to prevent circumvention of the CRA
Sunshine provisions. The agencies have retained the aggregation rules
included in the final rule because the CRA Sunshine provisions require
the aggregation of agreements in certain circumstances, and excluding
the aggregation principles from the final rule would require
institutions and NGEPs to consult both the statute and the rule to
determine compliance with those provisions.
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\19\ See 12 U.S.C.1831y(e)(1) and (2).
---------------------------------------------------------------------------
Other commenters requested clarification of certain aspects of the
aggregation rules. Those matters are addressed below.
a. Agreements entered into by the same parties. Under the final
rule, all written contracts, arrangements, or understandings that are
entered into by an insured depository institution or affiliate of an
insured depository institution will be considered to be part of a
single agreement if the contracts, arrangements, or understandings are
entered into with the same NGEP within a 12-month period and each
agreement is in fulfillment of the CRA. This aggregation rule applies
to all written agreements entered into during the 12-month period by
the same NGEP on the one hand, and any part of the same organization,
including an insured depository institution and any of its affiliates,
on the other hand. The following examples illustrate this aggregation
principle and assume that a CRA communication has occurred before each
agreement.
Example 1: In November, an insured depository institution enters
into a written agreement with Community Development Organization,
Inc. pursuant to which the institution makes an $8,000 investment in
the organization. In April of the next year, an affiliate of the
insured depository institution and Community Development
Organization, Inc. enter into a written agreement under which the
affiliate makes an additional $8,000 investment in the organization.
For purposes of this example, both investments are assumed to be
qualified investments under the CRA Regulations. The separate
agreements must be aggregated under the rule and the combined
agreement meets the $10,000 dollar threshold of the rule.
Accordingly, the agreements are jointly considered a covered
agreement.
Example 2: In September, an insured depository institution
orally agrees to donate $15,000 of computer equipment to a local
housing organization. In January of the following year, the
institution and organization enter into a written agreement for the
institution to make a $5,000 CRA qualified investment in a local
housing project that is eligible for low-income housing tax credits.
The agreements do not need to be aggregated under the rule because
the September agreement was not in writing.
Example 3: In February, an insured depository institution enters
into a written agreement with Partnership A for the institution to
make a $9,000 grant to Partnership A for the purpose of
rehabilitating affordable housing units. In August of the same year,
an affiliate of the insured depository institution enters into a
written agreement with Partnership A under which the affiliate makes
a payment of $9,000 so that its employees may have access to the
child care center operated by Partnership A. The August agreement is
not in fulfillment of the CRA. Accordingly, the two agreements would
not be aggregated under the rule.
b. Substantively Related Contracts. Section 48(e)(1)(A)(ii)
requires the aggregation of separate but "substantively related
contracts'' even where the contracts are entered into with different
NGEPs. Unlike the aggregation rule discussed above, the rule
aggregating "substantively related contracts'' applies only to
separate, written contracts and does not apply to other types of
written arrangements or understandings.
The rule defines written contracts entered into by an insured
depository institution or any of its affiliates as "substantively
related'' if the contracts were negotiated in a coordinated fashion.
The rule does not require that the separate contracts each be in
fulfillment of the CRA or that the parties to the contracts (other than
the banking organization) be the same. Thus, the rule prevents parties
from avoiding the disclosure and reporting obligations of the statute
by separating out from an agreement payments or grants that may not
themselves be in fulfillment of the CRA. The following examples
illustrate this aggregation principle and assume that a CRA
communication occurred before each contract.
Example 1: Two housing organizations jointly approach an insured
depository institution to obtain funding. A representative of the
insured depository institution meets with both organizations at the
same time to discuss their funding needs. The institution enters
into a written contract with one organization to provide it with
$9,000 for the purpose of rehabilitating affordable housing units.
The institution enters into a separate written contract with the
other organization to provide the organization with an unrestricted
grant of $9,000. Because the contracts were negotiated in a
coordinated fashion, the contracts must be aggregated under the
rule. When aggregated, the contracts would meet the statute's
$10,000 dollar threshold and each contract would be a covered
agreement.
Example 2: A bank holding company announces its intention to
acquire an insured depository institution. A Florida-based group and
a California-based group independently approach the bank holding
company to seek funding for specific projects and separately
negotiate written contracts with the bank holding company. The
contracts would not be aggregated under the rule, and each contract
would be a covered agreement only if that contract on its own met
the requirements of the rule.
7. Multiparty Agreements
The agencies requested comment on how the rule should apply in
circumstances where a covered agreement involves several parties and a
CRA communication has been made by or concerning only one of the
parties. This issue arises where several NGEPs enter into a covered
agreement with an insured depository institution and only one of the
entities or persons has made a CRA communication or where a NGEP has a
CRA communication concerning one insured depository institution and
[[Page 2065]]
subsequently enters into a covered agreement jointly with the
institution and several other unaffiliated insured depository
institutions. Several commenters indicated that the disclosure and
reporting requirements of the rule should only apply to parties to a
covered agreement that have engaged in a CRA communication.
The final rule provides that a NGEP that is a party to a covered
agreement that involves multiple NGEPs is not required to comply with
the requirements of the rule if two requirements are met. (See section
____.3(d).) First, the NGEP must not have had a CRA communication
concerning any insured depository institution or affiliate that is a
party to, or an affiliate of a party to, the agreement. Second, no
officer, employee or representative of the NGEP identified in section
____.3(b)(4) of the rule may have knowledge at the time the agreement
is entered into that another NGEP that is a party to the agreement has
had a CRA communication. Similarly, an insured depository institution
or affiliate that is a party to a covered agreement that involves
multiple insured depository institutions or affiliates is not subject
to the disclosure and reporting requirements if (1) no NGEP that is a
party to the agreement has had a CRA communication with or concerning
the institution or affiliate, and (2) no officer or employee of the
institution or affiliate identified in section ----.3(b)(3)(i) has
knowledge that the NGEP has had a CRA communication with another
insured depository institution or affiliate that is a party to the
agreement. In the context of multiparty agreements, covering parties
that have knowledge of a CRA communication by other parties to the
agreement assures that parties do not avoid the requirements of the CRA
Sunshine provisions by refraining from making a CRA communication
because the party is aware that the communication has already been made
by another party.
B. Disclosure of Covered Agreements
Section 48(a) requires that each party to a covered agreement fully
disclose the agreement in its entirety and make the full text of the
agreement available to the public and the appropriate agency with
supervisory responsibility over the relevant insured depository
institution.\21\ The disclosure requirements of section 48 apply only
to covered agreements entered into after November 12, 1999.\22\
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\21\ 12 U.S.C. 1831y(a).
\22\ The rule includes special transition provisions governing
the disclosure of covered agreements entered into after November 12,
1999, but before the effective date of the rule. See section III.D
below.
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1. Disclosure to the Public
Section ____.6 of the final rule requires that each party to a
covered agreement make a complete copy of the agreement available to
any member of the public upon request. A covered agreement must be made
available during the entire term of the agreement and the 12 month
period following expiration of the agreement, without regard to whether
funds are paid or received under the agreement during the year in which
a request for the agreement is made. A party may charge the requestor
for the costs of copying and sending an agreement, so long as the fees
are reasonable.
Commenters generally supported having maximum flexibility to make
covered agreements available to the public and to charge requestors
reasonable fees to cover the costs of making covered agreements
available.\23\ Accordingly, the final rule does not prescribe any
particular method a party must employ in making a covered agreement
available to the public. The agencies expect that parties to covered
agreements will employ methods of making agreements available that will
not require requestors to go through unreasonable efforts to obtain the
agreements. For example, a party may make a covered agreement available
to any individual or entity by mailing it to the requestor. A party
also may make an agreement available to an individual or entity with
access to the Internet by posting the agreement on a publicly
accessible website or to members of the public within a local
geographic area by making the agreement available at an office within
that area. In addition, a party may choose to publish a list of its
covered agreements and provide the full text of an agreement only to
any individual or entity that requests a particular agreement
identified in the list.
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\23\ Some commenters questioned whether a party to a covered
agreement may also charge a requestor for the cost of searching its
records for covered agreements. The final rule, like the provisions
of the CFA Regulations governing the public availability of
information in an insured depository institution's CRA public file,
does not authorize the recovery of search costs. See 12 CFR 25.43
(OCC); 12 CFR 228.43 (Board); 12 CFR 345.43 (FDIC); 12 CFR 563e.43
(OTS).
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Several commenters requested clarification concerning how a party
should comply with the statute's public disclosure requirement when a
covered agreement consists of or involves multiple documents. For
example, commenters questioned whether all of the supporting
documentation relating to a loan or grant must be disclosed. The final
rule follows the statute and requires only that the written contract,
arrangement, or understanding be disclosed and does not require the
disclosure or supporting documentation. When the covered agreement
consists of a single document, that document must be disclosed. When
the covered agreement consists of or is reflected by multiple
documents, the party may disclose all of the written documentation
relating to the agreement or only those documents that set forth the
primary terms of the agreement, including (1) the names and addresses
of the parties to the agreement; (2) the amount of any payments, fees,
loans, or other consideration to be made or provided by any party to
the agreement; (3) any description of how the funds or other resources
provided under the agreement are to be used; and (4) the term of the
agreement (if the agreement establishes a term).
Several commenters requested that the rule establish a fixed period
of time, such as 30 days, within which a party must respond to a
request for a covered agreement. The final rule follows the text of
section 48 and does not specify a time period for responding to public
requests for an agreement. The agencies expect that the parties will
promptly respond to requests from the public for covered agreements.
As with the proposed rule, the final rule gives discretion to an
insured depository institution to fulfill its public disclosure
obligation by placing a copy of a covered agreement in its CRA public
file and making it available in accordance with the procedures set
forth in the CRA Regulations relating to public files. Several
commenters recommended that affiliates of insured depository
institutions that are parties to covered agreement also be permitted to
disclose a covered agreement to the public by placing it in the CRA
public file of an affiliated insured depository institution. The final
rule allows affiliates to fulfill their disclosure obligations in this
manner so long as the affiliated insured depository institution then
makes the agreement publicly available in accordance with the rules
governing public disclosure of information in the CRA public file. When
an affiliate relies on the CRA public file of an insured depository
institution affiliate to fulfill the disclosure obligations of the
rule, it must refer members of the public that
[[Page 2066]]
request a copy of the affiliate's covered agreements to the affiliated
insured depository institution.
The proposed rule provided that the parties' obligation to make a
covered agreement publicly available terminated 12 months after the end
of the term of the agreement, and the agencies requested comment on
whether this time period should be shorter or longer. Several
commenters stated that the time period proposed was reasonable, while
others advocated a shorter time period or no time period at all after
the term of an agreement. In order to fulfill the purposes of section
48, the agencies believe that the parties to a covered agreement must
make the agreement available to the public for a reasonable period of
time. After reviewing the comments received, the final rule continues
to require covered agreements to be available to the public for a
period of 12 months after the term of the agreement.
2. Treatment of Confidential and Proprietary Information
Section 48(h)(2)(A) directs the agencies to ensure that their
implementing regulations "do not impose undue burden on the parties
[to a covered agreement] and that proprietary and confidential
information is protected.''\24\ This provision must be read in harmony
with section 48(a), which requires that a covered agreement "shall be
in its entirety fully disclosed, and the full text thereof made
available * * * to the public.''\25\ Other provisions of section 48
require the reporting of the terms and value of covered agreements, the
identity of the parties to the agreement, and the uses of funds and
resources provided under covered agreements.
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\24\ 12 U.S.C. 1831y(h)(2)(A).
\25\ 12 U.S.C. 1831y(a).
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The proposed rule provided that a party could withhold information
contained in a covered agreement from public disclosure only if the
party received a determination from the relevant supervisory agency
that such information could be withheld by the agency under the Freedom
of Information Act (5 U.S.C. 552) (FOIA). The agencies noted, moreover,
that the Act's directive that terms of covered agreements be made
available to the public could require disclosure of some types of
information that an agency might normally be able to withhold from
disclosure under the FOIA.
The agencies requested comment on a number of issues associated
with the disclosure of potentially confidential and proprietary
information in covered agreements, including the likelihood that
covered agreements would contain confidential and proprietary
information, whether FOIA standards should be applied in determining
whether information can be withheld, and whether alternative procedures
could be adopted.
Commenters indicated that covered agreements may often contain
information they ordinarily consider to be confidential or proprietary,
such as information about new and innovative programs an insured
depository institution is offering, underwriting standards for loans,
competitive pricing information, or personal data that would otherwise
be protected under applicable privacy rules. Some commenters expressed
concern that the requirement to disclose publicly covered agreements
could harm their competitive position or dissuade insured depository
institutions and their affiliates from entering into agreements with
NGEPs that are in fulfillment of the CRA.
Many commenters indicated that requesting a determination of
whether information can be withheld from disclosure from the relevant
supervisory agencies would be burdensome and time consuming. They
suggested the agencies streamline the process for obtaining such
determinations or, alternatively, provide a list of information that a
party could withhold from disclosure without obtaining an agency
determination. Many commenters expressed support for using the FOIA as
the standard for determining whether information can be withheld from
public disclosure.
In light of the comments received, the agencies have revised the
procedures for withholding information from public disclosure to
clarify the process for determining whether information can be withheld
from public disclosure and limit the circumstances in which the
relevant supervisory agency is involved in making the determination. As
discussed above, section 48 directs that certain information in covered
agreements be disclosed. Accordingly, the final rule requires the
disclosure of the following information contained in a covered
agreement:
The names and addresses of the parties to the agreement;
The amount of any payments, fees, loans, or other
consideration to be made or provided by any party to the agreement;
Any description of how the funds or other resources
provided under the agreement are to be used;
The term of the agreement (if the agreement establishes a
term); and
Any other information that the relevant supervisory agency
determines is not properly exempt from public disclosure.
The agencies anticipate making a determination that additional
information in a covered agreement must be disclosed only in response
to a specific request for such a determination. (See section
____.6(b)(4).) Any such request must be in writing and submitted to the
relevant supervisory agency in accordance with its rules concerning the
availability of information.\26\
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\26\ See, 12 CFR Part 4 (OCC); 12 CFR Part 261 (Board); 12 CFR
Part 309 (FDIC); 12 CFR Part 505 and 31 CFR Part 1 (OTS).
---------------------------------------------------------------------------
The final rule allows a party to a covered agreement to withhold
from public disclosure any information not described above if the party
believes the relevant supervisory agency could withhold that
information under The FOIA. There is no requirement that the party
obtain a determination from the relevant supervisory agency that such
information can be withheld. Standards the agencies use to determine
whether they can withhold information in their records from public
disclosure records are contained in subsection (b) of The FOIA (5
U.S.C. 552(b)).
With regard to the disclosure of information the agencies receive
under the final rule, including copies of covered agreements and annual
reports, section ____.8 provides that such information will be made
available in accordance with The FOIA and the rules regarding the
availability of information of the relevant supervisory agency.
3. Filing of Covered Agreement With Agencies
Section 48(a) also requires each party to a covered agreement to
make the agreement available to the appropriate agency. The proposed
rule required each insured depository institution or affiliate that is
a party to a covered agreement to file a complete copy of the agreement
with each relevant supervisory agency within 30 days after entering
into the agreement. NGEPs were obligated to file a covered agreement
with a relevant supervisory agency within 30 days of receiving a
request from the agency.
Some commenters requested that the agencies allow insured
depository institutions and affiliates, like NGEPs, to make a covered
agreement available to the relevant supervisory agency only upon an
agency's request. Others suggested that the rule allow insured
depository institutions and affiliates the option of filing with the
agencies either
[[Page 2067]]
copies of covered agreements or a list of their covered agreements.
Commenters also suggested that the agencies allow insured depository
institutions and affiliates to file covered agreements with the
agencies on a periodic basis, such as once each quarter or once each
year, rather than 30 days after entering into each agreement, or by
placing agreements in an institution's CRA public file.
The agencies believe that it is important for the agencies to
receive notice when parties enter into a covered agreement and to be
able to gain prompt access to the covered agreement. Such notice and
access allow the agencies to monitor compliance by the parties with the
disclosure and reporting requirements of section 48 and respond to
requests from interested members of the public for copies of, or
information related to, covered agreements. The agencies, however, have
sought to streamline the agency disclosure obligations imposed on
insured depository institutions and affiliates in a manner consistent
with these principles.
In particular, the final rule allows an insured depository
institution or affiliate to fulfill its agency disclosure obligation by
filing, within 60 days after the end of each calendar quarter, either a
complete copy of each covered agreement entered into during the
calendar quarter, or a list of all covered agreements entered into
during the calendar quarter. If the institution or affiliate elects to
file a list of agreements with the agency, the list must provide the
following information concerning each covered agreement entered into
during the relevant calendar quarter:
The name and address of each party to the agreement;
The date the agreement was entered into;
The estimated total value of all payments, fee, loans and
other considerations to be provided by the institution or any affiliate
under the agreement; and
The date the agreement terminates.
An institution or affiliate that files a list of covered agreements
with the relevant supervisory agency must provide any relevant
supervisory agency a complete copy of any covered agreement referenced
in the list within 7 calendar days of receiving a request from the
agency for the agreement. The rule allows an agency to request a copy
of an agreement referenced in a list for up to 36 months after the term
of the agreement. The final rule also continues to allow insured
depository institutions and affiliates that are parties to the same
covered agreement to file jointly the appropriate documents with each
relevant supervisory agency.
NGEPs that are parties to covered agreements must make a complete
copy of each agreement available to any relevant supervisory agency on
the agency's request. The NGEP must provide the requesting agency with
a copy of the agreement within 30 calendar days of the agency's
request. As with disclosure to the public, a NGEP's obligation to make
an agreement available to an agency terminates 12 months after the end
of the agreement's term.
Whenever an insured depository institution, affiliate or NGEP files
a copy of a covered agreement with an agency-either at the agency's
request or, in the case of an institution or affiliate, as part of a
quarterly filing-the institution, affiliate or NGEP must provide the
agency with a complete copy of the agreement. If the party proposes to
withhold information contained in the agreement, the party must also
file a public version of the agreement that excludes such information
and provide an explanation justifying the exclusions under the FOIA.
The agencies will not keep information confidential under the FOIA that
a party would be required to disclose to the public under section 48.
Accordingly, the parties may not propose to withhold, and the agencies
will not withhold under the FOIA, the types of information in a covered
agreement that a party must make publicly available under section
____.6(b)(3) of the rule.
4. Relevant Supervisory Agency
The final rule continues to use the term "relevant supervisory
agency'' to identify the appropriate agency for a particular covered
agreement. The agencies have moved the definition of this term from
section ____.6 of the rule to the general definitions section (section
____.11) because the term is used in multiple sections of the rule. The
agencies otherwise have made no substantive changes to the definition.
Under the rule, the "relevant supervisory agency'' for a covered
agreement is:
The OCC in the case where--
--The parties to the agreement include a national bank or subsidiary of
a national bank; or
A national bank or subsidiary or CRA affiliate of a
national bank provides funds or resources under the agreement;
The Board in the case where--
-- The parties to the agreement include a state member bank, subsidiary
of a state member bank, bank holding company, or subsidiary of a bank
holding company (other than an insured depository institution or
subsidiary thereof); or
--A state member bank or subsidiary or CRA affiliate of a state member
bank provides funds or resources under the agreement;
The FDIC in the case where--
-- The parties to the agreement include a state nonmember bank or
subsidiary of a state nonmember bank; or
--A state nonmember bank or subsidiary or CRA affiliate of a state
nonmember bank provides funds or resources under the agreement; or
The OTS in the case where--
-- The parties to the agreement include a savings association,
subsidiary of a savings association, savings and loan holding company
or subsidiary of a savings and loan holding company; or
--A savings association or subsidiary or CRA affiliate of a savings
association provides funds or resources under the agreement.
Under the definition, more than one agency may be the relevant
supervisory agency with respect to a single covered agreement. For
example, if a national bank, state nonmember bank, and a savings
association provide funds pursuant to a covered agreement entered into
by their parent bank holding company, the OCC, FDIC, OTS, and Board
would each be a relevant supervisory agency for the agreement.
Several commenters expressed concern that requiring filings with
multiple agencies under these circumstances could increase the burden
of complying with the statute. Some commenters asserted that the rule
should allow all filings to be made with one regulatory body, such as
the Federal Financial Institutions Examinations Council, and asserted
that such a procedure would reduce burden or help ensure the consistent
review of confidential and proprietary information that may be
contained in a covered agreement.
Section 48 directs that the "appropriate Federal banking agency''
receive agreements and annual reports under the statute. The agencies
continue to believe that the rule properly identifies the appropriate
Federal banking agency for a covered agreement by ensuring that a
covered agreement and its related annual reports are filed with the
agency or agencies that have supervisory authority over the insured
depository institution or affiliate that is involved with the
agreement, either as a party or as a source of funds or resources paid
under the agreement.
[[Page 2068]]
C. Annual Reports
The Act requires each NGEP, insured depository institution, or
affiliate of an insured depository institution that is a party to a
covered agreement to file a report at least annually concerning
disbursement, receipt and use of funds under the covered agreement.
Section ____.7 of the final rule implements these annual reporting
requirements. The rule's annual reporting obligations apply only to
covered agreements entered into on or after May 12, 2000.\27\
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\27\ The rule includes special transition provisions governing
the filing of annual reports that relate to the fiscal year of any
party to a covered agreement that ends prior to January 1, 2001. See
section III.D below.
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The proposed rule required each party to a covered agreement to
file an annual report for the fiscal year that the agreement was
entered into and each subsequent fiscal year during the term of the
agreement. The proposal also provided that a NGEP did not have to file
an annual report for any fiscal year during the term of a covered
agreement if the NGEP did not receive any funds under the covered
agreement in that year.
Commenters generally supported the reporting exception provided to
NGEPs. Several commenters requested that the agencies also provide
insured depository institutions and affiliates a similar exception from
the annual reporting requirement for years in which an institution or
affiliate does not make or receive payments, fees, or loans under a
covered agreement.
Section 48 requires a NGEP that is a party to a covered agreement
to file a report at least once a year providing "an accounting of the
use of funds received pursuant to'' the covered agreement during the
preceding 12-month period.\28\ The Act requires an insured depository
institution or affiliate that is a party to a covered agreement to file
an annual report concerning funds or other resources provided or
received by the institution or affiliate under the agreement and any
loans, investments, or services provided by any party under the
agreement during the preceding 12-month period.\29\
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\28\ See U.S.C. 1831y(c)(1).
\29\ See U.S.C. 1831y(b).
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In light of these requirements and the comments received, the final
rule provides that a NGEP must file an annual report for each fiscal
year in which the NGEP receives or uses funds or other resources under
a covered agreement. Because the statute focuses on both the receipt
and use of funds by a NGEP under a covered agreement, the agencies have
modified the rule to require a NGEP to file an annual report for any
fiscal year in which the NGEP uses funds received under a covered
agreement, even if the funds were not received in that year. An insured
depository institution or affiliate must file an annual report for a
fiscal year if the institution or affiliate made or received any
payments, fees, or loans under a covered agreement during the fiscal
year, or has data that must be reported on loans, investments, and
services provided by any party to the agreement during the fiscal year.
These requirements ensure that a party files an annual report for
each year that the party has information that must be provided to the
relevant supervisory agency, and that an annual report is not filed for
any fiscal year where the relevant party has no information that must
be reported. The agencies note that a NGEP must file an annual report
for a fiscal year if it received or used any funds or other resources
under the covered agreement during the fiscal year, even if the amount
of funds or resources received or used are less than the value
thresholds discussed above for defining a covered agreement. Any annual
report must be filed with each relevant supervisory agency for the
covered agreement.
The following examples illustrate these reporting requirements:
Example 1: A savings association and a community development
organization enter into a 3-year covered agreement pursuant to which
the association will invest $100,000 in the organization. The
savings association in fact provides $95,000 to the organization in
the first year of the agreement and the remaining $5,000 to the
organization in the second year of the agreement, and the
organization uses the funds in the fiscal years that they are
received. The organization must file an annual report with the OTS
for each of the first two fiscal years of the agreement because the
organization received and used funds under the agreement in those
years. The savings association also must file an annual report for
each of the first fiscal two years of the agreement since it made
payments in those years. Because the organization does not receive
or use funds under the covered agreement during the third year of
the agreement, the organization and savings association would not be
required to file an annual report with the OTS for that year.
Example 2: A state nonmember bank enters into a covered
agreement with a community organization to make $1 million in
community development grants in the community over the next 5 years.
The community organization will not receive any funds or other
resources under the agreement (including under the grants as they
are made), nor will it provide any services under the agreement.
Both parties must make the covered agreement available to the public
and the FDIC. In addition, the state nonmember bank must file an
annual report for any year in which it makes payments concerning
grants made and actions taken under the agreement. The community
organization is not required, however, to file any annual reports
concerning the agreement because the organization receives and uses
no funds or resources under the agreement.
1. Annual Reports Filed by NGEPs
Section 48(c) requires each NGEP that is a party to a covered
agreement to file a report at least annually with the appropriate
banking agency providing an accounting of how the NGEP used any funds
received under the covered agreement during the previous year. The
proposed rule required the annual report filed by a NGEP to set forth
(1) the name and mailing address of the NGEP, (2) information
sufficient to identify the covered agreement for which the report is
filed, such as by providing the names of the parties to the agreement
and the date it was entered into or by providing a copy of the
agreement, and (3) the amount of funds received by the NGEP under the
covered agreement during the fiscal year. The final rule retains these
information requirements.
a. Itemized List of Uses of Funds. Section 48(c) requires that the
annual report of a NGEP provide a detailed, itemized accounting of how
the NGEP used during the previous year any funds or resources received
under the covered agreement. The proposed rule required the accounting
to be provided in one of two ways--either a description of the specific
purpose or purposes for which the funds were used, or an itemized list
of the amount of general purpose funds used for pre-defined expense
categories. The proposed rule required a NGEP to use the specific
purpose reporting method for any funds or other resources that the NGEP
received and allocated for a specific purpose. Under the specific
purpose reporting method, the NGEP would provide in its annual report a
description of each specific purpose for which the funds or resources
were used during the fiscal year; and the amount of funds or resources
used for each specific purpose during the fiscal year.
For funds or other resources that were used for general or
unspecified purposes, the proposed rule required the NGEP to report the
amount of funds used during the fiscal year for each category of
expenses included in the detailed, itemized list set forth in section
48(c)(3). These categories required the NGEP to report the aggregate
amount of funds used during the fiscal year for compensation of
officers, directors, and employees; administrative expenses; travel
expenses; entertainment expenses;
[[Page 2069]]
payment of consulting and professional fees; and other expenses and
uses.
Commenters generally supported the itemized list and recommended
that the agencies not use their statutory authority to expand the list
of expense categories included in section 48(c)(3). The comments
received concerning the proposed specific purpose reporting method were
mixed. Some commenters supported the streamlined reporting procedures
for specific purpose funds because they believed it would require the
reporting of less information than the itemized list of expenses. Some
commenters that supported this reporting method requested that the
agencies provide NGEPs with the option of using the specific purpose
reporting method or the detailed itemized list to report the use of
specific purpose funds.
Several commenters opposed the specific purpose reporting method on
the basis that section 48(c) does not provide for this type of
reporting. In addition, some commenters expressed concern that the
proposed rule's definition of specific purpose funds was too broad or
unclear or requested additional guidance on when a NGEP receives and
uses funds or other resources for a specific purpose.
Section 48(c)(1) requires a NGEP to provide annually "an
accounting of the use of funds received pursuant to each [covered]
agreement during the preceding 12-month period.'' \30\ Section 48(c)(3)
provides that this annual accounting "shall include a detailed,
itemized list of the uses to which such funds have been made, including
compensation, administrative expenses, travel, entertainment,
consulting and professional fees paid, and such other categories, as
determined by regulation by the appropriate Federal banking agency.''
\31\ The final rule implements these requirements by providing that the
annual report of an NGEP must provide a detailed, itemized list of how
any funds or other resources received by the NGEP at any time under the
covered agreement were used during the fiscal year using the categories
of expenses included in section 48. Unlike the proposal, the list must
disclose how the NGEP during the fiscal year used any funds or
resources received under the covered agreement, including funds or
resources that were received in a previous fiscal year but that were
not used in that fiscal year. The agencies have modified the rule in
this way to more closely track the provisions of section 48.
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\30\ 12 U.S.C. 1831y(c)(1).
\31\ 12 U.S.C. 1831y(c)(3).
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Under section 48 and the rule, the itemized list of expenses must
include, at a minimum, the amount of funds used during the fiscal year
for--
Compensation of officers, directors, and employees;
Administrative expenses;
Travel expenses;
Entertainment expenses;
Payment of consulting and professional fees; and
Other expenses and uses (specify expense or use).
The annual report may reflect the total amount of funds from all
sources that the NGEP used during the fiscal year for the types of
expenses listed above. The agencies may determine from this and other
information included in the annual report the proportion of funds that
the NGEP received under the covered agreement that were used for each
category of expenses listed above. If a NGEP uses funds under a covered
agreement for certain categories of expenses, such as "travel
expenses,'' the annual report need only reflect the amount used for
that category.
The agencies also believe that it is appropriate and consistent
with the statute to allow a NGEP, where possible, to provide a more
detailed accounting of how it used funds received under a covered
agreement. A more detailed accounting can be provided when a NGEP
allocates and uses funds received under a covered agreement for a
specific purpose that is more limited than the categories of expenses
listed above, i.e., it is for a specific expense in one of the
categories listed above.
A specific purpose would not include a general statement that funds
were received, for example, for services rendered or to fund a general
program or to fund a project that involved spending in multiple
categories from the more detailed list. Instead, as explained below,
the final rule clarifies that this reporting option is available only
if the NGEP allocated and used the funds received under the agreement
for a purpose that is at least as specific and limited as a category of
expenses in the itemized list, such as to purchase a computer or to
fund a specific trip.
Accordingly, the final rule allows a NGEP that allocates and uses
funds received under a covered agreement for a specific purpose to
report how it used such funds by using the detailed, itemized list, or
stating the amount received and used for the specific purpose and
providing a brief description of the specific purpose. In the event a
NGEP chooses to use the more specific reporting option, the NGEP must
use the detailed, itemized list to report the use of any funds that
were not allocated and used for a specific purpose.
The final rule includes examples illustrating these reporting
provisions. (See section ____.7(d)(5).) The first example involves a
NGEP that receives $15,000 under a covered agreement and uses these
funds to support its general operations during the fiscal year. In
these circumstances, the NGEP's annual report must state that it
received $15,000 during the fiscal year under the agreement and provide
the total amount of funds and resources that the NGEP used during the
fiscal year for each category of expenses included in the detailed,
itemized list (i.e., for compensation, administrative, travel and
entertainment expenses, consulting and professional fees, and other
expenses and uses).
The second example involves an organization that receives $15,000
under a covered agreement and allocates and uses these funds during the
fiscal year to purchase computer equipment to support its activities.
Because the organization allocated and used the funds for a purpose
that is more narrow and limited than the categories of expenses in the
itemized list, the organization would have the option of reporting
either the total amount it used during the year for each type of
expense in the itemized list of expenses described above, or a
statement that it used the $15,000 to purchase computer equipment.
The third example involves a group that receives funds under a
covered agreement and uses some of these funds during the fiscal year
for a specific purpose (to fund a particular business trip) and some of
the funds for other purposes. Since the group did not use all of the
funds for a specific purpose, the group's annual report must provide
the amount that the group used during the year for each category of
expenses in the itemized list. The group also could report that it
allocated and used a specified portion of the funds for the business
trip and briefly describe the trip.
b. Use of Other Reports. As noted above, section 48(h)(2)(A)
directs the agencies to ensure that their regulations implementing
section 48 "do not impose an undue burden on the parties.'' \32\ The
Conference Report for the Act also indicates that the agencies should
allow reporting parties to use reports prepared for other purposes to
fulfill the annual reporting
[[Page 2070]]
requirements.\33\ Accordingly, the final rule does not require that a
NGEP's annual report be prepared on a special form or in a particular
format. Instead, the final rule provides that a NGEP's annual report
may consist of or incorporate reports or documents that the NGEP has
prepared for public, internal or other purposes so long as the
documents filed with the relevant supervisory agency contain all of the
information required by the rule.
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\32\ 12 U.S.C. 1831y(h)(2)(A).
\33\ See H.R. Conf. Rep. No. 106-434 at 179 (1999).
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The preamble to the proposed rule indicated that the agencies had
reviewed several tax forms commonly filed by tax-exempt nonprofit
organizations and noted that Internal Revenue Service Return of
Organization Exempt From Income Tax on Form 990 requires the filer to
provide information that is at least as detailed, and in some cases
more detailed, than the list of expenses required under section 48(c).
Accordingly, the preamble to the proposed rule specifically indicated
that NGEPs could use a completed Form 990 to provide the information
required by the rule.
Commenters expressed overwhelming support for allowing NGEPs to use
documents prepared for other purposes to fulfill the rule's reporting
requirements. Commenters in particular praised the agencies for
allowing NGEPs to use a Form 990 to fulfill their reporting obligations
and many requested that the agencies incorporate this guidance in the
text of the final rule. In response to these requests, the rule
expressly allows a NGEP to use a Form 990 to provide the information
required by the rule and includes an example illustrating how a NGEP
could use a Form 990 to provide the expense information required by the
rule. (See section ____.7(d)(3) and (d)(5)(i).)
Some commenters also requested that the agencies clarify whether a
NGEP could use other tax forms, such as Short Form Return of
Organization Exempt From Income Tax on Form 990EZ, to fulfill its
annual reporting obligation. The final rule continues to provide that
the annual report of a NGEP may consist of or incorporate any report or
Federal or state tax form so long as the documents submitted, when
taken as a whole, contain all of the information required by the rule.
Accordingly, a NGEP could incorporate a copy of an IRS Form 990EZ in
its annual report. However, unless the form contains all the
information required by the rule, the NGEP must supplement the form
with the additional information necessary to fulfill the rule's
reporting requirements.
c. Consolidated Annual Reports Permitted. The proposed rule
permitted a NGEP that is a party to 5 or more covered agreements to
file a single consolidated report covering all of the NGEP's covered
agreements. The agencies requested comment on whether consolidated
reports should be permitted when a NGEP is party to 2 or more covered
agreements. Commenters generally expressed support for permitting a
NGEP to file consolidated reports when it is a party to 2 or more
agreements, and the final rule makes that change.
A NGEP's consolidated report must identify the NGEP filing the
report and each agreement covered by the report. In addition, in order
to facilitate the tracking of payments under covered agreements, the
final rule requires that any consolidated annual report filed by a NGEP
indicate the amount the NGEP received under each covered agreement
included in the report during the fiscal year. All other information
required by the rule may be provided on an aggregate basis for all
agreements covered by the annual report. Any consolidated report must
be filed with all of the relevant supervisory agencies for the covered
agreements included in the report. The rule includes an example of the
type of information that must be included in a consolidated annual
report filed by a NGEP. (See section ____.7(d)(5)(iv).)
2. Annual Reports Filed by Insured Depository Institutions and
Affiliates
The annual reporting requirements for insured depository
institutions and affiliates are largely specified in section 48(b) and
the final rule, like the proposal, includes these requirements. The
annual report for an insured depository institution or affiliate must
identify the entity filing the report and identify the covered
agreement to which the annual report relates. In addition, the annual
report must provide:
The aggregate amount of payments, fees and loans (listed
separately) provided by the insured depository institution or affiliate
under the agreement to any other party during the fiscal year;
The aggregate amount of payments, fees and loans (listed
separately) received by the insured depository institution or affiliate
under the agreement from any other party during the fiscal year;
A description of the terms and conditions of any payments,
fees, or loans provided to, or received from, another party under the
agreement; and
The aggregate amount and number of loans, amount and
number of investments, and amount of services provided under the
covered agreement to any NGEP that is not a party to the agreement:
--By the insured depository institution or affiliate; and
--By any other party to the agreement, unless such information is not
known to the insured depository institution or affiliate or will be
contained in an annual report filed by another party.
These informational requirements track those established by the
statute.
The rule allows an insured depository institution and an affiliate
that are parties to the same covered agreement to file a single,
consolidated report for the agreement. The proposed rule also allowed
an insured depository institution or affiliate that is a party to 5 or
more covered agreements to file a single consolidated report relating
to all of the agreements. To reduce burden and in response to comments,
the final rule allows insured depository institutions or affiliates
that are a party to 2 or more covered agreements to file a consolidated
annual report.
The proposed rule would have permitted the consolidated report of
an insured depository institution or affiliate to provide aggregate
data on the amount of payments, fees and loans provided and received by
the institution or affiliate under all agreements included in the
report, and on the loans, investment and services provided by the other
parties to all of the agreements included in the report. In order to
facilitate the tracking of payments made by insured depository
institutions and affiliates under covered agreements, the final rule
requires that any consolidated report filed by an institution or
affiliate state the amount of payments, fees, and loans provided by the
institution or affiliate under each covered agreement included in the
report. The final rule continues to allow a consolidated report to
provide aggregate information concerning any payments, fees and loans
received by the institution or affiliate under all of the agreements
included in the report, and concerning any loans, investments and
services provided by other parties to the agreements included in the
report.
3. When and Where Must Annual Reports Be Filed
The final rule adopts the approach for filing annual reports taken
in the proposed rule and provides that each party to a covered
agreement generally must prepare and file an annual report with each
relevant supervisory agency for the fiscal year in which the party
enters into the agreement and each
[[Page 2071]]
subsequent fiscal year during the term of the covered agreement. In
order to provide maximum flexibility, the final rule also permits a
party to elect to use the calendar year as its fiscal year for purposes
of the rule. Using a fiscal year reporting period permits a party to
coordinate preparation of its annual reports with other documents or
reports that typically are prepared on a fiscal year basis. Commenters
generally supported this approach and the agencies have made no changes
to the proposed rule.
As in the proposal, each party to a covered agreement must file its
annual report for a fiscal year with each relevant supervisory agency
within 6 months of the end of the party's fiscal year. Some commenters
requested additional time to prepare and file annual reports. The
agencies believe allowing 6 months for the filing of annual reports
gives the parties to a covered agreement a reasonable amount of time to
gather the information necessary from the previous fiscal year and
prepare the report. In addition, the time period is similar to the time
period that parties have to prepare tax forms and annual reports
relating to the previous fiscal year. For example, IRS rules generally
require an IRS Form 990 to be filed by the 15th day of the 5th month
after the end of an organization's fiscal year.
Consistent with section 48(c)(2), the rule allows a NGEP to fulfill
its filing requirement by providing its annual report to the insured
depository institution or affiliate that is a party to the agreement.
In response to comments, the agencies have revised the rule to allow a
NGEP up to 6 months (rather than 5) after the end of its fiscal year to
provide a copy of its annual report to the appropriate insured
depository institution or affiliate. Any NGEP that uses this filing
option must instruct the institution or affiliate to file the report
with all of the relevant supervisory agencies on behalf of the NGEP. An
insured depository institution or affiliate that receives an annual
report from a NGEP in this manner must forward it to the relevant
supervisory agencies within 30 days. This procedure reduces the
likelihood that annual reports will be filed with the wrong agency
because the insured depository institution or affiliate will know its
relevant supervisory agency while the NGEP may not.
D. Effective Dates of Disclosure and Reporting Requirements
As discussed above, the disclosure provisions of section 48 apply
to all covered agreements entered into after November 12, 1999, and the
annual reporting provisions apply to all covered agreements entered
into on or after May 12, 2000.
1. Agreements That Are Amended or Renewed After Statutory Dates
A written modification, amendment, renewal, or extension of an
agreement creates a new agreement. Thus, if an agreement entered into
before November 12, 1999, is modified, amended, renewed or extended
after that date, the parties must disclose the entire new agreement in
accordance with the rule's requirements if the agreement meets the
criteria to be a covered agreement.
Example: An insured depository institution and a community
organization entered into a written agreement in January 1999 that
calls for the institution to place an ATM in the local community by
January 2001. In September 2000, the parties entered into a written
modification of the agreement that calls for the institution to
establish a full-service branch rather than an ATM. If the modified
agreement meets the criteria to be a covered agreement, each party
must disclose the modified agreement in accordance with the rule and
the insured depository institution must file any annual reports
required by the rule concerning the agreement. (The organization
would not be required to file an annual report because it does not
receive any funds or resources under the agreement.)
2. Transition Rules
Section ____.10 of the final rule contains special transition
provisions governing the disclosure and reporting for covered
agreements that were entered into after the dates set forth above, but
before April 1, 2001, the effective date of the final rule.
a. Disclosure to Public. The final rule provides that a covered
agreement that was entered into after November 12, 1999, and that
terminates before April 1, 2001, the effective date of the rule, must
be made publicly available in accordance with the procedures in section
____.6 of the rule until April 1, 2002, one year after the effective
date of the rule. The agencies believe this requirement provides the
public with a reasonable opportunity to obtain copies of the agreements
consistent with the requirements of section 48. Parties to such covered
agreements are not required to make the agreements available to the
public until the final rule becomes effective.
b. Disclosure to Relevant Supervisory Agency. The final rule
requires a NGEP to make any covered agreement that was entered into
after November 12, 1999, and that terminates prior to April 1, 2001,
available to the relevant supervisory agency upon request until April
1, 2002. Insured depository institutions and affiliates that are a
party to any such agreement must make the agreement available to the
relevant supervisory agency by June 30, 2001, by providing the agency
either a copy of the agreement or a list identifying the agreement in
accordance with section ____.6(d) of the rule.
c. Annual Reporting. The final rule also includes a special
transition rule for annual reports that relate to fiscal years that end
on or before December 31, 2000. Under this provision, if an insured
depository institution, affiliate or NGEP is a party to a covered
agreement that was entered into between May 12, 2000, and December 31,
2000, and has a fiscal year that ends within that period, the
institution, affiliate or NGEP must file an annual report concerning
the covered agreement with the relevant supervisory agency by June 30,
2001, relating to that fiscal year.\34\ The annual report must provide
the information described in section ____.7 of the rule. For any fiscal
year that ends after December 31, 2000, the party would follow the
reporting procedures in section ____.7 of the rule.
\34\ A NGEP may comply with this requirement by providing a copy
of the annual report by June 30, 2001, to an insured depository
institution or affiliate that is a party to the agreement in
accordance with section ____.7(f)(2).
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Example. On May 30, 2000, a NGEP and insured depository
institution entered into a covered agreement for the institution to
make a grant of $30,000 in two $15,000 installments. The first
installment was made on June 15, 2000 and the second on December 15,
2000. The fiscal year of the NGEP ended on June 30, 2000. The NGEP
is required to file an annual report for its fiscal year that ended
June 30, 2000, no later than June 30, 2001. This report would
reflect the June 15, 2000, payment received by the NGEP. Under
section ____.7 of the rule, the NGEP would then file a second annual
report by December 31, 2001, for its fiscal year ending June 30,
2001. This second annual report would reflect the December 15, 2000,
payment.
E. Compliance Provisions
The final rule makes no substantive changes to the compliance
provisions that were proposed. Section 48(g) specifically provides that
nothing in section 48 authorizes the agencies to enforce the provisions
of any covered agreement. The proposed rule incorporated this provision
and the final rule retains it. (See section ____.9(e)) This is
consistent with the long-standing policy of the agencies that CRA-
related agreements entered into between insured depository institutions
(or their affiliates) and NGEPs are private matters between the parties
and are not enforced by the agencies.
[[Page 2072]]
Some commenters objected that the compliance provisions in section
____.9 (a) through (c) only apply to NGEPs and do not apply to insured
depository institutions and affiliates. The agencies may enforce
compliance by insured depository institutions and affiliates with the
disclosure and reporting requirements of section 48 using the cease and
desist and other enforcement powers granted in section 8 of the FDI
Act.\35\ Section 8 of the FDI Act, however, applies only to insured
depository institutions, affiliates and institution-affiliated parties,
as defined in the FDI Act. The provisions of section 8 of the FDI Act,
therefore, generally do not apply to NGEPs that are parties to a
covered agreement. Section 48(f) instead includes special compliance
provisions applicable to NGEPs that are party to a covered
agreement.\36\
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\35\ See 12 U.S.C. 1818.
\36\ Other Federal statutes outside the banking laws also may
provide for penalties if an insured depository institution,
affiliate, or NGEP fails to comply with the agency disclosure and
reporting requirements of section 48 or includes false information
in a filing made with an agency under section 48. See, e.g. 18
U.S.C. 1001.
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Under these provisions, the material and willful failure of a NGEP
to comply with section 48 may cause the related covered agreement to be
unenforceable. In particular, under the section 48(f)(1), if the
appropriate agency determines that a NGEP has willfully failed to
comply with section 48 in a material way, and the NGEP does not comply
with the law after receiving notice and a reasonable period of time to
correct the area of noncompliance, the agreement thereafter is
unenforceable by operation of section 48.
Consistent with section 48(f)(3), the rule provides that
inadvertent or de minimis errors in reports or other documents filed
with an agency under the rule will not subject the filing party to any
penalty. The rule requires the agencies to provide a NGEP written
notice and an opportunity to respond before determining the NGEP has
not complied with the rule, and allows the NGEP at least 90 days to
correct a willful and material violation.
The rule also clarifies that, in these circumstances, the agreement
becomes unenforceable only by the party that has willfully and
materially failed to comply with the rule. Any other party to the
agreement may continue to enforce the agreement against the
noncomplying party. The agencies believe this construction is the
interpretation that is most consistent with the language and purpose of
the Act. The agencies note that an alternative construction could
encourage NGEPs to violate the statute in an attempt to avoid
performance under a legally binding contract, thereby frustrating the
purpose of the statute. If the insured depository institution or
affiliate elects not to enforce the covered agreement against the
noncomplying NGEP, the appropriate agency may assist the institution or
affiliate in identifying a successor NGEP to assume the
responsibilities of the NGEP under a covered agreement that has become
unenforceable.
Section 48(f)(1)(B) also provides that, if an individual diverts
funds or resources received under a covered agreement for his or her
personal financial gain and contrary to the purposes of the agreement,
the appropriate agency may order the individual to disgorge the funds
and/or prohibit the individual from being a party to any covered
agreement for up to 10 years. As noted above, section 48 specifically
provides that it does not authorize the agencies to enforce any
provision of a covered agreement. If, however, a court or other body of
competent jurisdiction determines that an individual has diverted funds
or resources for personal financial gain and contrary to the purposes
of the agreement, the agencies may take one of the actions specified in
the statute.
F. Other Definitions and Rules of Construction
1. Nongovernmental Entity or Person
Section 48 applies only to agreements entered into by a
"nongovernmental entity or person'' with an insured depository
institution or affiliate. For ease of reference, the rule uses the term
"NGEP'' instead of the phrase "nongovernmental entity or person.''
Some commenters requested that the agencies exclude certain types of
entities or organizations from the definition of NGEP, including
government-sponsored enterprises, credit unions, and quasi-public
entities.
The final rule adopts the definition of nongovernmental entity or
person as proposed. The agencies believe this definition properly
identifies those entities and persons that are not governmental
entities and persons and, therefore, are within the meaning of the
statutory term "nongovernmental entity or person.'' Under the rule, a
NGEP means any individual or entity other than the U.S. government, a
state government, a unit of local government, an Indian tribe, or any
department, agency, or instrumentality of such a governmental entity. A
NGEP does not include a federally chartered public corporation that
receives federal funds appropriated specifically for that corporation.
A nongovernmental entity that is affiliated with, or receives funding
from, such a federally chartered public corporation, however, would not
be considered a NGEP under the rule, unless the entity independently
qualified for an exclusion.
The final rule also does not treat insured depository institutions
and their affiliates as NGEPs. Section 48 draws a distinction between
insured depository institutions and their affiliates, on one hand, and
NGEPs on the other hand, and imposes separate obligations on these two
groups.
2. Affiliate
The final rule adopts the term "affiliate'' as proposed. The term
is defined in the FDI Act by reference to the Bank Holding Company
Act.\37\ Under the Bank Holding Company Act, an affiliate is any
company that controls, is controlled by, or is under common control
with another company. A company generally is considered to control
another entity if it owns or controls 25 percent or more of any class
of the other entity's voting securities.
---------------------------------------------------------------------------
\37\ 12 U.S.C. 1813(w)(6); 12 U.S.C. 1841(k).
---------------------------------------------------------------------------
The final rule retains the special rule of construction that would
apply in situations where an insured depository institution has filed
an application with an agency to become affiliated or merge with
another entity. In such circumstances, a NGEP may have a CRA
communication and enter into an agreement with the acquiring insured
depository institution (or holding company thereof) concerning the
adequacy of the CRA performance of the target institution. The agencies
believe these types of contacts constitute a CRA communication under
section 48 and that any agreement resulting from such communication is
a covered agreement if it otherwise meets the requirements of section
48. Accordingly, the rule provides that an insured depository
institution is deemed to be an affiliate of any company that would be
under common control or merged with the institution pursuant to a
transaction that is pending before an agency. This rule of construction
applies only where the agency application is pending at both the time
an agreement is entered into and the time when a triggering CRA
communication occurs. An example illustrating this point is provided in
section ____.3(c)(1)(iv) of the final rule.
3. CRA Affiliate Treated as Insured Depository Institution
The CRA Regulations provide that an insured depository institution,
at its
[[Page 2073]]
election, may request that an agency consider certain activities
conducted by an affiliate in evaluating the CRA performance of the
insured depository institution.\38\ In these circumstances, the
selected activities of the affiliate are viewed as activities of the
insured depository institution. Accordingly, the proposed rule provided
that a contact concerning this type of affiliate, referred to as a
"CRA affiliate,'' to be the equivalent of a contact concerning an
insured depository institution. Similarly, the proposed rule provided
that an agreement would be considered to be in fulfillment of the CRA
if it concerned the performance of any of the activities in the list of
factors performed by a "CRA affiliate'' of an insured depository
institution.
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\38\ See CRA lending test (12 CFR 25.22(c), 228.22(c), 345.22(c)
and 563e.22(c)); CRA investment test (12 CFR 25.23(c), 228.23(c),
345.23(c) and 563e.23(c)); CRA service test (12 CFR 25.24(c),
228.24(c), 345.24(c) and 563e.24(c)); CRA community development test
for wholesale and limited-purpose institutions (12 CFR 25.25(d),
228.25(d), 345.25(d) and 5632.25(d)); and CRA strategic plans (12
CFR 25.27(c), 228.27(c), 245.27(c) and 563e.27(c)).
---------------------------------------------------------------------------
The agencies requested comment on the treatment of CRA affiliates
and how agreements should be treated that relate to affiliates that are
not CRA affiliates at the time an agreement is entered into, but become
CRA affiliates during the term of an agreement. Commenters generally
did not object to the definition of CRA affiliate or treating
activities of such an affiliate as the activities of the insured
depository institution for purposes of the CRA Sunshine provisions.
However, several commenters objected to an existing agreement becoming
a covered agreement during the term of an agreement as a result of the
designation of an affiliate as a CRA affiliate.
In light of the comments, section ____.11(c) of the final rule
defines a "CRA affiliate'' as any company that is an affiliate of an
insured depository institution and whose activities were considered by
an agency in assessing the CRA performance of the institution at the
institution's most recent CRA examination prior to the agreement. In
addition, the rule provides that an insured depository institution or
affiliate may designate a company as a "CRA affiliate'' at any time
prior to the time a covered agreement is entered into by informing the
NGEP that is a party to the agreement of such designation. Section
____.4(b) of the final rule requires that an insured depository
institution or affiliate inform the other parties to a covered
agreement if the agreement concerns the activities of a CRA affiliate.
The institution or affiliate must provide this notification not later
than the time the agreement is entered into. The agencies are of the
view that an agreement that relates to an affiliate that is not a CRA
affiliate at the time the parties enter into an agreement cannot become
a covered agreement if the affiliate becomes a CRA affiliate during the
term of the agreement.
Example 1: The director of a NGEP submits a written comment to a
Federal banking agency concerning the adequacy of the CRA lending
performance of a mortgage company that is affiliated with an insured
depository institution. One year later, the director of the NGEP
negotiates an agreement with the mortgage company for it to provide
$100 million in mortgage loans in low- and moderate-income
neighborhoods in the next year. The insured depository institution
elected, in accordance with the agencies' CRA Regulations, to have
the lending activities of the mortgage company considered in the
institution's most recent CRA performance evaluation. The mortgage
affiliate, therefore, is considered a CRA affiliate with respect to
its lending activities. The agreement is in fulfillment of the CRA
for purposes of section 48 and the NGEP has engaged in a CRA
communication under section ____.3(a)(1) because the selected
activities of a CRA affiliate and contacts with an agency regarding
a CRA affiliate are considered activities of and contacts concerning
an insured depository institution. Accordingly, the agreement is a
covered agreement.
Example 2: An affiliate of an insured depository institution
engages in mortgage lending and provides credit counseling services.
The insured depository institution elected to have only the mortgage
lending activities of the affiliate considered in its most recent
CRA performance evaluation. The affiliate and a community group
enter into an agreement that provides for the affiliate to provide
credit counseling services in the local community. The agreement is
not in fulfillment of the CRA because the affiliate is not
considered a CRA affiliate with respect to its credit counseling
activities. Accordingly, the agreement is not a covered agreement.
4. Term of Agreement
Under the final rule, the duration of a party's obligation to make
a covered agreement publicly available and to file annual reports
concerning the agreement is based on the term of the covered agreement.
As a general matter, the term of an agreement ends on the agreement's
termination date established by the parties. Agreements that do not
establish a termination date are deemed for purposes of the proposed
rule to terminate on the last date on which any party makes any
payments or provides any loan or other resources under the agreement.
The rule gives the agencies discretion, in appropriate circumstances,
to determine that the term of such an agreement is a shorter or longer
period. The appropriate agency could exercise this discretion, for
example, where a one-time grant is made to a NGEP late in a year with
the clear expectation that the funds would be used in the next year. In
such circumstances, the agency could require the NGEP to file an annual
report for the next year.
IV. Regulatory Flexibility Act Analysis
Office of the Comptroller of the Currency
The Regulatory Flexibility Act (5 U.S.C. 604) requires an agency to
publish a final regulatory flexibility analysis when promulgating a
final rule that was subject to notice and comment, unless the agency
certifies that the rule will not have a significant economic impact on
a substantial number of small entities. The OCC believes that this rule
will not have a significant economic impact on a substantial number of
small national banks, national bank subsidiaries, or NGEPs that are
party to covered agreements with national banks or their subsidiaries.
This final rule restates the statutory requirements and includes
provisions designed to reduce the regulatory burden on entities and
persons of all sizes. The OCC has prepared the following final
regulatory flexibility analysis because the Gramm-Leach-Bliley Act
imposes requirements that are new to the OCC and those subject to the
rule, and because the OCC is unable at this time to estimate
definitively the economic impact of compliance with the new
requirements of the rule.
Need for and Objectives of Rule
As discussed above, this rule implements the CRA Sunshine
provisions of section 48 of the Federal Deposit Insurance Act (12
U.S.C. 1831y), which was enacted by section 711 of the Gramm-Leach-
Bliley Act (Pub. L. 106-102, 113 Stat. 1465 (1999)). The rule's
objectives are to inform insured depository institutions, affiliates of
insured depository institutions, and NGEPs on how to comply with
section 48 by:
(1) Identifying those agreements that are covered by section 48,
including describing the circumstances in which an agreement is in
fulfillment of the CRA;
(2) Providing procedures for the disclosure of covered agreements
to the public and the relevant supervisory agency; and
(3) Providing procedures for preparing and filing annual reports
relating to covered agreements with the relevant supervisory agency.
[[Page 2074]]
New Compliance Requirements
The final rule contains new compliance requirements that require
insured depository institutions, affiliates, and NGEPs that enter into
a covered agreement to make the agreement available to members of the
public and to the appropriate agency, and to file an annual report with
the appropriate agency concerning the disbursement and use of funds
under the agreement. These reporting provisions are required by section
48 and apply regardless of the size of the insured depository
institution, affiliate, or NGEP. The agencies have sought to reduce
burden of complying with these requirements wherever possible and
consistent with section 48.
Comments on the Initial Regulatory Flexibility Analysis
Although few commenters addressed the initial regulatory
flexibility analysis specifically, many commenters addressed the
regulatory burdens associated with complying with the final rule. Many
commenters noted that section 48 was broadly worded and commended the
agencies' efforts to clarify which agreements are subject to section 48
and how a party to a covered agreement may comply with the statute's
disclosure and reporting obligations. Many commenters, however,
expressed concern that the scope of agreements that were covered by the
proposed rule would result in coverage of a wide range of agreements
between banking organizations and NGEPs that were not intended to be
subject to the disclosure and reporting requirements of section 48.
Many commenters also expressed concern that the statute and the rule
would discourage banking organizations from entering into agreements
with NGEPs to provide loans, investments or banking services in their
local communities.
Commenters also provided specific comments on the disclosure and
annual reporting procedures of the proposed rule. These comments are
discussed in detail in part III. Commenters generally supported
granting the parties to covered agreements maximum flexibility in
disclosing covered agreements to the public and allowing the parties to
charge reasonable fees for making covered agreements available. Some
commenters requested clarification concerning how a party should comply
with the public disclosure requirements when a covered agreement
consists of multiple documents. Some commenters supported requiring the
public disclosure period to terminate 12 months after the term of the
agreement, as proposed, while others recommended a shorter time period
or no time period at all after the term of the agreement.
Many commenters expressed concern that the procedures in the
proposed rule for obtaining a determination from an agency that
information in covered agreements may be withheld from public
disclosure was vague and overly complicated. Commenters also expressed
concern with the requirement that an insured depository institution and
affiliate file each covered agreement with the relevant supervisory
agency within 30 days of entering into the agreement.
Several commenters objected to the proposed rule's requirement that
a NGEP that receives and uses funds or other resources for a specific
purposes must follow reporting procedures that are different from the
detailed, itemized list that is described in section 48, while others
supported the proposal. Commenters also requested additional detail on
the circumstances in which funds or other resources are received for a
specific purpose. Commenters overwhelmingly supported the proposed
rule's provisions allowing NGEPs to use Federal tax forms and other
reports to fulfill the reporting requirements of the rule.
Several commenters requested that insured depository institutions
and affiliates have an exception for filing annual reports for fiscal
years in which they have no information to report. Some commenters also
requested that a form be adopted for insured depository institutions
and affiliates to use in filing annual reports. In addition, commenters
generally supported the option of filing consolidated reports for
NGEPs, insured depository institutions, and affiliates that are parties
to two or more covered agreements.
Minimizing Impact on Small Institutions
Section 48 directs the OCC and the other agencies to ensure that
the rule does not impose an undue burden on the parties to covered
agreements. The final rule includes several provisions that are
designed to reduce the burden and minimize the impact of the rule on
insured depository institutions, affiliates and NGEPs, including small
institutions, affiliates and NGEPs. Many of the provisions of the
proposed rule that were supported by commenters were retained in the
final rule and other provisions were added in response to comments
received by the OCC and the other agencies.
The final rule gives parties to covered agreements flexibility in
determining how to make a covered agreement available to the public.
The rule permits an insured depository institution or affiliate to use
the institution's CRA public file to disclose covered agreements to the
public. Parties to covered agreements also may charge a requestor
reasonable fees for the cost of copying and mailing covered agreements.
In response to comments received, the final rule provides a streamlined
method parties may follow to determine whether information in a covered
agreement can be withheld from public disclosure and additional
guidance on the types of information that must be disclosed.
The rule requires a NGEP to file a covered agreement with a
relevant supervisory agency only upon request of the agency. In
addition, in response to comments, the final rule allows an insured
depository institution or affiliate to make a covered agreement
available to the relevant supervisory agency by either filing a copy of
the covered agreement with the agency or filing with the agency a list
that briefly describes the covered agreements to which the institution
or affiliate is a party. These filings must be made 60 days after the
end of the relevant calendar quarter. The final rule also permits two
or more insured depository institutions and affiliates that are parties
to the same covered agreement to file jointly the information that must
be disclosed to the relevant supervisory agency.
The final rule provides exceptions to the annual reporting
requirements for NGEPs and insured depository institutions and
affiliates under certain circumstances. It also permits parties to
covered agreements to file their annual reports on either a fiscal year
or calendar year basis. The rule also allows an insured depository
institution, affiliate, or NGEP that is a party to 2 or more covered
agreements to prepare a single, consolidated annual report concerning
all of the covered agreements.
NGEPs are permitted to incorporate into their annual reports other
reports that have been prepared for other purposes, such as tax returns
and financial statements, to fulfill the annual reporting requirement.
The final rule also permits NGEPs that receive and use funds for a
specific purpose (that is, a purpose that is more specific and limited
than the reporting categories listed in the regulation) either to
provide a detailed, itemized list of the uses of funds by the NGEP or a
brief description of the use and the amount of funds used for the
specific purpose. NGEPs are permitted to file an annual
[[Page 2075]]
report with the relevant supervisory agency by filing it directly with
the agency or by filing it with the insured depository institution or
affiliate that is a party to the covered agreement with instructions to
forward the annual report to the relevant supervisory agency.
Entities and Persons Covered
The OCC's final rule applies to national banks, subsidiaries of
national banks and NGEPs that enter into covered agreements with a
national bank or a national bank subsidiary. Section 48 does not
authorize the OCC to provide an exemption for covered agreements based
on the size of the insured depository institution, affiliate or NGEP
that enters into the agreement.
The OCC and the other agencies requested estimates of the burden
the proposed rule would impose on insured depository institutions and
affiliates and NGEPs. One large bank estimated that it was a party to
over 500 agreements in 1999 that would have been considered covered
agreements under the proposed rule. A national organization that
promotes the availability of credit and capital in underserved
communities commented that it and its 720 community organization
members have negotiated 300 "CRA agreements'' with insured depository
institutions and their affiliates.
The agreements that trigger the disclosure and reporting
requirements of the final rule are entered into by private parties on a
voluntary basis, are not enforced by the agencies and, to date, have
not been required to be disclosed to the agencies. The OCC believes
that larger national banks and NGEPs are likely to be party to more
covered agreements than smaller national banks and NGEPs. The OCC and
the other agencies have modified the rule in several respects in order
to clarify the types of agreements that are covered by section 48, and
the types of agreements that are exempt from coverage. Although some
commenters submitted estimates of the number of covered agreements they
would be a party to under the proposed rule, the OCC does not believe
the information provided to date is sufficiently comprehensive to
enable it to estimate definitively the total number of national banks,
subsidiaries, or NGEPs that are parties to covered agreements.
Federal Reserve System
The Regulatory Flexibility Act (5 U.S.C. 604) requires an agency to
publish a final regulatory flexibility analysis when promulgating a
final rule that was subject to notice and comment, unless the agency
certifies that the rule will not have a significant economic impact on
a substantial number of small entities. The Board believes that this
rule will not have a significant economic impact on a substantial
number of small state member banks, bank holding companies, affiliates
of bank holding companies, and NGEPs that are a party to a covered
agreement with any of the foregoing. This final rule restates the
statutory requirements and includes provisions designed to reduce the
regulatory burden on entities and persons of all sizes. The Board has
prepared the following final regulatory flexibility analysis because
the Gramm-Leach-Bliley Act imposes requirements that are new to the
Board and those subject to the rule, and because the Board is unable at
this time to estimate definitively the economic impact of compliance
with the new requirements of the rule.
Need for and Objectives of Rule
As discussed above, this rule implements the CRA Sunshine
provisions of section 48 of the Federal Deposit Insurance Act (12
U.S.C. 1831y), which was enacted by section 711 of the Gramm-Leach-
Bliley Act (Pub. L. 106-102, 113 Stat. 1465 (1999)). The rule's
objectives are to inform insured depository institutions, affiliates of
insured depository institutions, and NGEPs on how to comply with
section 48 by:
(1) Identifying those agreements that are covered by section 48,
including describing the circumstances in which an agreement is in
fulfillment of the CRA;
(2) Providing procedures for the disclosure of covered agreements
to the public and the relevant supervisory agency; and
(3) Providing procedures for preparing and filing annual reports
relating to covered agreements with the relevant supervisory agency.
New Compliance Requirements
The final rule contains new compliance requirements that require
insured depository institutions, affiliates, and NGEPs that enter into
a covered agreement to make the agreement available to members of the
public and to the appropriate agency, and to file an annual report with
the appropriate agency concerning the disbursement and use of funds
under the agreement. These reporting provisions are required by section
48 and apply regardless of the size of the insured depository
institution, affiliate, or NGEP. The agencies have sought to reduce
burden of complying with these requirements wherever possible and
consistent with section 48.
Comments on the Initial Regulatory Flexibility Analysis
Although few commenters addressed the initial regulatory
flexibility analysis specifically, many commenters addressed the
regulatory burdens associated with complying with the final rule. Many
commenters noted that section 48 was broadly worded and commended the
agencies' efforts to clarify which agreements are subject to section 48
and how a party to a covered agreement may comply with the statute's
disclosure and reporting obligations. Many commenters, however,
expressed concern that the scope of agreements that were covered by the
proposed rule would result in coverage of a wide range of agreements
between banking organizations and NGEPs that were not intended to be
subject to the disclosure and reporting requirements of section 48.
Many commenters also expressed concern that the statute and the rule
would discourage banking organizations from entering into agreements
with NGEPs to provide loans, investments or banking services in their
local communities. Commenters also provided specific comments on the
disclosure and annual reporting procedures of the proposed rule. These
comments are discussed in detail in part III. Commenters generally
supported granting the parties to covered agreements maximum
flexibility in disclosing covered agreements to the public and allowing
the parties to charge reasonable fees for making covered agreements
available. Some commenters requested clarification concerning how a
party should comply with the public disclosure requirements when a
covered agreement consists of multiple documents. Some commenters
supported requiring the public disclosure period to terminate 12 months
after the term of the agreement, as proposed, while others recommended
a shorter time period or no time period at all after the term of the
agreement.
Many commenters expressed concern that the procedures in the
proposed rule for obtaining a determination from an agency that
information in covered agreements may be withheld from public
disclosure was vague and overly complicated. Commenters also expressed
concern with the requirement that an insured depository institution and
affiliate file each covered agreement with the relevant supervisory
agency within 30 days of entering into the agreement.
[[Page 2076]]
Several commenters objected to the proposed rule's requirement that
a NGEP that receives and uses funds or other resources for a specific
purposes must follow reporting procedures that are different from the
detailed, itemized list that is described in section 48, while others
supported the proposal. Commenters also requested additional detail on
the circumstances in which funds or other resources are received for a
specific purpose. Commenters overwhelmingly supported the proposed
rule's provisions allowing NGEPs to use Federal tax forms and other
reports to fulfill the reporting requirements of the rule.
Several commenters requested that insured depository institutions
and affiliates have an exception for filing annual reports for fiscal
years in which they have no information to report. Some commenters also
requested that a form be adopted for insured depository institutions
and affiliates to use in filing annual reports. In addition, commenters
generally supported the option of filing consolidated reports for
NGEPs, insured depository institutions, and affiliates that are parties
to two or more covered agreements.
Minimizing Impact on Small Institutions
Section 48 directs the Board and the other agencies to ensure that
the rule does not impose an undue burden on the parties to covered
agreements. The final rule includes several provisions that are
designed to reduce the burden and minimize the impact of the rule on
insured depository institutions, affiliates and NGEPs, including small
institutions, affiliates and NGEPs. Many of the provisions of the
proposed rule that were supported by commenters were retained in the
final rule and other provisions were added in response to comments
received by the Board and the other agencies.
The final rule gives parties to covered agreements flexibility in
determining how to make a covered agreement available to the public.
The rule permits an insured depository institution or affiliate to use
the institution's CRA public file to disclose covered agreements to the
public. Parties to covered agreements also may charge a requestor
reasonable fees for the cost of copying and mailing covered agreements.
In response to comments received, the final rule provides a streamlined
method parties may follow to determine whether information in a covered
agreement can be withheld from public disclosure and additional
guidance on the types of information that must be disclosed.
The rule requires a NGEP to file a covered agreement with a
relevant supervisory agency only upon request of the agency. In
addition, in response to comments, the final rule allows an insured
depository institution or affiliate to make a covered agreement
available to the relevant supervisory agency by either filing a copy of
the covered agreement with the agency or filing with the agency a list
that briefly describes the covered agreements to which the institution
or affiliate is a party. These filings must be made 60 days after the
end of the relevant calendar quarter. The final rule also permits two
or more insured depository institutions and affiliates that are parties
to the same covered agreement to file jointly the information that must
be disclosed to the relevant supervisory agency.
The final rule provides exceptions to the annual reporting
requirements for NGEPs and insured depository institutions and
affiliates under certain circumstances. It also permits parties to
covered agreements to file their annual reports on either a fiscal year
or calendar year basis. The rule also allows an insured depository
institution, affiliate, or NGEP that is a party to 2 or more covered
agreements to prepare a single, consolidated annual report concerning
all of the covered agreements.
NGEPs are permitted to incorporate into their annual reports other
reports that have been prepared for other purposes, such as tax returns
and financial statements, to fulfill the annual reporting requirement.
The final rule also permits NGEPs that receive and use funds for a
specific purpose either to provide a detailed, itemized list of the
uses of funds by the NGEP or a brief description of the use and the
amount of funds used for the specific purpose. NGEPs are permitted to
file an annual report with the relevant supervisory agency by filing it
directly with the agency or by filing it with the insured depository
institution or affiliate that is a party to the covered agreement with
instructions to forward the annual report to the relevant supervisory
agency.
Entities and Persons Covered
The Board's final rule applies only to the following parties to
covered agreements: (1) State member banks and subsidiaries of state
member banks, (2) bank holding companies, (3) affiliates of bank
holding companies, other than banks, savings associations and
subsidiaries of banks and savings associations, and (4) NGEPs that
enter into covered agreements with any company listed in (1) through
(3). Section 48 does not authorize the Board to provide an exemption
for covered agreements based on the size of the insured depository
institution, affiliate or NGEP that enters into the agreement.
The Board requested estimates of the burden the proposed rule would
impose on insured depository institutions and affiliates and NGEPs. One
large bank estimated that it was a party to over 500 agreements in 1999
that would have been considered covered agreements under the proposed
rule. A national organization that promotes the availability of credit
and capital in underserved communities commented that it and its 720
community organization members have negotiated 300 "CRA agreements''
with insured depository institutions and their affiliates.
The agreements that trigger the disclosure and reporting
requirements of the final rule are entered into by private parties on a
voluntary basis, are not enforced by the agencies and, to date, have
not been required to be disclosed to the agencies. The Board believes
that larger banking organizations and NGEPs are likely to be party to a
higher proportion of covered agreements than smaller banking
organizations and NGEPs. Although some commenters submitted estimates
of the number of covered agreements they would be a party to under the
proposed rule, the Board and the other agencies have modified the rule
in several respects in order to clarify the types of agreements that
are covered by section 48, and the types of agreements that are exempt
from coverage. The Board does not believe it has received enough
information at this time to estimate definitively the total number of
insured depository institutions, affiliates or NGEPs that are parties
to covered agreements.
Federal Deposit Insurance Corporation
Subject to certain exceptions, the Regulatory Flexibility Act (5
U.S.C. 601-612) (RFA) requires an agency to prepare a final regulatory
flexibility analysis in conjunction with its issuance of a final rule.
If the agency certifies that the rule will not have a significant
economic impact on a substantial number of small entities, a final
regulatory flexibility analysis is not required.\39\ At the time of
issuance of
[[Page 2077]]
the proposed rule, the FDIC was unable to certify that the rule would
not have a significant economic impact on a substantial number of small
entities. Although the final rule contains provisions designed to
reduce the burden of regulatory compliance by all parties to covered
agreements, the FDIC lacks sufficient information to certify that the
final rule will not have a significant economic impact on a substantial
number of small entities. Therefore, pursuant to section 604 of the
RFA, the FDIC provides the following final regulatory flexibility
analysis.
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\39\ The RFA defines the term "small entity'' in 5 U.S.C. 601
by reference to definitions published by the Small Business
Administration (SBA). The SBA has defined a "small entity'' for
banking purposes as a national or commercial bank, savings
institution or credit union with less than $100 million in assets.
See 13 CFR 121.201.
---------------------------------------------------------------------------
Need for and Objectives of the Rule
The final rule implements Sec. 48 of the Federal Deposit Insurance
Act (FDIA) addressing disclosure and reporting requirements for certain
agreements related to the CRA. Section 48(h) requires the Federal
banking agencies to publish regulations applicable to insured
depository institutions, their affiliates, and NGEPs relating to:
The types of agreements covered by the rule;
The procedures for implementing the disclosure
requirements related to agreements covered by the rule; and
The procedures for implementing the annual reporting
requirements related to agreements covered by the rule.
Small Entities to Which the Final Rule Will Apply
The final rule applies to all FDIC-insured state nonmember banks
(and their affiliates), including those insured state nonmember banks
with assets of under $100 million. As of September 2000, 3,331 (of
5,130 total) FDIC-insured state nonmember banks had assets of under
$100 million. The final rule also applies to NGEPs that enter into
covered agreements with insured depository institutions or their
affiliates.
Section 48 does not authorize the FDIC to create exemptions for
disclosure or reporting requirements based on the asset size of either
an insured depository institution (or its affiliate) or a NGEP;
therefore, the FDIC did not establish alternative compliance standards
for small entities.
Because agreements like those that will trigger the disclosure and
reporting requirements of the final rule have not been previously
disclosed or monitored by the FDIC, the FDIC lacks sufficient
information to estimate the total number of insured state nonmember
banks (or their affiliates) and NGEPs that may be parties to covered
agreements.
Initial Regulatory Flexibility Analysis and Related Burden Reduction
Measures
In its initial regulatory flexibility analysis, the FDIC
specifically requested information on the likely significance of the
economic impact the proposed rule would impose on state nonmember
banks, their affiliates, and NGEPs who enter into covered agreements.
Following publication of the proposed rule, the FDIC received
approximately 200 comment letters. Although none of the commenters
specifically responded to the questions raised in the initial
regulatory flexibility section of the proposed rule, many commenters
addressed the regulatory burdens associated with the disclosure and
reporting requirements described in the proposed rule. They also
requested clarification regarding the types of agreements that would be
subject to the rule and advocated implementation of a more streamlined
way to protect confidential or proprietary information from disclosure.
(For a more complete discussion of the comments received, see the
analysis contained in Part II of the Supplementary Information section
of the preamble.)
Section 48 of the FDIA requires insured depository institutions,
their affiliates, and NGEPs that are parties to covered agreements: to
make the agreements available to the public and to the relevant
supervisory agency (as defined in the rule), and to file an annual
report related to covered agreements with the relevant supervisory
agency.
Section 48(h)(2)(A) of the FDIA further requires the Federal
banking agencies to prescribe implementing regulations that do not
impose an undue burden on parties to covered agreements. In accordance
with both this statutory mandate and with the comments received in
response to the proposed rule, in the final rule, the FDIC sought to
minimize the burden on all parties to covered agreements--including
small entities.
A brief description of some of the burden reduction measures
related to the final rule's disclosure and reporting requirements
follows. (For a more detailed discussion explanation of these and other
burden reduction measures adopted in the final rule, see the analysis
contained in Part III of the Supplementary Information section of the
preamble.)
The rule minimizes burden in its disclosure requirements by
offering parties to covered agreements flexibility in making these
agreements available to public. No one single method of disclosure is
prescribed. NGEPs need only disclose covered agreements when a request
for the agreement is made. One way that insured depository institutions
(or affiliates) may meet their agency disclosure obligations is by
filing a quarterly list of covered agreements with the relevant
supervisory agency, with the actual agreement to be provided upon the
request of the agency. If two or more insured depository institutions
or their affiliates are parties to a covered agreement, they are
permitted to jointly disclose the agreements to the relevant
supervisory agency. Further, an insured depository institution and its
affiliates may use the institution's CRA public file as a disclosure
mechanism. All parties to covered agreements are permitted to collect
reasonable fees associated with the disclosure of these agreements. For
clarity, the rule contains a list of items contained in a covered
agreement that may not be withheld from disclosure, but it allows
parties to request an agency determination concerning whether other
information properly may be withheld.
The rule minimizes burden in its reporting requirements by
providing certain exceptions to the annual reporting requirement for
both NGEPs and for insured depository institutions and their
affiliates. Annual reports may be filed to reflect either a calendar
year or fiscal year accounting system. A NGEP may use certain tax forms
and other reports to satisfy its reporting requirement and also may
meet its reporting obligations by filing the report with the insured
depository institution (or affiliate) that is a party to the agreement.
The rule permits consolidated annual reporting if insured depository
institutions, their affiliates, or NGEPs are parties to at least two
covered agreements.
Reporting, Recordkeeping, and Other Compliance Requirements
The final rule contains disclosure and reporting requirements
applicable to all FDIC-insured state nonmember banks, affiliates of
state nonmember banks, and non-governmental entities or persons that
are parties to covered agreements. Parties to covered agreements are
required to make the agreements available to the public and to the
relevant supervisory agency and to report annually to the relevant
supervisory agency concerning the covered agreements. (For a more
detailed explanation of the disclosure requirements of the final rule,
see the explanation contained in Part III, B of the Supplementary
Information section of the preamble. For a more detailed
[[Page 2078]]
explanation of the reporting requirements of the final rule, see the
explanation contained in Part III, C of the Supplementary Information
section of the preamble.)
The final rule does not establish specific recordkeeping procedures
for parties to covered agreements. The FDIC anticipates that the
parties will employ recordkeeping policies and practices sufficient to
allow retrieval of covered agreements as necessary for compliance with
the disclosure and annual reporting requirements of the final rule.
Although the final rule contains provisions to minimize the
compliance burden on parties to covered agreements, it is possible that
insured state nonmember banks (and their affiliates) and NGEPs may
require professional skills in recognizing the existence of a covered
agreement; and in compiling materials responsive to annual reporting
requirements of the final rule.
Office of Thrift Supervision
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires federal
agencies to prepare a final regulatory flexibility analysis (RFA) with
a final rule that was subject to notice and comment, unless the agency
certifies that the rule will not have a significant economic impact on
a substantial number of small entities. OTS believes that this rule
will not have a significant economic impact on a substantial number of
small savings associations and their subsidiaries, savings and loan
holding companies, affiliates of savings associations and savings and
loan holding companies (other than bank holding companies, banks, and
subsidiaries of bank holding companies and banks), or NGEPs that enter
into covered agreements with any of the foregoing because the burden
imposed on small entities stems in large part from the GLB Act, rather
than the final rule. This final rule restates the statutory
requirements and includes clarifications designed to reduce the
regulatory burden on savings associations, affiliates, and NGEPs of all
sizes, as discussed below. OTS has prepared the following RFA because
the GLB Act imposes requirements that are new to OTS, the thrift
industry, and others, and because OTS is uncertain of the economic
impact of compliance with the new requirements.
1. Statement of Need and Objectives
A description of the reasons why OTS is adopting this final rule
and a statement of the objectives of, and legal basis for, the final
rule, are contained in the Supplementary Information above.
2. Small Entities to Which the Final Rule Applies
OTS's final rule applies to the following types of entities if they
are a party to a covered agreement:
(1) Savings associations and their subsidiaries;
(2) Savings and loan holding companies
(3) Affiliates of savings associations and savings and loan holding
companies, other than bank holding companies; banks; and subsidiaries
of bank holding companies and banks; and
(4) NGEPs that enter into covered agreements with any company
listed in (1), (2), or (3).
The final rule would apply regardless of the size of the savings
association, affiliate, or NGEP.
Small savings associations are generally defined, for Regulatory
Flexibility Act purposes, as those with assets of $100 million or less.
13 CFR 121.201, Division H (2000). As of the publication of the
proposed rule, OTS calculated that of the approximately 1,100 savings
associations, a maximum of 486 were small savings associations. OTS
also calculated that these 486 savings associations held approximately
100 subordinate organizations that could possibly qualify as small
entities. OTS further calculated that a maximum of 205 savings and loan
holding companies could possibly qualify as small entities.\40\
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\40\ It is likely that the number of small SLHCs is
significantly less than 205. In a recent notice of proposed
rulemaking, OTS applied a newly promulgated Small Business
Administration (SBA) standard for determining whether holding
companies are small. OTS estimated there were 88 small SLHCs under
the asset-based definition in the SBA's rule (i.e., holding company
structures holding assets of less than $100 million), or 150 small
SLHCs using the revenue-based definition in the SBA's rule. See
Savings and Loan Holding Companies Notice of Significant
Transactions or Activities and OTS Review of Capital Adequacy, 65
Fed. Reg. 64,392, 64,397 (October 27, 2000) (applying SBA rule 13
CFR 121.201).
---------------------------------------------------------------------------
The initial RFA (IRFA) published in the proposed rule explained
that to date, parties to covered agreements have not had to disclose or
report agreements to OTS. Generally, neither OTS nor any other Federal
agency is a party to covered agreements. Finally, OTS does not enforce
such agreements. Thus, OTS did not have information about these
agreements. OTS sought comments to enable it to make an accurate burden
estimate including the number and size of savings associations,
affiliates, and NGEPs that are parties to covered agreements, and the
number of covered agreements that currently exist and would likely be
entered into each year in the future.
OTS received many comments on the proposed rule addressing its
potentially broad application. A few NGEPs specifically noted that
three of the largest community advocacy organizations have 720, 1,200,
and 3,600 members, respectively. Commenters noted that each of these
members is a potential NGEP. Community advocacy organizations are just
one of many types of NGEPs subject to the rule.
A substantial number of NGEPs commented that there were hundreds,
if not thousands, of covered agreements. Commenters estimated that one
large community advocacy organization alone had 300 covered agreements,
including more than $1 trillion in loans and investments for low- and
moderate-income communities. Commenters estimated another community
advocacy organization had a dozen agreements. A very large financial
institution estimated that it had more than 500 covered agreements in
effect in 1999. A federal savings association indicated that it entered
into 42 covered agreements with 38 community groups during the first
six months since the GLB Act was enacted. A local government indicated
that it had $1.3 billion in loans or grants in 60,000 separate
transactions that potentially were covered, including 15,000
transactions with one large financial institution alone.
While this information provides anecdotal evidence that a
potentially large number of savings associations, affiliates, and NGEPs
of all sizes are parties to a potentially large number of covered
agreements, it does not enable OTS to make a reliable estimate of the
burden of the final rule.
3. Reporting, Recordkeeping, and Other Compliance Requirements of the
Final Rule
As described more fully elsewhere in the Supplementary Information
above, the primary requirements of the final rule involve the
disclosure and reporting of covered agreements. The final rule requires
each party to a covered agreement to disclose the agreement to the
public by making a complete copy available to any individual or entity
upon request. It also requires each savings association or affiliate
that is a party to a covered agreement to provide a copy to each
relevant supervisory agency (as defined in the rule) and requires each
NGEP that is a party to provide a copy to each relevant supervisory
agency upon request. The final rule also requires each party to a
covered agreement to file an annual report with each relevant
supervisory agency concerning the disbursement, receipt, and uses of
funds
[[Page 2079]]
or other resources under the covered agreement. Most of these
requirements are mandated by section 48 of the FDI Act.
Savings associations, affiliates, and NGEPs may already have
recordkeeping and other policies and practices that would already
enable them to partly or fully meet the requirements of this final
rule. To the extent that existing practices and available resources are
insufficient, parties to covered agreements would need professional
skills to comply with this final rule. To disclose covered agreements,
parties may need clerical and computer personnel. To prepare required
reports and disclosures, parties may need personnel with these skills,
as well as personnel skilled in financial, accounting, and legal
matters. Some degree of personnel training may be necessary, such as to
enable employees to determine when parties enter into covered
agreements, and how to retain, record, redact, and compile information
about agreements.
OTS cannot predict exactly how savings associations, affiliates,
and NGEPs will comply with the final rule since the requirements are
new. For example, OTS cannot assess the extent to which savings
associations, affiliates, and NGEPs will avoid entering into covered
agreements as a result of the final rule. A common concern expressed by
commenters was that the statute and rule would have precisely this
effect.
As discussed below, the final rule contains many provisions
designed to minimize the compliance burden. These provisions are
consistent with the directive in section 48(h)(2)(A) of the FDI Act
that the Federal banking agencies ensure that the regulations
prescribed do not impose an undue burden on the parties.
4. Significant Issues Raised in Response to Initial Regulatory
Flexibility Analysis and Changes Made to Minimize Burden
The issues raised by the commenters addressing burden in general
are described elsewhere in the Supplementary Information. Many NGEPs
and insured depository institutions commented that the disclosure and
reporting burdens would be heavy. The issues that were raised by
commenters that specifically relate to the rule's impact on small
businesses were the following:
Tracking and reporting on covered agreements would require
many NGEPs, particularly small ones, to hire outside CPAs for the first
time. One NGEP estimated that an additional 100,000 or more nonprofits
would find it necessary to hire outside CPA firms, and that the
paperwork, accounting, and bookkeeping costs would amount to at least
$3,000 annually for each nonprofit or $300 million annually for all.
Disclosing and reporting covered agreements would require
additional staff, both for NGEPs and insured depository institutions.
One estimate was that a total of at least 5,000 additional bank
employees would be needed. One financial institution indicated it would
need at least one additional full-time employee. Several NGEPs
indicated that nonprofits reliant on volunteers could least afford
additional staff.
The proposed rule contained several provisions designed to avoid
undue burdens. The final rule contains additional provisions that
should minimize the need for new accounting systems and additional
staff.
With regard to the disclosure burden, the final rule:
Terminates the public disclosure requirement and the
requirement for a NGEP to provide a copy to the relevant supervisory
agencies upon request 12 months after the end of the term of the
covered agreement.
Does not mandate any particular method for disclosing the
agreement to the public.
Allows each party to charge reasonable copying and mailing
fees when it discloses an agreement to the public.
Requires an NGEP to provide a copy to the relevant
supervisory agencies only if the agency requests a copy.
Allows a savings association or affiliate to file with the
relevant supervisory agencies a copy of a covered agreement 60 days
after the end of each calendar quarter. (The proposed rule would have
required filing 30 days after entering into the agreement.)
Allows a savings association or affiliate to elect to file
a list of its covered agreements, rather than the actual agreement with
the relevant supervisory agencies. It would be required to submit a
complete copy of an agreement only upon a request from the agency. (The
proposed rule would not have offered the option of a list.)
Allows a savings association or affiliate to publicly
disclose by placing a copy of the covered agreement in its CRA public
file and the savings association making it available under the public
file procedures. (The proposed rule would not have extended this option
to affiliates.)
Allows two or more insured depository institutions or
affiliates that are parties to a covered agreement to jointly file with
each relevant supervisory agency.
Enhances the protections for proprietary and confidential
information. (The final rule, unlike the proposed rule, permits the
parties to redact information before making agreements publicly
available without the need for prior agency review and approval. It
also lists the specific information that parties may not redact to
provide clearer guidance. Finally, it provides procedures for parties
to submit both redacted and unredacted copies to the agencies to
facilitate release of information in accordance with FOIA and related
safeguards.)
Contains transition provisions to ease compliance with
disclosure requirements for agreements entered into prior to the
effective date of the final rule. (The proposed rule had no transition
provisions.)
With regard to the reporting burden, the final rule:
Does not mandate any particular form for the annual
report.
Allows each party to report on its own fiscal year basis
or on the calendar year.
Exempts a NGEP from filing a report for a fiscal year if
the NGEP does not receive or use any funds or resources during that
year.
Exempts an institution or affiliate from filing a report
for a fiscal year if the institution or affiliate does not receive or
provide any payments, fees, or loans during that year and has no data
to report on loans, investments, and services provided by a party to
the agreement. An institution or affiliate has no data to report on
another party's activities if it does not know of the information or
the information is contained in another party's annual report. (The
proposed rule would not have included this exemption.)
Provides the option of special purpose reporting
procedures rather than a detailed, itemized list for NGEPs that
allocate and use funds or other resources under a covered agreement.
(The proposed rule contained similar provisions but would have made
special purpose reporting mandatory where applicable.)
Allows a NGEP's report to consist of, or incorporate,
reports prepared for other purposes, such as IRS Form 990 and financial
statements. (The proposed rule contained similar provisions, but would
not have specifically referred to IRS Form 990.)
Permits a savings association, affiliate, or NGEP that is
a party to two or more covered agreements to file a single consolidated
annual report covering all its covered agreements, aggregating certain
information. (The proposed rule only would have allowed
[[Page 2080]]
consolidated reporting for entities that are parties to five or more
covered agreements.)
Allows a savings association and its affiliates that are
parties to the same covered agreement to file a single consolidated
report.
Allows a NGEP to file its report with the insured
depository institution or affiliate that is a party to the agreement,
rather than with the relevant supervisory agency, allotting six months
to do so. The institution must then forward the report to the relevant
supervisory agency within 30 days.
Contains transition provisions to ease compliance with
reporting requirements for agreements entered into prior to the
effective date of the final rule. (The proposed rule had no transition
provisions.)
The final rule also:
Clarifies, through examples, that a covered agreement
(including a written pledge) must reflect a mutual arrangement or
understanding.
Excludes an agreement from the definition of covered
agreement if no NGEP that is a party has a CRA communication. (The
final rule's definition of "CRA communication'' is narrower than the
proposed rule's definition of "CRA contact'' in three ways: (1) The
types of communications that concern the CRA are somewhat clarified and
narrowed; (2) CRA communications must be known about by particular
employees and officers of the parties (in some instances, a depository
institution or affiliate may be deemed to have knowledge); and (3) CRA
communications must occur no earlier than one to three years prior to
entering into the agreement depending on the type of CRA
communication.)
Does not subject a party to a multiparty agreement to the
requirements of the rule if the party has not had a CRA communication
and does not know about any CRA communication among other parties to
the agreement. (The proposed rule would have had no comparable
provision.)
Clarifies that agreements that relate to activities of
affiliates that are not CRA affiliates at the time a covered agreement
is entered into are not covered.
Implements the "fulfillment'' provision to cover
activities of the type that are likely to receive favorable
consideration by a Federal banking agency in evaluating the performance
under the CRA of the insured depository institution that is a party to
the agreement or an affiliate of a party to the agreement. (The
proposed rule would not have had implemented the provision in this
manner.)
Provides flexibility to the parties to determine the value
of an agreement that does not specify the amount of payments, grants,
loans, or other consideration.
Excludes from the definition of covered agreement any
individual loan secured by real estate.
Excludes from the definition of covered agreement,
specific contracts or commitments for a loan or extension of credit if
certain requirements are met, provides flexibility to the parties to
determine if the loans are "substantially below market rates,'' and
clarifies that the terms of the loan application and other loan
documents establish whether the restriction against relending is
satisfied.
In determining whether an agreement that combines an
exempt loan and other consideration is covered, the exempt loan may be
excluded from consideration.
5. Significant Alternatives to the Final Rule
The requirements in the final rule parallel those in the GLB Act.
The final rule clarifies the statutory requirements in some areas and
restates the requirements in a more understandable manner in other
areas. The final rule does not impose any requirements that differ
substantially from the statute. Since the requirements are set by
statute, OTS has only limited discretion to consider alternatives. To
the extent that OTS does have discretion, it has exercised that
discretion to minimize the burden as discussed above.
Congress has decided that "each'' insured depository institution,
affiliate, or person that is a party to a covered agreement must
disclose and report the agreement. The GLB Act does not expressly
authorize OTS to exempt small savings associations, affiliates, or
NGEPs from these requirements. OTS does not interpret the statute to
permit such an exemption.
6. Duplicative, Overlapping, or Conflicting Federal Rules
This final rule does not appear to duplicate or overlap with any
other Federal rules. To the extent that required information is already
contained in reports prepared for other purposes, the final rule allows
a NGEP's report to consist of, or incorporate, these existing reports.
The final rule also allows insured depository institutions and
affiliates to use the CRA public file established under the CRA
Regulations as a mechanism for disclosing agreements. The rule is not
intended to otherwise affect the CRA.
OTS lacks sufficient information about the contents of covered
agreements, however, to conclude whether the final requirements
conflict with other Federal rules. One area of potential conflict on
which comment was solicited was the rule's requirement to make a
"complete copy'' of a covered agreement available to the public and to
the relevant supervisory agencies. OTS solicited specific comment on
whether covered agreements contain information that savings
associations, affiliates, or persons may be barred from disclosing
under other Federal rules (e.g., private customer information), or may
be permitted to refrain from disclosing to the public or a Federal
banking agency under other Federal rules (e.g., proprietary
information). OTS also generally sought comment on any Federal rules
that may duplicate, overlap, or conflict with the proposal.
Several commenters indicated that covered agreements are likely to
contain proprietary and confidential information. Several commenters
requested that the final rule accord full FOIA protections to
information in covered agreements. As discussed above, the agencies
have enhanced the procedures for protecting proprietary and
confidential information in the final rule.
V. Executive Order 12866 Determination
OCC: The Comptroller of the Currency has determined that this final
rule does not constitute a "significant regulatory action'' for
purposes of Executive Order 12866 because it does not satisfy any of
the elements of the definition of "significant regulatory action''
provided by the Executive Order.
OTS: OTS has determined that this final rule does not constitute a
significant regulatory action for the purpose of Executive Order 12866.
Reporting and disclosure are mandated by section 48 of the FDI Act.
Most of the final rule's provisions closely follow the requirements of
this section. OTS has exercised its discretion, to the extent possible,
to minimize costs and burdens. While OTS acknowledges that the rule
will impose costs on insured depository institutions, affiliates, and
NGEPs by requiring these entities to disclose and report on covered
agreements, OTS believes that the impact of the rule does not meet the
thresholds of the Executive Order.
VI. Paperwork Reduction Act
The agencies may not conduct or sponsor, and an organization is not
[[Page 2081]]
required to respond to, an information collection unless it displays a
currently valid Office of Management and Budget (OMB) control number.
The OMB control numbers are listed below:
OCC: 1557-0219
Board: 7100-0298
FDIC: 3064-0139
OTS: 1550-0105
The agencies sought comment on all aspects of the burden estimates
for the information collections in the reporting and disclosure
provisions of the proposed rule, including how burdensome it would be
for NGEPs, insured depository institutions, and affiliates of insured
depository institutions to comply with the burden elements. Many
commenters suggested, in response to specific proposed sections, that
the disclosure and reporting requirements of the rule would impose
significant burden on them. Several asserted that the agencies had
underestimated the burden associated with complying with the rule.
Many commenters recommended changes in the procedures of the
proposed rule for disclosing covered agreements to the public and the
relevant supervisory agencies and for submitting annual reports
relating to covered agreements. The agencies have addressed several of
these concerns by amending the relevant provisions of the rule as
discussed above.
The final rule contains four disclosure requirements and two
reporting requirements for insured depository institutions and
affiliates of insured depository institutions, as well as three
disclosure requirements and one reporting requirement for NGEPs. Below
is a brief summary of the paperwork burdens implemented by this final
rule.
The final rule requires each NGEP, insured depository institution,
and affiliate of an insured depository institution that is a party to a
covered agreement to make the agreement available to the public upon
request at any time during the term of the agreement and continuing
until 12 months after the term of the agreement (Secs. ____.6(b)(1) and
____.6(b)(5)).
A NGEP is required to disclose a covered agreement to the relevant
supervisory agency within 30 days of a request from the agency
(Secs. ____.6(c)(1)). An insured depository institution or affiliate
that enters into a covered agreement must, within 60 days after the
close of the relevant calendar quarter, provide to each relevant
supervisory agency either (1) a complete copy of each agreement entered
into during the calendar quarter (Secs. ____.6(d)(1)(i)), or (2) a list
of all covered agreements entered into during the calendar quarter
(Secs. ____.6(d)(1)(ii)). Some commenters felt that allowing insured
depository institutions or affiliates to submit a list of their covered
agreements would help to decrease burden on the organization. If an
institution or affiliate submits a list of its agreement, the
institution or affiliate must provide any relevant supervisory agency
with a complete copy of any covered agreement referenced in the list
within 7 calendar days of receiving a request from the agency
(Secs. ____.6(d)(2)). The obligation of an institution or affiliate to
provide an agency with a copy of a covered agreement referenced in a
list terminates 36 months after the term of the agreement.
The final rule also requires each NGEP that is a party to a covered
agreement to file an annual report that relates to the agreement for
each fiscal year that the NGEP receives or uses funds received under
the agreement (Secs. ____.7(b)). Each insured depository institution or
affiliate that is a party to a covered agreement must file an annual
report for each fiscal year that the institution or affiliate makes or
receives payments under the agreement or has data to report on loans,
investments or services provided under the agreement (Secs. ____.7(b)).
Annual reports must be filed with each relevant supervisory agency for
the covered agreement. The content requirements for the annual report
for NGEPs, and insured depository institutions and affiliates of an
insured depository institutions are contained in (Secs. ____.7(d)) and
(Secs. ____.7(e)) respectively. The insured depository institution or
affiliate must submit its annual report to the relevant supervisory
agency within 6 months of the end of its fiscal year. A NGEP must,
within 6 months of the end of its fiscal year, either file its annual
report with each relevant supervisory agency directly or an insured
depository institution or affiliate that is a party to the agreement
with instructions for the institution or affiliate to file it with the
relevant supervisory agency. The insured depository institution or
affiliate must submit the annual report of a NGEP to each relevant
supervisory agency within 30 days of receiving the report
(Secs. ____.7(f)(2)(ii)).
Finally, an insured depository institution or affiliate that is a
party to a covered agreement that concerns the performance of any
activity identified in section ____.4 (fulfillment) of a CRA affiliate
is required to notify each NGEP that is a party to the agreement that
the agreement concerns a CRA affiliate (Secs. ____.4(b)).
The estimated total annual reporting and disclosure burden of the
final rule will depend on the number of covered agreements. The
agencies specifically requested comment on the total number of NGEPs,
insured depository institutions, and affiliates that may be parties to
covered agreements, and the total number of covered agreements that may
be subject to the disclosure and reporting requirements of the rule.
The agencies received few estimates from NGEPs, insured depository
institutions and affiliates concerning the number of agreements to
which they are parties that would be covered under the rule. One large
bank estimated that it was a party to over 500 agreements in 1999 that
would have been considered covered agreements under the proposed rule.
A national organization that promotes the availability of credit and
capital in underserved communities commented that it and its 720
community organization members have negotiated 300 "CRA agreements''
with insured depository institutions and their affiliates.
The agreements that trigger the disclosure and reporting
requirements of the final rule are entered into by private parties on a
voluntary basis, are not enforced by the agencies and, to date, have
not been required to be disclosed to the agencies. The agencies believe
that larger banking organizations and NGEPs are likely to be party to a
higher proportion of covered agreements than smaller banking
organizations and NGEPs. Although some commenters provided estimates on
the number of covered agreements that might exist under the proposed
rule, as noted above, the final rule clarifies in several important
areas the types of agreements that are covered by section 48, and the
types of agreements that are exempt from coverage.
Accordingly, the agencies do not believe they have received enough
information at this time to definitively estimate the total number of
insured depository institutions, affiliates or NGEPs that are parties
to covered agreements or the total number of covered agreements that
may be subject to the disclosure and reporting requirements of the
rule. Nevertheless, solely for purposes of complying with the
requirements of the Paperwork Reduction Act, each agency has computed
the estimate of annual paperwork burden assuming that each insured
depository institution it regulates is involved, either as a party or
as a source of funds, with two covered agreements. This would take
[[Page 2082]]
into account that large banking organizations may be parties to
substantially more covered agreements and many small banking
organizations may be party to no covered agreements. In addition, the
agencies have assumed that one NGEP is a party to each of these
agreements. After the agencies have gained some experience with
collecting information under the rule, they will re-examine the
paperwork burden.
There are other requirements for NGEPs, insured depository
institutions, and affiliates of an insured depository institutions
which are not considered to be paperwork requirements. These
requirements are discussed in detail in the regulation text and earlier
in this preamble.
OCC: OMB has reviewed and approved the collections of information
contained in the rule under control number 1557-0219, in accordance
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). OMB
clearance will expire on July 31, 2003.
The potential respondents include national banks and subsidiaries
of national banks, and NGEPs that are a party to a covered agreement
with any of the foregoing.
Estimated number of financial institution respondents: 2,400.
Estimated number of NGEP respondents: 4,800.
Estimated average annual burden hours for financial institution
respondents per agreement: 9 hours.
Estimated burden hours for NGEPs per agreement: 6 hours.
Estimated total annual reporting and disclosure burden: 72,000
hours.
Board: In accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3506; 5 CFR 1320, appendix A.1), the Board approved the rule
under the authority delegated to the Board by the OMB. The OMB control
number is 7100-0298. OMB clearance will expire on January 31, 2004.
The potential respondents are state member banks and subsidiaries
of state member banks; bank holding companies; affiliates of bank
holding companies other than savings associations, national banks,
insured nonmember banks, and subsidiaries of such associations and
banks, and NGEPs that are a party to a covered agreement with any of
the foregoing.
Estimated number of financial institution respondents: 994.
Estimated number of NGEP respondents: 1,988.
Estimated average annual burden hours for financial institution
respondents per agreement: 9 hours.
Estimated burden hours for NGEPs per agreement: 6 hours.
Estimated total annual reporting and disclosure burden: 29,820
hours.
FDIC: OMB has reviewed and approved the collections of information
contained in the rule under control number 3064-0139, in accordance
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). OMB
clearance will expire on July 31, 2003.
The potential respondents are insured nonmember banks, subsidiaries
of insured nonmember banks, and NGEPs that are a party to a covered
agreement with any of the foregoing.
Estimated number of financial institution respondents: 5,130.
Estimated number of NGEP respondents: 10,260.
Estimated average annual burden hours for financial institution
respondents per agreement: 9 hours.
Estimated burden hours for NGEPs per agreement: 6 hours.
Estimated total annual reporting and disclosure burden: 153,900
hours.
OTS: OMB has reviewed and approved the collections of information
contained in the rule under control number 1550-0105, in accordance
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). OMB
clearance will expire on July 31, 2003.
The potential respondents are savings associations and their
subsidiaries, savings and loan holding companies, affiliates of savings
associations and savings and loan holding companies other than bank
holding companies, banks and subsidiaries of bank holding companies,
and NGEPs that are a party to a covered agreement with any of the
foregoing.
Estimated number of financial institution respondents: 1,075.
Estimated number of NGEP respondents: 2,150.
Estimated average annual burden hours for financial institution
respondents per agreement: 9 hours.
Estimated burden hours for NGEPs respondents per agreement: 6
hours.
Estimated total annual reporting and disclosure burden: 32,250
hours.
The agencies have a continuing interest in the public's opinion
regarding collections of information. Members of the public may submit
comments, at any time, regarding any aspect of these collections of
information. Comments may be sent to:
OCC: Jessie Dunaway, Clearance Officer, Office of the Comptroller
of the Currency, 250 E Street, SW., Mailstop 8-4, Washington, DC 20219.
Board: Mary M. West, Federal Reserve Board Clearance Officer,
Mailstop 97, Division of Research and Statistics, Board of Governors of
the Federal Reserve System, Washington, DC 20551.
FDIC: Steven F. Hanft, Assistant Executive Secretary (Regulatory
Analysis), Federal Deposit Insurance Corporation, Room F-4080, 550 17th
Street, NW., Washington, DC 20429.
OTS: Dissemination Branch (1550-0106), Office of Thrift
Supervision, 1700 G Street, NW., Washington, DC 20552.
A copy of all comments should also be sent to the Office of
Management and Budget, Paperwork Reduction Project (include OMB control
number), Washington, DC 20503.
VII. Comments Regarding the Use of "Plain Language''
Section 722 of the Gramm-Leach-Bliley Act requires the agencies to
use "plain language'' in all final rules published after January 1,
2000. The agencies requested comments on whether the proposed rule
meets the plain language standard, whether changes should be made to
the organization or format of the rule and whether terms used in the
rule are clear.
Some commenters recommended that agencies move the section that
defines terms used in the rule to the front of the rule. The agencies
believe that including the substantive provisions of the rule,
including the key definitions of what agreements are "covered
agreements'' and "in fulfillment of the CRA,'' at the front of the
rule will assist users in rapidly identifying whether a particular
agreement meets the requirements to be a covered agreement.
Accordingly, the agencies have not moved the section including other
definitions to the front of the rule. Some commenters requested that
the agencies clarify the scope of certain terms used in the proposed
rule or examples included in the proposed rule or accompanying
SUPPLEMENTARY INFORMATION. These comments are addressed in Part III of
this preamble.
VIII. Unfunded Mandates Act of 1995
OCC: Section 202 of the Unfunded Mandates Act of 1995, 2 U.S.C.
1532 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
Federal mandate that may result in expenditures by state, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule.
This final rule does not apply to state, local or tribal
governments. The OCC is not required to assess the effects of its
regulatory actions on the private sector
[[Page 2083]]
to the extent those regulations incorporate requirements specifically
set forth in law. 2 U.S.C. 1531. The provisions in the final rule
incorporate the requirements of Section 711 of the GLBA. Moreover, as
described elsewhere in the Supplementary Information, the final rule
contains provisions intended to minimize costs and burdens on the
private sector entities to which it applies. Therefore, the OCC has
determined that this rule will not result in expenditures by State,
local, and tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year and, accordingly, has
not prepared a budgetary impact statement.
OTS: Section 202 of the Unfunded Mandates Reform Act of 1995, 2
U.S.C. 1532 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
Federal mandate that may result in expenditures by state, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule.
The final rule does not apply to state, local or tribal
governments. Although the final rule applies to insured depository
institutions, affiliates, and NGEPs, OTS is not required to assess the
effects of its regulatory actions on the private sector to the extent
such regulations incorporate requirements specifically set forth in
law. 2 U.S.C. 1531. Most of the final rule's provisions closely follow
the requirements of section 711 of the GLB Act. Moreover, OTS has
exercised its discretion, to the extent possible, to minimize costs and
burdens. Therefore, OTS has determined that this final rule will not
result in expenditures by State, local, and tribal governments, in the
aggregate, or by the private sector, of $100 million or more in any one
year. Accordingly, OTS has not prepared a budgetary impact statement or
specifically addressed the regulatory alternatives considered.
IX. Compliance Chart
Disclosure of Covered Agreements to the Public
------------------------------------------------------------------------
Insured Depository
NGEP Institution or
affiliate
------------------------------------------------------------------------
Which agreements must be Covered agreements Covered agreements
disclosed to the public? entered into after entered into after
11/12/99. 11/12/99.
When does my duty to 4/1/01............. 4/1/01.
disclose a covered
agreement to the public
begin?
What event triggers my An individual or An individual or
obligation to disclose a entity must request entity must request
covered agreement to a you to make a you to make a
member of the public? covered agreement covered agreement
available. available.
How do I disclose a covered You must promptly You must promptly
agreement to the public? make a copy of the make a copy of the
covered agreement covered agreement
available. You may available. You may
withhold withhold
information that is information that is
confidential and confidential and
proprietary under proprietary under
FOIA standards. FOIA standards.
However, you must However, you must
disclose certain disclose certain
enumerated items of enumerated items of
information information
identified at Sec. identified at Sec.
.6(b)(3). .6(b)(3).
An IDI or affiliate
may make an
agreement available
by placing a copy
of the covered
agreement in the
IDI's CRA public
file. The IDI must
make the agreement
available in
accordance with the
CRA rule on public
files.
When does my duty to Twelve months after Twelve months after
disclose a covered the end of the term the end of the term
agreement to the public of the agreement. of the agreement.
end? However, if your However if your
agreement agreement
terminated before 4/ terminated before 4/
1/01, your 1/01, your
obligation to obligation to
disclose terminates disclose terminates
4/1/02. 4/1/02.
------------------------------------------------------------------------
Disclosure of Covered Agreements to the Relevant Supervisory Agency
(RSA)
------------------------------------------------------------------------
Insured Depository
NGEP Institution or
affiliate
------------------------------------------------------------------------
What agreements must be Covered agreements Covered agreements
disclosed to the RSA?. entered into after entered into after
11/12/99. 11/12/99.
When does my duty to 4/1/01.............. 4/1/01.
disclose a covered
agreement to the RSA begin?.
When must I disclose a You must disclose You must disclose
covered agreement to the your covered your covered
RSA?. agreement to the agreement to the
RSA within 30 days RSA within 60 days
after the RSA of the end of the
requests a copy of calendar quarter in
the agreement. which the agreement
is entered into.
However, if your
agreement
terminated before 4/
1/01, you must
disclose your
agreement to the
RSA by 6/30/01.
[[Page 2084]]
How do I disclose a covered You must provide the You must provide the
agreement to the RSA?. RSA with a complete RSA with a complete
copy of the copy of the
agreement. If you agreement. If you
propose the propose the
withholding of any withholding of any
information that information that
can be withheld can be withheld
from disclosure from disclosure
under FOIA, you under FOIA, you
must also provide a must also provide a
public version of public version of
the agreement that the agreement that
excludes such excludes such
information and an information and an
explanation explanation
justifying the justifying the
exclusion. The exclusion. The
public version must public version must
include the include the
information information
identified at Sec. identified at Sec.
.6(b)(3). .6(b)(3).
Alternatively, you
may provide a list
of all covered
agreements that you
entered into during
the calendar
quarter, and
include the
information
described at Sec.
.6(d)(1)(ii). If
the RSA requests a
copy of an
agreement
referenced in the
list, you must
provide a copy of
the agreement and a
public version (if
applicable) within
seven calendar
days.
When does my duty to Twelve months after If you file a list,
disclose a covered the end of the term your obligation to
agreement to the RSA end?. of the agreement. provide a copy of
However, if your an agreement
agreement referenced in the
terminated before 4/ list terminates
1/01, you must make thirty-six months
the agreement after the end of
available to the the term of the
RSA until 4/l/02. agreement.
------------------------------------------------------------------------
Annual Reports
------------------------------------------------------------------------
Insured Depository
NGEP Institution or
Affiliate
------------------------------------------------------------------------
What agreements are subject Covered agreements Covered agreements
to annual reporting entered into on or entered into on or
requirements? after 5/12/00. after 5/12/00.
What periods require an You must file a You must file a
annual report? report for each report for each
fiscal year in fiscal year in
which you receive which you have any
or use funds or reportable data
other resources concerning the
under the covered covered agreement
agreement. described in Sec.
Alternatively, you .7(e)(1)(iii),
may file your (e)(1)(iv) or
report on a (e)(1)(vi).
calendar year basis. Alternatively, you
may file your
report on a
calendar year
basis.
When must I file the annual For fiscal years For fiscal years
report? that end on or that end on or
after 1/1/01, you after 1/1/01, you
must file the must file the
report with each report with each
RSA within six RSA within six
months after the months after the
end of the fiscal end of the fiscal
year covered by the year covered by the
report. report.
Alternatively, you If a NGEP has
may, within this provided its report
six month period, to you, you must
provide the report also file that
to an IDI or report with the
affiliate that is a RSA(s)on behalf of
party to the the NGEP within 30
agreement. You must days of receipt.
include written
instructions
requiring the IDI
or affiliate to
promptly forward
the report to the
RSA(s).
For fiscal years For fiscal years
that end between 5/ that end between 5/
12/00 and 12/31/00, 12/00 and 12/31/00,
you must file the you must file the
report with each report with each
RSA (or with an IDI RSA no later than 6/
or affiliate that 30/01.
is party to the
agreement) no later
than 6/30/01.
May I file a consolidated If you are a party If you are a party
annual report? to two or more to two or more
covered agreements, covered agreements,
you may file a you may file a
single consolidated single consolidated
annual report annual report
concerning all the concerning all the
covered agreements. covered agreements.
If you and your
affiliates are
parties to the same
covered agreement,
you may file a
single consolidated
annual report
relating to the
agreement.
What must I include in the You must include the You must include the
annual report? information information
described at Sec. described at Sec.
.7(d). .7(e).
------------------------------------------------------------------------
List of Subjects
12 CFR Part 35
Community development, Credit, Freedom of information, Investments,
National banks, Reporting and recordkeeping requirements.
12 CFR Part 207
Banks, Banking, Community development, Federal Reserve System,
Holding companies, Reporting and recordkeeping requirements.
12 CFR Part 346
Banks, Banking; Community development; and Reporting and
recordkeeping.
12 CFR Part 533
Administrative practice and procedure, Business and industry,
Community development, Confidential business information, Credit,
Freedom of information, Holding companies, Investments, Mortgages,
Nonprofit organizations, Penalties, Reporting and recordkeeping
requirements, Savings associations.
Office of the Comptroller of the Currency
12 CFR Chapter I
Authority and Issuance
For the reasons set out in the joint preamble, Title 12, Chapter I,
of the Code of Federal Regulations is amended by adding a new part 35
to read as follows:
[[Page 2085]]
PART 35--DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS
Sec.
35.1 Purpose and scope of this part.
35.2 Definition of covered agreement.
35.3 CRA communications.
35.4 Fulfillment of the CRA.
35.5 Related agreements considered a single agreement.
35.6 Disclosure of covered agreements.
35.7 Annual reports.
35.8 Release of information under FOIA.
35.9 Compliance provisions.
35.10 Transition provisions.
35.11 Other definitions and rules of construction used in this
part.
Authority: 12 U.S.C. 1831y.
Sec. 35.1 Purpose and scope of this part.
(a) General. This part implements section 711 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1831y). That section requires any nongovernmental
entity or person, insured depository institution, or affiliate of an
insured depository institution that enters into a covered agreement
to--
(1) Make the covered agreement available to the public and the
appropriate Federal banking agency; and
(2) File an annual report with the appropriate Federal banking
agency concerning the covered agreement.
(b) Scope of this part. The provisions of this part apply to
national banks, subsidiaries of national banks, and nongovernmental
entities or persons that enter into covered agreements with a national
bank or a subsidiary of a national bank.
(c) Relation to Community Reinvestment Act. This part does not
affect in any way the Community Reinvestment Act of 1977 (12 U.S.C.
2901 et seq.), part 25 of this chapter (Community Reinvestment Act and
Interstate Deposit Production Regulations) or the OCC's interpretations
or administration of that Act or regulation.
(d) Examples.--(1) The examples in this part are not exclusive.
Compliance with an example, to the extent applicable, constitutes
compliance with this part.
(2) Examples in a paragraph illustrate only the issue described in
the paragraph and do not illustrate any other issues that may arise in
this part.
Sec. 35.2 Definition of covered agreement.
(a) General definition of covered agreement. A covered agreement is
any contract, arrangement, or understanding that meets all of the
following criteria--
(1) The agreement is in writing.
(2) The parties to the agreement include--
(i) One or more insured depository institutions or affiliates of an
insured depository institution; and
(ii) One or more nongovernmental entities or persons (referred to
hereafter as NGEPs).
(3) The agreement provides for the insured depository institution
or any affiliate to--
(i) Provide to one or more individuals or entities (whether or not
parties to the agreement) cash payments, grants, or other consideration
(except loans) that have an aggregate value of more than $10,000 in any
calendar year; or
(ii) Make to one or more individuals or entities (whether or not
parties to the agreement) loans that have an aggregate principal amount
of more than $50,000 in any calendar year.
(4) The agreement is made pursuant to, or in connection with, the
fulfillment of the Community Reinvestment Act of 1977 (12 U.S.C. 2901
et seq.) (CRA), as defined in Sec. 35.4.
(5) The agreement is with a NGEP that has had a CRA communication
as described in Sec. 35.3 prior to entering into the agreement.
(b) Examples concerning written arrangements or understandings.--
(1) Example 1. A NGEP meets with an insured depository institution and
states that the institution needs to make more community development
investments in the NGEP's community. The NGEP and insured depository
institution do not reach an agreement concerning the community
development investments the institution should make in the community,
and the parties do not reach any mutual arrangement or understanding.
Two weeks later, the institution unilaterally issues a press release
announcing that it has established a general goal of making $100
million of community development grants in low- and moderate-income
neighborhoods served by the insured depository institution over the
next 5 years. The NGEP is not identified in the press release. The
press release is not a written arrangement or understanding.
(2) Example 2. A NGEP meets with an insured depository institution
and states that the institution needs to offer new loan programs in the
NGEP's community. The NGEP and the insured depository institution reach
a mutual arrangement or understanding that the institution will provide
additional loans in the NGEP's community. The institution tells the
NGEP that it will issue a press release announcing the program. Later,
the insured depository institution issues a press release announcing
the loan program. The press release incorporates the key terms of the
understanding reached between the NGEP and the insured depository
institution. The written press release reflects the mutual arrangement
or understanding of the NGEP and the insured depository institution and
is, therefore, a written arrangement or understanding.
(3) Example 3. An NGEP sends a letter to an insured depository
institution requesting that the institution provide a $15,000 grant to
the NGEP. The insured depository institution responds in writing and
agrees to provide the grant in connection with its annual grant
program. The exchange of letters constitutes a written arrangement or
understanding.
(c) Loan agreements that are not covered agreements. A covered
agreement does not include--
(1) Any individual loan that is secured by real estate; or
(2) Any specific contract or commitment for a loan or extension of
credit to an individual, business, farm, or other entity, or group of
such individuals or entities, if--
(i) The funds are loaned at rates that are not substantially below
market rates; and
(ii) The loan application or other loan documentation does not
indicate that the borrower intends or is authorized to use the borrowed
funds to make a loan or extension of credit to one or more third
parties.
(d) Examples concerning loan agreements.--(1) Example 1. An insured
depository institution provides an organization with a $1 million loan
that is documented in writing and is secured by real estate owned or
to-be-acquired by the organization. The agreement is an individual
mortgage loan and is exempt from coverage under paragraph (c)(1) of
this section, regardless of the interest rate on the loan or whether
the organization intends or is authorized to re-loan the funds to a
third party.
(2) Example 2. An insured depository institution commits to provide
a $500,000 line of credit to a small business that is documented by a
written agreement. The loan is made at rates that are within the range
of rates offered by the institution to similarly situated small
businesses in the market and the loan documentation does not indicate
that the small business intends or is authorized to re-lend the
borrowed funds. The agreement is exempt from coverage under paragraph
(c)(2) of this section.
(3) Example 3. An insured depository institution offers small
business loans that are guaranteed by the Small Business Administration
(SBA). A small business obtains a $75,000 loan,
[[Page 2086]]
documented in writing, from the institution under the institution's SBA
loan program. The loan documentation does not indicate that the
borrower intends or is authorized to re-lend the funds. Although the
rate charged on the loan is well below that charged by the institution
on commercial loans, the rate is within the range of rates that the
institution would charge a similarly situated small business for a
similar loan under the SBA loan program. Accordingly, the loan is not
made at substantially below market rates and is exempt from coverage
under paragraph (c)(2) of this section.
(4) Example 4. A bank holding company enters into a written
agreement with a community development organization that provides that
insured depository institutions owned by the bank holding company will
make $250 million in small business loans in the community over the
next 5 years. The written agreement is not a specific contract or
commitment for a loan or an extension of credit and, thus, is not
exempt from coverage under paragraph (c)(2) of this section. Each small
business loan made by the insured depository institution pursuant to
this general commitment would, however, be exempt from coverage if the
loan is made at rates that are not substantially below market rates and
the loan documentation does not indicate that the borrower intended or
was authorized to re-lend the funds.
(e) Agreements that include exempt loan agreements. If an agreement
includes a loan, extension of credit or loan commitment that, if
documented separately, would be exempt under paragraph (c) of this
section, the exempt loan, extension of credit or loan commitment may be
excluded for purposes of determining whether the agreement is a covered
agreement.
(f) Determining annual value of agreements that lack schedule of
disbursements. For purposes of paragraph (a)(3) of this section, a
multi-year agreement that does not include a schedule for the
disbursement of payments, grants, loans or other consideration by the
insured depository institution or affiliate, is considered to have a
value in the first year of the agreement equal to all payments, grants,
loans and other consideration to be provided at any time under the
agreement.
Sec. 35.3 CRA communications.
(a) Definition of CRA communication. A CRA communication is any of
the following--
(1) Any written or oral comment or testimony provided to a Federal
banking agency concerning the adequacy of the performance under the CRA
of the insured depository institution, any affiliated insured
depository institution, or any CRA affiliate.
(2) Any written comment submitted to the insured depository
institution that discusses the adequacy of the performance under the
CRA of the institution and must be included in the institution's CRA
public file.
(3) Any discussion or other contact with the insured depository
institution or any affiliate about--
(i) Providing (or refraining from providing) written or oral
comments or testimony to any Federal banking agency concerning the
adequacy of the performance under the CRA of the insured depository
institution, any affiliated insured depository institution, or any CRA
affiliate;
(ii) Providing (or refraining from providing) written comments to
the insured depository institution that concern the adequacy of the
institution's performance under the CRA and must be included in the
institution's CRA public file; or
(iii) The adequacy of the performance under the CRA of the insured
depository institution, any affiliated insured depository institution,
or any CRA affiliate.
(b) Discussions or contacts that are not CRA communications--(1)
Timing of contacts with a Federal banking agency. An oral or written
communication with a Federal banking agency is not a CRA communication
if it occurred more than 3 years before the parties entered into the
agreement.
(2) Timing of contacts with insured depository institutions and
affiliates. A communication with an insured depository institution or
affiliate is not a CRA communication if the communication occurred--
(i) More than 3 years before the parties entered into the
agreement, in the case of any written communication;
(ii) More than 3 years before the parties entered into the
agreement, in the case of any oral communication in which the NGEP
discusses providing (or refraining from providing) comments or
testimony to a Federal banking agency or written comments that must be
included in the institution's CRA public file in connection with a
request to, or agreement by, the institution or affiliate to take (or
refrain from taking) any action that is in fulfillment of the CRA; or
(iii) More than 1 year before the parties entered into the
agreement, in the case of any other oral communication not described in
paragraph (b)(2)(ii).
(3) Knowledge of communication by insured depository institution or
affiliate.--(i) A communication is only a CRA communication under
paragraph (a) of this section if the insured depository institution or
its affiliate has knowledge of the communication under this paragraph
(b)(3)(ii) or (b)(3)(iii) of this section.
(ii) Communication with insured depository institution or
affiliate. An insured depository institution or affiliate has knowledge
of a communication by the NGEP to the institution or its affiliate
under this paragraph only if one of the following representatives of
the insured depository institution or any affiliate has knowledge of
the communication--
(A) An employee who approves, directs, authorizes, or negotiates
the agreement with the NGEP; or
(B) An employee designated with responsibility for compliance with
the CRA or executive officer if the employee or executive officer knows
that the institution or affiliate is negotiating, intends to negotiate,
or has been informed by the NGEP that it expects to request that the
institution or affiliate negotiate an agreement with the NGEP.
(iii) Other communications. An insured depository institution or
affiliate is deemed to have knowledge of--
(A) Any testimony provided to a Federal banking agency at a public
meeting or hearing;
(B) Any comment submitted to a Federal banking agency that is
conveyed in writing by the agency to the insured depository institution
or affiliate; and
(C) Any written comment submitted to the insured depository
institution that must be and is included in the institution's CRA
public file.
(4) Communication where NGEP has knowledge. A NGEP has a CRA
communication with an insured depository institution or affiliate only
if any of the following individuals has knowledge of the
communication--
(i) A director, employee, or member of the NGEP who approves,
directs, authorizes, or negotiates the agreement with the insured
depository institution or affiliate;
(ii) A person who functions as an executive officer of the NGEP and
who knows that the NGEP is negotiating or intends to negotiate an
agreement with the insured depository institution or affiliate; or
(iii) Where the NGEP is an individual, the NGEP.
(c) Examples of CRA communications.--(1) Examples of actions that
are CRA communications. The following are examples of CRA
[[Page 2087]]
communications. These examples are not exclusive and assume that the
communication occurs within the relevant time period as described in
paragraph (b)(1) or (b)(2) of this section and the appropriate
representatives have knowledge of the communication as specified in
paragraphs (b)(3) and (b)(4) of this section.
(i) Example 1. A NGEP files a written comment with a Federal
banking agency that states than an insured depository institution
successfully addresses the credit needs of its community. The written
comment is in response to a general request from the agency for
comments on an application of the insured depository institution to
open a new branch and a copy of the comment is provided to the
institution.
(ii) Example 2. A NGEP meets with an executive officer of an
insured depository institution and states that the institution must
improve its CRA performance.
(iii) Example 3. A NGEP meets with an executive officer of an
insured depository institution and states that the institution needs to
make more mortgage loans in low- and moderate-income neighborhoods in
its community.
(iv) Example 4. A bank holding company files an application with a
Federal banking agency to acquire an insured depository institution.
Two weeks later, the NGEP meets with an executive officer of the bank
holding company to discuss the adequacy of the performance under the
CRA of the target insured depository institution. The insured
depository institution was an affiliate of the bank holding company at
the time the NGEP met with the target institution. (See Sec. 35.11(a).)
Accordingly, the NGEP had a CRA communication with an affiliate of the
bank holding company.
(2) Examples of actions that are not CRA communications. The
following are examples of actions that are not by themselves CRA
communications. These examples are not exclusive.
(i) Example 1. A NGEP provides to a Federal banking agency comments
or testimony concerning an insured depository institution or affiliate
in response to a direct request by the agency for comments or testimony
from that NGEP. Direct requests for comments or testimony do not
include a general invitation by a Federal banking agency for comments
or testimony from the public in connection with a CRA performance
evaluation of, or application for a deposit facility (as defined in
section 803 of the CRA (12 U.S.C. 2902(3)) by, an insured depository
institution or an application by a company to acquire an insured
depository institution.
(ii) Example 2. A NGEP makes a statement concerning an insured
depository institution or affiliate at a widely attended conference or
seminar regarding a general topic. A public or private meeting, public
hearing, or other meeting regarding one or more specific institutions,
affiliates or transactions involving an application for a deposit
facility is not considered a widely attended conference or seminar.
(iii) Example 3. A NGEP, such as a civil rights group, community
group providing housing and other services in low- and moderate-income
neighborhoods, veterans organization, community theater group, or youth
organization, sends a fundraising letter to insured depository
institutions and to other businesses in its community. The letter
encourages all businesses in the community to meet their obligation to
assist in making the local community a better place to live and work by
supporting the fundraising efforts of the NGEP.
(iv) Example 4. A NGEP discusses with an insured depository
institution or affiliate whether particular loans, services,
investments, community development activities, or other activities are
generally eligible for consideration by a Federal banking agency under
the CRA. The NGEP and insured depository institution or affiliate do
not discuss the adequacy of the CRA performance of the insured
depository institution or affiliate.
(v) Example 5. A NGEP engaged in the sale or purchase of loans in
the secondary market sends a general offering circular to financial
institutions offering to sell or purchase a portfolio of loans. An
insured depository institution that receives the offering circular
discusses with the NGEP the types of loans included in the loan pool,
whether such loans are generally eligible for consideration under the
CRA, and which loans are made to borrowers in the institution's local
community. The NGEP and insured depository institution do not discuss
the adequacy of the institution's CRA performance.
(d) Multiparty covered agreements.--(1) A NGEP that is a party to a
covered agreement that involves multiple NGEPs is not required to
comply with the requirements of this part if--
(i) The NGEP has not had a CRA communication; and
(ii) No representative of the NGEP identified in paragraph (b)(4)
of this section has knowledge at the time of the agreement that another
NGEP that is a party to the agreement has had a CRA communication.
(2) An insured depository institution or affiliate that is a party
to a covered agreement that involves multiple insured depository
institutions or affiliates is not required to comply with the
disclosure and annual reporting requirements in Secs. 35.6 and 35.7
if--
(i) No NGEP that is a party to the agreement has had a CRA
communication concerning the insured depository institution or any
affiliate; and
(ii) No representative of the insured depository institution or any
affiliate identified in paragraph (b)(3) of this section has knowledge
at the time of the agreement that an NGEP that is a party to the
agreement has had a CRA communication concerning any other insured
depository institution or affiliate that is a party to the agreement.
Sec. 35.4 Fulfillment of the CRA.
(a) List of factors that are in fulfillment of the CRA. Fulfillment
of the CRA, for purposes of this part, means the following list of
factors--
(1) Comments to a Federal banking agency or included in CRA public
file. Providing or refraining from providing written or oral comments
or testimony to any Federal banking agency concerning the performance
under the CRA of an insured depository institution or CRA affiliate
that is a party to the agreement or an affiliate of a party to the
agreement or written comments that are required to be included in the
CRA public file of any such insured depository institution; or
(2) Activities given favorable CRA consideration. Performing any of
the following activities if the activity is of the type that is likely
to receive favorable consideration by a Federal banking agency in
evaluating the performance under the CRA of the insured depository
institution that is a party to the agreement or an affiliate of a party
to the agreement--
(i) Home-purchase, home-improvement, small business, small farm,
community development, and consumer lending, as described in Sec. 25.22
(12 CFR 25.22), including loan purchases, loan commitments, and letters
of credit;
(ii) Making investments, deposits, or grants, or acquiring
membership shares, that have as their primary purpose community
development, as described in Sec. 25.23 (12 CFR 25.23);
(iii) Delivering retail banking services, as described in
Sec. 25.24(d) (12 CFR 25.24(d));
[[Page 2088]]
(iv) Providing community development services, as described in
Sec. 25.24(e) (12 CFR 25.24(e));
(v) In the case of a wholesale or limited-purpose insured
depository institution, community development lending, including
originating and purchasing loans and making loan commitments and
letters of credit, making qualified investments, or providing community
development services, as described in Sec. 25.25(c) (12 CFR 25.25(c));
(vi) In the case of a small insured depository institution, any
lending or other activity described in Sec. 25.26(a) (12 CFR 25.26(a));
or
(vii) In the case of an insured depository institution that is
evaluated on the basis of a strategic plan, any element of the
strategic plan, as described in Sec. 25.27(f) (12 CFR 25.27(f)).
(b) Agreements relating to activities of CRA affiliates. An insured
depository institution or affiliate that is a party to a covered
agreement that concerns any activity described in paragraph (a) of this
section of a CRA affiliate must, prior to the time the agreement is
entered into, notify each NGEP that is a party to the agreement that
the agreement concerns a CRA affiliate.
Sec. 35.5 Related agreements considered a single agreement.
The following rules must be applied in determining whether an
agreement is a covered agreement under Sec. 35.2.
(a) Agreements entered into by same parties. All written agreements
to which an insured depository institution or an affiliate of the
insured depository institution is a party shall be considered to be a
single agreement if the agreements--
(1) Are entered into with the same NGEP;
(2) Were entered into within the same 12-month period; and
(3) Are each in fulfillment of the CRA.
(b) Substantively related contracts. All written contracts to which
an insured depository institution or an affiliate of the insured
depository institution is a party shall be considered to be a single
agreement, without regard to whether the other parties to the contracts
are the same or whether each such contract is in fulfillment of the
CRA, if the contracts were negotiated in a coordinated fashion and a
NGEP is a party to each contract.
Sec. 35.6 Disclosure of covered agreements.
(a) Applicability date. This section applies only to covered
agreements entered into after November 12, 1999.
(b) Disclosure of covered agreements to the public--(1) Disclosure
required. Each NGEP and each insured depository institution or
affiliate that enters into a covered agreement must promptly make a
copy of the covered agreement available to any individual or entity
upon request.
(2) Nondisclosure of confidential and proprietary information
permitted. In responding to a request for a covered agreement from any
individual or entity under paragraph (b)(1) of this section, a NGEP,
insured depository institution, or affiliate may withhold from public
disclosure confidential or proprietary information that the party
believes the relevant supervisory agency could withhold from disclosure
under the Freedom of Information Act (5 U.S.C. 552 et seq.) (FOIA).
(3) Information that must be disclosed. Notwithstanding paragraph
(b)(2) of this section, a party must disclose any of the following
information that is contained in a covered agreement--
(i) The names and addresses of the parties to the agreement;
(ii) The amount of any payments, fees, loans, or other
consideration to be made or provided by any party to the agreement;
(iii) Any description of how the funds or other resources provided
under the agreement are to be used;
(iv) The term of the agreement (if the agreement establishes a
term); and
(v) Any other information that the relevant supervisory agency
determines is not properly exempt from public disclosure.
(4) Request for review of withheld information. Any individual or
entity may request that the relevant supervisory agency review whether
any information in a covered agreement withheld by a party must be
disclosed. Any requests for agency review of withheld information must
be filed, and will be processed in accordance with, the relevant
supervisory agency's rules concerning the availability of information
(see subpart B of part 4 of the OCC's rules regarding the availability
of information under the Freedom of Information Act (12 CFR part 4,
subpart B).
(5) Duration of obligation. The obligation to disclose a covered
agreement to the public terminates 12 months after the end of the term
of the agreement.
(6) Reasonable copy and mailing fees. Each NGEP and each insured
depository institution or affiliate may charge an individual or entity
that requests a copy of a covered agreement a reasonable fee not to
exceed the cost of copying and mailing the agreement.
(7) Use of CRA public file by insured depository institution or
affiliate. An insured depository institution and any affiliate of an
insured depository institution may fulfill its obligation under this
paragraph (b) by placing a copy of the covered agreement in the insured
depository institution's CRA public file if the institution makes the
agreement available in accordance with the procedures set forth in
Sec. 25.43 (12 CFR 25.43);
(c) Disclosure by NGEPs of covered agreements to the relevant
supervisory agency.--(1) Each NGEP that is a party to a covered
agreement must provide the following within 30 days of receiving a
request from the relevant supervisory agency--
(i) A complete copy of the agreement; and
(ii) In the event the NGEP proposes the withholding of any
information contained in the agreement in accordance with paragraph
(b)(2) of this section, a public version of the agreement that excludes
such information and an explanation justifying the exclusions. Any
public version must include the information described in paragraph
(b)(3) of this section.
(2) The obligation of a NGEP to provide a covered agreement to the
relevant supervisory agency terminates 12 months after the end of the
term of the covered agreement.
(d) Disclosure by insured depository institution or affiliate of
covered agreements to the relevant supervisory agency.--(1) In general.
Within 60 days of the end of each calendar quarter, each insured
depository institution and affiliate must provide each relevant
supervisory agency with--
(i)(A) A complete copy of each covered agreement entered into by
the insured depository institution or affiliate during the calendar
quarter; and
(B) In the event the institution or affiliate proposes the
withholding of any information contained in the agreement in accordance
with paragraph (b)(2) of this section, a public version of the
agreement that excludes such information (other than any information
described in paragraph (b)(3) of this section) and an explanation
justifying the exclusions; or
(ii) A list of all covered agreements entered into by the insured
depository institution or affiliate during the calendar quarter that
contains--
(A) The name and address of each insured depository institution or
affiliate that is a party to the agreement;
(B) The name and address of each NGEP that is a party to the
agreement;
[[Page 2089]]
(C) The date the agreement was entered into;
(D) The estimated total value of all payments, fees, loans and
other consideration to be provided by the institution or any affiliate
of the institution under the agreement; and
(E) The date the agreement terminates.
(2) Prompt filing of covered agreements contained in list
required.--(i) If an insured depository institution or affiliate files
a list of the covered agreements entered into by the institution or
affiliate pursuant to paragraph (d)(1)(ii) of this section, the
institution or affiliate must provide any relevant supervisory agency a
complete copy and public version of any covered agreement referenced in
the list within 7 calendar days of receiving a request from the agency
for a copy of the agreement.
(ii) The obligation of an insured depository institution or
affiliate to provide a covered agreement to the relevant supervisory
agency under this paragraph (d)(2) terminates 36 months after the end
of the term of the agreement.
(3) Joint filings. In the event that 2 or more insured depository
institutions or affiliates are parties to a covered agreement, the
insured depository institution(s) and affiliate(s) may jointly file the
documents required by this paragraph (d). Any joint filing must
identify the insured depository institution(s) and affiliate(s) for
whom the filings are being made.
Sec. 35.7 Annual reports.
(a) Applicability date. This section applies only to covered
agreements entered into on or after May 12, 2000.
(b) Annual report required. Each NGEP and each insured depository
institution or affiliate that is a party to a covered agreement must
file an annual report with each relevant supervisory agency concerning
the disbursement, receipt, and uses of funds or other resources under
the covered agreement.
(c) Duration of reporting requirement--(1) NGEPs. A NGEP must file
an annual report for a covered agreement for any fiscal year in which
the NGEP receives or uses funds or other resources under the agreement.
(2) Insured depository institutions and affiliates. An insured
depository institution or affiliate must file an annual report for a
covered agreement for any fiscal year in which the institution or
affiliate--
(i) provides or receives any payments, fees, or loans under the
covered agreement that must be reported under paragraphs (e)(1)(iii)
and (iv) of this section; or
(ii) has data to report on loans, investments, and services
provided by a party to the covered agreement under the covered
agreement under paragraph (e)(1)(vi) of this section.
(d) Annual reports filed by NGEP--(1) Contents of report. The
annual report filed by a NGEP under this section must include the
following--
(i) The name and mailing address of the NGEP filing the report;
(ii) Information sufficient to identify the covered agreement for
which the annual report is being filed, such as by providing the names
of the parties to the agreement and the date the agreement was entered
into or by providing a copy of the agreement;
(iii) The amount of funds or resources received under the covered
agreement during the fiscal year; and
(iv) A detailed, itemized list of how any funds or resources
received by the NGEP under the covered agreement were used during the
fiscal year, including the total amount used for--
(A) Compensation of officers, directors, and employees;
(B) Administrative expenses;
(C) Travel expenses;
(D) Entertainment expenses;
(E) Payment of consulting and professional fees; and
(F) Other expenses and uses (specify expense or use).
(2) More detailed reporting of uses of funds or resources
permitted--(i) In general. If a NGEP allocated and used funds received
under a covered agreement for a specific purpose, the NGEP may fulfill
the requirements of paragraph (d)(1)(iv) of this section with respect
to such funds by providing--
(A) A brief description of each specific purpose for which the
funds or other resources were used; and
(B) The amount of funds or resources used during the fiscal year
for each specific purpose.
(ii) Specific purpose defined. A NGEP allocates and uses funds for
a specific purpose if the NGEP receives and uses the funds for a
purpose that is more specific and limited than the categories listed in
paragraph (d)(1)(iv) of this section.
(3) Use of other reports. The annual report filed by a NGEP may
consist of or incorporate a report prepared for any other purpose, such
as the Internal Revenue Service Return of Organization Exempt From
Income Tax on Form 990, or any other Internal Revenue Service form,
state tax form, report to members or shareholders, audited or unaudited
financial statements, audit report, or other report, so long as the
annual report filed by the NGEP contains all of the information
required by this paragraph (d).
(4) Consolidated reports permitted. A NGEP that is a party to 2 or
more covered agreements may file with each relevant supervisory agency
a single consolidated annual report covering all the covered
agreements. Any consolidated report must contain all the information
required by this paragraph (d). The information reported under
paragraphs (d)(1)(iv) and (d)(2) of this section may be reported on an
aggregate basis for all covered agreements.
(5) Examples of annual report requirements for NGEPs--(i) Example
1. A NGEP receives an unrestricted grant of $15,000 under a covered
agreement, includes the funds in its general operating budget and uses
the funds during its fiscal year. The NGEP's annual report for the
fiscal year must provide the name and mailing address of the NGEP,
information sufficient to identify the covered agreement, and state
that the NGEP received $15,000 during the fiscal year. The report must
also indicate the total expenditures made by the NGEP during the fiscal
year for compensation, administrative expenses, travel expenses,
entertainment expenses, consulting and professional fees, and other
expenses and uses. The NGEP's annual report may provide this
information by submitting an Internal Revenue Service Form 990 that
includes the required information. If the Internal Revenue Service Form
does not include information for all of the required categories listed
in this part, the NGEP must report the total expenditures in the
remaining categories either by providing that information directly or
by providing another form or report that includes the required
information.
(ii) Example 2. An organization receives $15,000 from an insured
depository institution under a covered agreement and allocates and uses
the $15,000 during the fiscal year to purchase computer equipment to
support its functions. The organization's annual report must include
the name and address of the organization, information sufficient to
identify the agreement, and a statement that the organization received
$15,000 during the year. In addition, since the organization allocated
and used the funds for a specific purpose that is more narrow and
limited than the categories of expenses included in the detailed,
itemized list of expenses, the organization would have the option of
providing either the total amount it used during the year for each
category of expenses included in paragraph (d)(1)(iv) of this section,
or a statement that it used the $15,000 to purchase
[[Page 2090]]
computer equipment and a brief description of the equipment purchased.
(iii) Example 3. A community group receives $50,000 from an insured
depository institution under a covered agreement. During its fiscal
year, the community group specifically allocates and uses $5,000 of the
funds to pay for a particular business trip and uses the remaining
$45,000 for general operating expenses. The group's annual report for
the fiscal year must include the name and address of the group,
information sufficient to identify the agreement, and a statement that
the group received $50,000. Because the group did not allocate and use
all of the funds for a specific purpose, the group's annual report must
provide the total amount of funds it used during the year for each
category of expenses included in paragraph (d)(1)(iv) of this section.
The group's annual report also could state that it used $5,000 for a
particular business trip and include a brief description of the trip.
(iv) Example 4. A community development organization is a party to
two separate covered agreements with two unaffiliated insured
depository institutions. Under each agreement, the organization
receives $15,000 during its fiscal year and uses the funds to support
its activities during that year. If the organization elects to file a
consolidated annual report, the consolidated report must identify the
organization and the two covered agreements, state that the
organization received $15,000 during the fiscal year under each
agreement, and provide the total amount that the organization used
during the year for each category of expenses included in paragraph
(d)(1)(iv) of this section.
(e) Annual report filed by insured depository institution or
affiliate--(1) General. The annual report filed by an insured
depository institution or affiliate must include the following--
(i) The name and principal place of business of the insured
depository institution or affiliate filing the report;
(ii) Information sufficient to identify the covered agreement for
which the annual report is being filed, such as by providing the names
of the parties to the agreement and the date the agreement was entered
into or by providing a copy of the agreement;
(iii) The aggregate amount of payments, aggregate amount of fees,
and aggregate amount of loans provided by the insured depository
institution or affiliate under the covered agreement to any other party
to the agreement during the fiscal year;
(iv) The aggregate amount of payments, aggregate amount of fees,
and aggregate amount of loans received by the insured depository
institution or affiliate under the covered agreement from any other
party to the agreement during the fiscal year;
(v) A general description of the terms and conditions of any
payments, fees, or loans reported under paragraphs (e)(1)(iii) and (iv)
of this section, or, in the event such terms and conditions are set
forth--
(A) In the covered agreement, a statement identifying the covered
agreement and the date the agreement (or a list identifying the
agreement) was filed with the relevant supervisory agency; or
(B) In a previous annual report filed by the insured depository
institution or affiliate, a statement identifying the date the report
was filed with the relevant supervisory agency; and
(vi) The aggregate amount and number of loans, aggregate amount and
number of investments, and aggregate amount of services provided under
the covered agreement to any individual or entity not a party to the
agreement--
(A) By the insured depository institution or affiliate during its
fiscal year; and
(B) By any other party to the agreement, unless such information is
not known to the insured depository institution or affiliate filing the
report or such information is or will be contained in the annual report
filed by another party under this section.
(2) Consolidated reports permitted.--(i) Party to multiple
agreements. An insured depository institution or affiliate that is a
party to 2 or more covered agreements may file a single consolidated
annual report with each relevant supervisory agency concerning all the
covered agreements.
(ii) Affiliated entities party to the same agreement. An insured
depository institution and its affiliates that are parties to the same
covered agreement may file a single consolidated annual report relating
to the agreement with each relevant supervisory agency for the covered
agreement.
(iii) Content of report. Any consolidated annual report must
contain all the information required by this paragraph (e). The amounts
and data required to be reported under paragraphs (e)(1)(iv) and (vi)
of this section may be reported on an aggregate basis for all covered
agreements.
(f) Time and place of filing.--(1) General. Each party must file
its annual report with each relevant supervisory agency for the covered
agreement no later than six months following the end of the fiscal year
covered by the report.
(2) Alternative method of fulfilling annual reporting requirement
for a NGEP.--(i) A NGEP may fulfill the filing requirements of this
section by providing the following materials to an insured depository
institution or affiliate that is a party to the agreement no later than
six months following the end of the NGEP's fiscal year--
(A) A copy of the NGEP's annual report required under paragraph (d)
of this section for the fiscal year; and
(B) Written instructions that the insured depository institution or
affiliate promptly forward the annual report to the relevant
supervisory agency or agencies on behalf of the NGEP.
(ii) An insured depository institution or affiliate that receives
an annual report from a NGEP pursuant to paragraph (f)(2)(i) of this
section must file the report with the relevant supervisory agency or
agencies on behalf of the NGEP within 30 days.
Sec. 35.8 Release of information under FOIA.
The OCC will make covered agreements and annual reports available
to the public in accordance with the Freedom of Information Act (5
U.S.C. 552 et seq.) and the OCC's rules regarding the availability of
information under the Freedom of Information Act (12 CFR part 4,
subpart B). A party to a covered agreement may request confidential
treatment of proprietary and confidential information in a covered
agreement or an annual report under those procedures.
Sec. 35.9 Compliance provisions.
(a) Willful failure to comply with disclosure and reporting
obligations.--(1) If the OCC determines that a NGEP has willfully
failed to comply in a material way with Secs. 35.6 or 35.7, the OCC
will notify the NGEP in writing of that determination and provide the
NGEP a period of 90 days (or such longer period as the OCC finds to be
reasonable under the circumstances) to comply.
(2) If the NGEP does not comply within the time period established
by the OCC, the agreement shall thereafter be unenforceable by that
NGEP by operation of section 48 of the Federal Deposit Insurance Act
(12 U.S.C. 1831y).
(3) The OCC may assist any insured depository institution or
affiliate that is a party to a covered agreement that is unenforceable
by a NGEP by operation of section 48 of the Federal Deposit Insurance
Act (12 U.S.C. 1831y) in identifying a successor to assume the NGEP's
responsibilities under the agreement.
(b) Diversion of funds. If a court or other body of competent
jurisdiction
[[Page 2091]]
determines that funds or resources received under a covered agreement
have been diverted contrary to the purposes of the covered agreement
for an individual's personal financial gain, the OCC may take either or
both of the following actions--
(1) Order the individual to disgorge the diverted funds or
resources received under the agreement;
(2) Prohibit the individual from being a party to any covered
agreement for a period not to exceed 10 years.
(c) Notice and opportunity to respond. Before making a
determination under paragraph (a)(1) of this section, or taking any
action under paragraph (b) of this section, the OCC will provide
written notice and an opportunity to present information to the OCC
concerning any relevant facts or circumstances relating to the matter.
(d) Inadvertent or de minimis errors. Inadvertent or de minimis
errors in annual reports or other documents filed with the OCC under
Secs. 35.6 or 35.7 will not subject the reporting party to any penalty.
(e) Enforcement of provisions in covered agreements. No provision
of this part shall be construed as authorizing the OCC to enforce the
provisions of any covered agreement.
Sec. 35.10 Transition provisions.
(a) Disclosure of covered agreements entered into before the
effective date of this part. The following disclosure requirements
apply to covered agreements that were entered into after November 12,
1999, and that terminated before April 1, 2001.
(1) Disclosure to the public. Each NGEP and each insured depository
institution or affiliate that was a party to the agreement must make
the agreement available to the public under Sec. 35.6 until at least
April 1, 2002.
(2) Disclosure to the relevant supervisory agency.--(i) Each NGEP
that was a party to the agreement must make the agreement available to
the relevant supervisory agency under Sec. 35.6 until at least April 1,
2002.
(ii) Each insured depository institution or affiliate that was a
party to the agreement must, by June 30, 2001, provide each relevant
supervisory agency either--
(A) A copy of the agreement under Sec. 35.6(d)(1)(i); or
(B) The information described in Sec. 35.6(d)(1)(ii) for each
agreement.
(b) Filing of annual reports that relate to fiscal years ending on
or before December 31, 2000. In the event that a NGEP, insured
depository institution or affiliate has any information to report under
Sec. 35.7 for a fiscal year that ends on or before December 31, 2000,
and that concerns a covered agreement entered into between May 12,
2000, and December 31, 2000, the annual report for that fiscal year
must be provided no later than June 30, 2001, to--
(1) Each relevant supervisory agency; or
(2) In the case of a NGEP, to an insured depository institution or
affiliate that is a party to the agreement in accordance with
Sec. 35.7(f)(2).
Sec. 35.11 Other definitions and rules of construction used in this
part.
(a) Affiliate. "Affiliate'' means--
(1) Any company that controls, is controlled by, or is under common
control with another company; and
(2) For the purpose of determining whether an agreement is a
covered agreement under Sec. 35.2, an "affiliate'' includes any
company that would be under common control or merged with another
company on consummation of any transaction pending before a Federal
banking agency at the time--
(i) The parties enter into the agreement; and
(ii) The NGEP that is a party to the agreement makes a CRA
communication, as described in Sec. 35.3.
(b) Control. "Control'' is defined in section 2(a) of the Bank
Holding Company Act (12 U.S.C. 1841(a)).
(c) CRA affiliate. A "CRA affiliate'' of an insured depository
institution is any company that is an affiliate of an insured
depository institution to the extent, and only to the extent, that the
activities of the affiliate were considered by the appropriate Federal
banking agency when evaluating the CRA performance of the institution
at its most recent CRA examination prior to the agreement. An insured
depository institution or affiliate also may designate any company as a
CRA affiliate at any time prior to the time a covered agreement is
entered into by informing the NGEP that is a party to the agreement of
such designation.
(d) CRA public file. "CRA public file'' means the public file
maintained by an insured depository institution and described in
Sec. 25.43 (12 CFR 25.43).
(e) Executive officer. The term "executive officer'' has the same
meaning as in Sec. 215.2(e)(1) of Regulation O issued by the Board of
Governors of the Federal Reserve System (12 CFR 215.2(e)(1)).
(f) Federal banking agency; appropriate Federal banking agency. The
terms "Federal banking agency'' and "appropriate Federal banking
agency'' have the same meanings as in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813).
(g) Fiscal year. (1) The fiscal year for a NGEP that does not have
a fiscal year shall be the calendar year.
(2) Any NGEP, insured depository institution, or affiliate that has
a fiscal year may elect to have the calendar year be its fiscal year
for purposes of this part.
(h) Insured depository institution. "Insured depository
institution'' has the same meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813).
(i) NGEP. "NGEP'' means a nongovernmental entity or person.
(j) Nongovernmental entity or person--(1) General. A
"nongovernmental entity or person'' is any partnership, association,
trust, joint venture, joint stock company, corporation, limited
liability corporation, company, firm, society, other organization, or
individual.
(2) Exclusions. A nongovernmental entity or person does not
include--
(i) The United States government, a state government, a unit of
local government (including a county, city, town, township, parish,
village, or other general-purpose subdivision of a state) or an Indian
tribe or tribal organization established under Federal, state or Indian
tribal law (including the Department of Hawaiian Home Lands), or a
department, agency, or instrumentality of any such entity;
(ii) A federally-chartered public corporation that receives Federal
funds appropriated specifically for that corporation;
(iii) An insured depository institution or affiliate of an insured
depository institution; or
(iv) An officer, director, employee, or representative (acting in
his or her capacity as an officer, director, employee, or
representative) of an entity listed in paragraphs (i)(2)(i) through
(iii) of this section.
(k) Party. The term "party'' with respect to a covered agreement
means each NGEP and each insured depository institution or affiliate
that entered into the agreement.
(l) Relevant supervisory agency. The "relevant supervisory
agency'' for a covered agreement means the appropriate Federal banking
agency for--
(1) Each insured depository institution (or subsidiary thereof)
that is a party to the covered agreement;
(2) Each insured depository institution (or subsidiary thereof) or
CRA affiliate that makes payments or loans or provides services that
are subject to the covered agreement; and
(3) Any company (other than an insured depository institution or
[[Page 2092]]
subsidiary thereof) that is a party to the covered agreement.
(m) Term of agreement. An agreement that does not have a fixed
termination date is considered to terminate on the last date on which
any party to the agreement makes any payment or provides any loan or
other resources under the agreement, unless the relevant supervisory
agency for the agreement otherwise notifies each party in writing.
Dated: December 21, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.
Federal Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set out in the joint preamble, Title 12, Chapter
II, of the Code of Federal Regulations is amended by adding a new part
207 to read as follows:
PART 207--DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS
(REGULATION G)
Sec.
207.1 Purpose and scope of this part.
207.2 Definition of covered agreement.
207.3 CRA communications.
207.4 Fulfillment of the CRA.
207.5 Related agreements considered a single agreement.
207.6 Disclosure of covered agreements.
207.7 Annual reports.
207.8 Release of information under FOIA.
207.9 Compliance provisions.
207.10 Transition provisions.
207.11 Other definitions and rules of construction used in this
part.
Authority: 12 U.S.C. 1831y.
Sec. 207.1 Purpose and scope of this part.
(a) General. This part implements section 711 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1831y). That section requires any nongovernmental
entity or person, insured depository institution, or affiliate of an
insured depository institution that enters into a covered agreement
to--
(1) Make the covered agreement available to the public and the
appropriate Federal banking agency; and
(2) File an annual report with the appropriate Federal banking
agency concerning the covered agreement.
(b) Scope of this part. The provisions of this part apply to--
(1) State member banks and their subsidiaries;
(2) Bank holding companies;
(3) Affiliates of bank holding companies, other than banks, savings
associations and subsidiaries of banks and savings associations; and
(4) Nongovernmental entities or persons that enter into covered
agreements with any company listed in paragraph (b)(1) through (3) of
this section.
(c) Relation to Community Reinvestment Act. This part does not
affect in any way the Community Reinvestment Act of 1977 (12 U.S.C.
2901 et seq.), the Board's Regulation BB (12 CFR part 228), or the
Board's interpretations or administration of that Act or regulation.
(d) Examples.--(1) The examples in this part are not exclusive.
Compliance with an example, to the extent applicable, constitutes
compliance with this part.
(2) Examples in a paragraph illustrate only the issue described in
the paragraph and do not illustrate any other issues that may arise in
this part.
Sec. 207.2 Definition of covered agreement.
(a) General definition of covered agreement. A covered agreement is
any contract, arrangement, or understanding that meets all of the
following criteria--
(1) The agreement is in writing.
(2) The parties to the agreement include--
(i) One or more insured depository institutions or affiliates of an
insured depository institution; and
(ii) One or more nongovernmental entities or persons (referred to
hereafter as NGEPs).
(3) The agreement provides for the insured depository institution
or any affiliate to--
(i) Provide to one or more individuals or entities (whether or not
parties to the agreement) cash payments, grants, or other consideration
(except loans) that have an aggregate value of more than $10,000 in any
calendar year; or
(ii) Make to one or more individuals or entities (whether or not
parties to the agreement) loans that have an aggregate principal amount
of more than $50,000 in any calendar year.
(4) The agreement is made pursuant to, or in connection with, the
fulfillment of the Community Reinvestment Act of 1977 (12 U.S.C. 2901
et seq.) (CRA), as defined in Sec. 207.4.
(5) The agreement is with a NGEP that has had a CRA communication
as described in Sec. 207.3 prior to entering into the agreement.
(b) Examples concerning written arrangements or understandings.--
(1) Example 1. A NGEP meets with an insured depository institution and
states that the institution needs to make more community development
investments in the NGEP's community. The NGEP and insured depository
institution do not reach an agreement concerning the community
development investments the institution should make in the community,
and the parties do not reach any mutual arrangement or understanding.
Two weeks later, the institution unilaterally issues a press release
announcing that it has established a general goal of making $100
million of community development grants in low- and moderate-income
neighborhoods served by the insured depository institution over the
next 5 years. The NGEP is not identified in the press release. The
press release is not a written arrangement or understanding.
(2) Example 2. A NGEP meets with an insured depository institution
and states that the institution needs to offer new loan programs in the
NGEP's community. The NGEP and the insured depository institution reach
a mutual arrangement or understanding that the institution will provide
additional loans in the NGEP's community. The institution tells the
NGEP that it will issue a press release announcing the program. Later,
the insured depository institution issues a press release announcing
the loan program. The press release incorporates the key terms of the
understanding reached between the NGEP and the insured depository
institution. The written press release reflects the mutual arrangement
or understanding of the NGEP and the insured depository institution and
is, therefore, a written arrangement or understanding.
(3) Example 3. An NGEP sends a letter to an insured depository
institution requesting that the institution provide a $15,000 grant to
the NGEP. The insured depository institution responds in writing and
agrees to provide the grant in connection with its annual grant
program. The exchange of letters constitutes a written arrangement or
understanding.
(c) Loan agreements that are not covered agreements. A covered
agreement does not include--
(1) Any individual loan that is secured by real estate; or
(2) Any specific contract or commitment for a loan or extension of
credit to an individual, business, farm, or other entity, or group of
such individuals or entities, if--
(i) The funds are loaned at rates that are not substantially below
market rates; and
(ii) The loan application or other loan documentation does not
indicate that the borrower intends or is authorized to use the borrowed
funds to make a loan or extension of credit to one or more third
parties.
[[Page 2093]]
(d) Examples concerning loan agreements.--(1) Example 1. An insured
depository institution provides an organization with a $1 million loan
that is documented in writing and is secured by real estate owned or
to-be-acquired by the organization. The agreement is an individual
mortgage loan and is exempt from coverage under paragraph (c)(1) of
this section, regardless of the interest rate on the loan or whether
the organization intends or is authorized to re-loan the funds to a
third party.
(2) Example 2. An insured depository institution commits to provide
a $500,000 line of credit to a small business that is documented by a
written agreement. The loan is made at rates that are within the range
of rates offered by the institution to similarly situated small
businesses in the market and the loan documentation does not indicate
that the small business intends or is authorized to re-lend the
borrowed funds. The agreement is exempt from coverage under paragraph
(c)(2) of this section.
(3) Example 3. An insured depository institution offers small
business loans that are guaranteed by the Small Business Administration
(SBA). A small business obtains a $75,000 loan, documented in writing,
from the institution under the institution's SBA loan program. The loan
documentation does not indicate that the borrower intends or is
authorized to re-lend the funds. Although the rate charged on the loan
is well below that charged by the institution on commercial loans, the
rate is within the range of rates that the institution would charge a
similarly situated small business for a similar loan under the SBA loan
program. Accordingly, the loan is not made at substantially below
market rates and is exempt from coverage under paragraph (c)(2) of this
section.
(4) Example 4. A bank holding company enters into a written
agreement with a community development organization that provides that
insured depository institutions owned by the bank holding company will
make $250 million in small business loans in the community over the
next 5 years. The written agreement is not a specific contract or
commitment for a loan or an extension of credit and, thus, is not
exempt from coverage under paragraph (c)(2) of this section. Each small
business loan made by the insured depository institution pursuant to
this general commitment would, however, be exempt from coverage if the
loan is made at rates that are not substantially below market rates and
the loan documentation does not indicate that the borrower intended or
was authorized to re-lend the funds.
(e) Agreements that include exempt loan agreements. If an agreement
includes a loan, extension of credit or loan commitment that, if
documented separately, would be exempt under paragraph (c) of this
section, the exempt loan, extension of credit or loan commitment may be
excluded for purposes of determining whether the agreement is a covered
agreement.
(f) Determining annual value of agreements that lack schedule of
disbursements. For purposes of paragraph (a)(3) of this section, a
multi-year agreement that does not include a schedule for the
disbursement of payments, grants, loans or other consideration by the
insured depository institution or affiliate, is considered to have a
value in the first year of the agreement equal to all payments, grants,
loans and other consideration to be provided at any time under the
agreement.
Sec. 207.3 CRA communications.
(a) Definition of CRA communication. A CRA communication is any of
the following--
(1) Any written or oral comment or testimony provided to a Federal
banking agency concerning the adequacy of the performance under the CRA
of the insured depository institution, any affiliated insured
depository institution, or any CRA affiliate.
(2) Any written comment submitted to the insured depository
institution that discusses the adequacy of the performance under the
CRA of the institution and must be included in the institution's CRA
public file.
(3) Any discussion or other contact with the insured depository
institution or any affiliate about--
(i) Providing (or refraining from providing) written or oral
comments or testimony to any Federal banking agency concerning the
adequacy of the performance under the CRA of the insured depository
institution, any affiliated insured depository institution, or any CRA
affiliate;
(ii) Providing (or refraining from providing) written comments to
the insured depository institution that concern the adequacy of the
institution's performance under the CRA and must be included in the
institution's CRA public file; or
(iii) The adequacy of the performance under the CRA of the insured
depository institution, any affiliated insured depository institution,
or any CRA affiliate.
(b) Discussions or contacts that are not CRA communications.--(1)
Timing of contacts with a Federal banking agency. An oral or written
communication with a Federal banking agency is not a CRA communication
if it occurred more than 3 years before the parties entered into the
agreement.
(2) Timing of contacts with insured depository institutions and
affiliates. A communication with an insured depository institution or
affiliate is not a CRA communication if the communication occurred--
(i) More than 3 years before the parties entered into the
agreement, in the case of any written communication;
(ii) More than 3 years before the parties entered into the
agreement, in the case of any oral communication in which the NGEP
discusses providing (or refraining from providing) comments or
testimony to a Federal banking agency or written comments that must be
included in the institution's CRA public file in connection with a
request to, or agreement by, the institution or affiliate to take (or
refrain from taking) any action that is in fulfillment of the CRA; or
(iii) More than 1 year before the parties entered into the
agreement, in the case of any other oral communication not described in
paragraph (b)(2)(ii) of this section.
(3) Knowledge of communication by insured depository institution or
affiliate.--(i) A communication is only a CRA communication under
paragraph (a) of this section if the insured depository institution or
its affiliate has knowledge of the communication under this paragraph
(b)(3)(ii) or (b)(3)(iii) of this section.
(ii) Communication with insured depository institution or
affiliate. An insured depository institution or affiliate has knowledge
of a communication by the NGEP to the institution or its affiliate
under this paragraph only if one of the following representatives of
the insured depository institution or any affiliate has knowledge of
the communication.
(A) An employee who approves, directs, authorizes, or negotiates
the agreement with the NGEP; or
(B) An employee designated with responsibility for compliance with
the CRA or executive officer if the employee or executive officer knows
that the institution or affiliate is negotiating, intends to negotiate,
or has been informed by the NGEP that it expects to request that the
institution or affiliate negotiate an agreement with the NGEP.
(iii) Other communications. An insured depository institution or
affiliate is deemed to have knowledge of--
[[Page 2094]]
(A) Any testimony provided to a Federal banking agency at a public
meeting or hearing;
(B) Any comment submitted to a Federal banking agency that is
conveyed in writing by the agency to the insured depository institution
or affiliate; and
(C) Any written comment submitted to the insured depository
institution that must be and is included in the institution's CRA
public file.
(4) Communication where NGEP has knowledge. A NGEP has a CRA
communication with an insured depository institution or affiliate only
if any of the following individuals has knowledge of the
communication--
(i) A director, employee, or member of the NGEP who approves,
directs, authorizes, or negotiates the agreement with the insured
depository institution or affiliate;
(ii) A person who functions as an executive officer of the NGEP and
who knows that the NGEP is negotiating or intends to negotiate an
agreement with the insured depository institution or affiliate; or
(iii) Where the NGEP is an individual, the NGEP.
(c) Examples of CRA communications.--(1) Examples of actions that
are CRA communications. The following are examples of CRA
communications. These examples are not exclusive and assume that the
communication occurs within the relevant time period as described in
paragraph (b)(1) or (b)(2) of this section and the appropriate
representatives have knowledge of the communication as specified in
paragraphs (b)(3) and (b)(4) of this section.
(i) Example 1. A NGEP files a written comment with a Federal
banking agency that states than an insured depository institution
successfully addresses the credit needs of its community. The written
comment is in response to a general request from the agency for
comments on an application of the insured depository institution to
open a new branch and a copy of the comment is provided to the
institution.
(ii) Example 2. A NGEP meets with an executive officer of an
insured depository institution and states that the institution must
improve its CRA performance.
(iii) Example 3. A NGEP meets with an executive officer of an
insured depository institution and states that the institution needs to
make more mortgage loans in low- and moderate-income neighborhoods in
its community.
(iv) Example 4. A bank holding company files an application with a
Federal banking agency to acquire an insured depository institution.
Two weeks later, the NGEP meets with an executive officer of the bank
holding company to discuss the adequacy of the performance under the
CRA of the target insured depository institution. The insured
depository institution was an affiliate of the bank holding company at
the time the NGEP met with the target institution. (See
Sec. 207.11(a).) Accordingly, the NGEP had a CRA communication with an
affiliate of the bank holding company.
(2) Examples of actions that are not CRA communications. The
following are examples of actions that are not by themselves CRA
communications. These examples are not exclusive.
(i) Example 1. A NGEP provides to a Federal banking agency comments
or testimony concerning an insured depository institution or affiliate
in response to a direct request by the agency for comments or testimony
from that NGEP. Direct requests for comments or testimony do not
include a general invitation by a Federal banking agency for comments
or testimony from the public in connection with a CRA performance
evaluation of, or application for a deposit facility (as defined in
section 803 of the CRA (12 U.S.C. 2902(3)) by, an insured depository
institution or an application by a company to acquire an insured
depository institution.
(ii) Example 2. A NGEP makes a statement concerning an insured
depository institution or affiliate at a widely attended conference or
seminar regarding a general topic. A public or private meeting, public
hearing, or other meeting regarding one or more specific institutions,
affiliates or transactions involving an application for a deposit
facility is not considered a widely attended conference or seminar.
(iii) Example 3. A NGEP, such as a civil rights group, community
group providing housing and other services in low- and moderate-income
neighborhoods, veterans organization, community theater group, or youth
organization, sends a fundraising letter to insured depository
institutions and to other businesses in its community. The letter
encourages all businesses in the community to meet their obligation to
assist in making the local community a better place to live and work by
supporting the fundraising efforts of the NGEP.
(iv) Example 4. A NGEP discusses with an insured depository
institution or affiliate whether particular loans, services,
investments, community development activities, or other activities are
generally eligible for consideration by a Federal banking agency under
the CRA. The NGEP and insured depository institution or affiliate do
not discuss the adequacy of the CRA performance of the insured
depository institution or affiliate.
(v) Example 5. A NGEP engaged in the sale or purchase of loans in
the secondary market sends a general offering circular to financial
institutions offering to sell or purchase a portfolio of loans. An
insured depository institution that receives the offering circular
discusses with the NGEP the types of loans included in the loan pool,
whether such loans are generally eligible for consideration under the
CRA, and which loans are made to borrowers in the institution's local
community. The NGEP and insured depository institution do not discuss
the adequacy of the institution's CRA performance.
(d) Multiparty covered agreements.--(1) A NGEP that is a party to a
covered agreement that involves multiple NGEPs is not required to
comply with the requirements of this part if--
(i) The NGEP has not had a CRA communication; and
(ii) No representative of the NGEP identified in paragraph (b)(4)
of this section has knowledge at the time of the agreement that another
NGEP that is a party to the agreement has had a CRA communication.
(2) An insured depository institution or affiliate that is a party
to a covered agreement that involves multiple insured depository
institutions or affiliates is not required to comply with the
disclosure and annual reporting requirements in Secs. 207.6 and 207.7
if--
(i) No NGEP that is a party to the agreement has had a CRA
communication concerning the insured depository institution or any
affiliate; and
(ii) No representative of the insured depository institution or any
affiliate identified in paragraph (b)(3) of this section has knowledge
at the time of the agreement that an NGEP that is a party to the
agreement has had a CRA communication concerning any other insured
depository institution or affiliate that is a party to the agreement.
Sec. 207.4 Fulfillment of the CRA.
(a) List of factors that are in fulfillment of the CRA. Fulfillment
of the CRA, for purposes of this part, means the following list of
factors--
(1) Comments to a Federal banking agency or included in CRA public
file. Providing or refraining from providing written or oral comments
or testimony to any Federal banking agency concerning the performance
under the CRA of an insured depository
[[Page 2095]]
institution or CRA affiliate that is a party to the agreement or an
affiliate of a party to the agreement or written comments that are
required to be included in the CRA public file of any such insured
depository institution; or
(2) Activities given favorable CRA consideration. Performing any of
the following activities if the activity is of the type that is likely
to receive favorable consideration by a Federal banking agency in
evaluating the performance under the CRA of the insured depository
institution that is a party to the agreement or an affiliate of a party
to the agreement--
(i) Home-purchase, home-improvement, small business, small farm,
community development, and consumer lending, as described in
Sec. 228.22 of Regulation BB (12 CFR 228.22), including loan purchases,
loan commitments, and letters of credit;
(ii) Making investments, deposits, or grants, or acquiring
membership shares, that have as their primary purpose community
development, as described in Sec. 228.23 of Regulation BB (12 CFR
228.23);
(iii) Delivering retail banking services, as described in
Sec. 228.24(d) of Regulation BB (12 CFR 228.24(d));
(iv) Providing community development services, as described in
Sec. 228.24(e) of Regulation BB (12 CFR 228.24(e));
(v) In the case of a wholesale or limited-purpose insured
depository institution, community development lending, including
originating and purchasing loans and making loan commitments and
letters of credit, making qualified investments, or providing community
development services, as described in Sec. 228.25(c) of Regulation BB
(12 CFR 228.25(c));
(vi) In the case of a small insured depository institution, any
lending or other activity described in Sec. 228.26(a) of Regulation BB
(12 CFR 228.26(a)); or
(vii) In the case of an insured depository institution that is
evaluated on the basis of a strategic plan, any element of the
strategic plan, as described in Sec. 228.27(f) of Regulation BB (12 CFR
228.27(f)).
(b) Agreements relating to activities of CRA affiliates. An insured
depository institution or affiliate that is a party to a covered
agreement that concerns any activity described in paragraph (a) of this
section of a CRA affiliate must, prior to the time the agreement is
entered into, notify each NGEP that is a party to the agreement that
the agreement concerns a CRA affiliate.
Sec. 207.5 Related agreements considered a single agreement.
The following rules must be applied in determining whether an
agreement is a covered agreement under Sec. 207.2.
(a) Agreements entered into by same parties. All written agreements
to which an insured depository institution or an affiliate of the
insured depository institution is a party shall be considered to be a
single agreement if the agreements--
(1) Are entered into with the same NGEP;
(2) Were entered into within the same 12-month period; and
(3) Are each in fulfillment of the CRA.
(b) Substantively related contracts. All written contracts to which
an insured depository institution or an affiliate of the insured
depository institution is a party shall be considered to be a single
agreement, without regard to whether the other parties to the contracts
are the same or whether each such contract is in fulfillment of the
CRA, if the contracts were negotiated in a coordinated fashion and a
NGEP is a party to each contract.
Sec. 207.6 Disclosure of covered agreements.
(a) Applicability date. This section applies only to covered
agreements entered into after November 12, 1999.
(b) Disclosure of covered agreements to the public--(1) Disclosure
required. Each NGEP and each insured depository institution or
affiliate that enters into a covered agreement must promptly make a
copy of the covered agreement available to any individual or entity
upon request.
(2) Nondisclosure of confidential and proprietary information
permitted. In responding to a request for a covered agreement from any
individual or entity under paragraph (b)(1) of this section, a NGEP,
insured depository institution, or affiliate may withhold from public
disclosure confidential or proprietary information that the party
believes the relevant supervisory agency could withhold from disclosure
under the Freedom of Information Act (5 U.S.C. 552 et seq.) (FOIA).
(3) Information that must be disclosed. Notwithstanding paragraph
(b)(2) of this section, a party must disclose any of the following
information that is contained in a covered agreement--
(i) The names and addresses of the parties to the agreement;
(ii) The amount of any payments, fees, loans, or other
consideration to be made or provided by any party to the agreement;
(iii) Any description of how the funds or other resources provided
under the agreement are to be used;
(iv) The term of the agreement (if the agreement establishes a
term); and
(v) Any other information that the relevant supervisory agency
determines is not properly exempt from public disclosure.
(4) Request for review of withheld information. Any individual or
entity may request that the relevant supervisory agency review whether
any information in a covered agreement withheld by a party must be
disclosed. Any requests for agency review of withheld information must
be filed, and will be processed in accordance with, the relevant
supervisory agency's rules concerning the availability of information
(see Sec. 261.12 of the Board's Rules Regarding the Availability of
Information (12 CFR 261.12)).
(5) Duration of obligation. The obligation to disclose a covered
agreement to the public terminates 12 months after the end of the term
of the agreement.
(6) Reasonable copy and mailing fees. Each NGEP and each insured
depository institution or affiliate may charge an individual or entity
that requests a copy of a covered agreement a reasonable fee not to
exceed the cost of copying and mailing the agreement.
(7) Use of CRA public file by insured depository institution or
affiliate. An insured depository institution and any affiliate of an
insured depository institution may fulfill its obligation under this
paragraph (b) by placing a copy of the covered agreement in the insured
depository institution's CRA public file if the institution makes the
agreement available in accordance with the procedures set forth in
Sec. 228.43 of Regulation BB (12 CFR 228.43).
(c) Disclosure by NGEPs of covered agreements to the relevant
supervisory agency. (1) Each NGEP that is a party to a covered
agreement must provide the following within 30 days of receiving a
request from the relevant supervisory agency--
(i) A complete copy of the agreement; and
(ii) In the event the NGEP proposes the withholding of any
information contained in the agreement in accordance with paragraph
(b)(2) of this section, a public version of the agreement that excludes
such information and an explanation justifying the exclusions. Any
public version must include the information described in paragraph
(b)(3) of this section.
(2) The obligation of a NGEP to provide a covered agreement to the
relevant supervisory agency terminates 12 months after the end of the
term of the covered agreement.
[[Page 2096]]
(d) Disclosure by insured depository institution or affiliate of
covered agreements to the relevant supervisory agency--(1) In general.
Within 60 days of the end of each calendar quarter, each insured
depository institution and affiliate must provide each relevant
supervisory agency with--
(i)(A) A complete copy of each covered agreement entered into by
the insured depository institution or affiliate during the calendar
quarter; and
(B) In the event the institution or affiliate proposes the
withholding of any information contained in the agreement in accordance
with paragraph (b)(2) of this section, a public version of the
agreement that excludes such information (other than any information
described in paragraph (b)(3) of this section) and an explanation
justifying the exclusions; or
(ii) A list of all covered agreements entered into by the insured
depository institution or affiliate during the calendar quarter that
contains--
(A) The name and address of each insured depository institution or
affiliate that is a party to the agreement;
(B) The name and address of each NGEP that is a party to the
agreement;
(C) The date the agreement was entered into;
(D) The estimated total value of all payments, fees, loans and
other consideration to be provided by the institution or any affiliate
of the institution under the agreement; and
(E) The date the agreement terminates.
(2) Prompt filing of covered agreements contained in list required.
(i) If an insured depository institution or affiliate files a list of
the covered agreements entered into by the institution or affiliate
pursuant to paragraph (d)(1)(ii) of this section, the institution or
affiliate must provide any relevant supervisory agency a complete copy
and public version of any covered agreement referenced in the list
within 7 calendar days of receiving a request from the agency for a
copy of the agreement.
(ii) The obligation of an insured depository institution or
affiliate to provide a covered agreement to the relevant supervisory
agency under this paragraph (d)(2) terminates 36 months after the end
of the term of the agreement.
(3) Joint filings. In the event that 2 or more insured depository
institutions or affiliates are parties to a covered agreement, the
insured depository institution(s) and affiliate(s) may jointly file the
documents required by this paragraph (d). Any joint filing must
identify the insured depository institution(s) and affiliate(s) for
whom the filings are being made.
Sec. 207.7 Annual reports.
(a) Applicability date. This section applies only to covered
agreements entered into on or after May 12, 2000.
(b) Annual report required. Each NGEP and each insured depository
institution or affiliate that is a party to a covered agreement must
file an annual report with each relevant supervisory agency concerning
the disbursement, receipt, and uses of funds or other resources under
the covered agreement.
(c) Duration of reporting requirement--(1) NGEPs. A NGEP must file
an annual report for a covered agreement for any fiscal year in which
the NGEP receives or uses funds or other resources under the agreement.
(2) Insured depository institutions and affiliates. An insured
depository institution or affiliate must file an annual report for a
covered agreement for any fiscal year in which the institution or
affiliate--
(i) provides or receives any payments, fees, or loans under the
covered agreement that must be reported under paragraphs (e)(1)(iii)
and (iv) of this section; or
(ii) has data to report on loans, investments, and services
provided by a party to the covered agreement under the covered
agreement under paragraph (e)(1)(vi) of this section.
(d) Annual reports filed by NGEP.--(1) Contents of report. The
annual report filed by a NGEP under this section must include the
following--
(i) The name and mailing address of the NGEP filing the report;
(ii) Information sufficient to identify the covered agreement for
which the annual report is being filed, such as by providing the names
of the parties to the agreement and the date the agreement was entered
into or by providing a copy of the agreement;
(iii) The amount of funds or resources received under the covered
agreement during the fiscal year; and
(iv) A detailed, itemized list of how any funds or resources
received by the NGEP under the covered agreement were used during the
fiscal year, including the total amount used for--
(A) Compensation of officers, directors, and employees;
(B) Administrative expenses;
(C) Travel expenses;
(D) Entertainment expenses;
(E) Payment of consulting and professional fees; and
(F) Other expenses and uses (specify expense or use).
(2) More detailed reporting of uses of funds or resources
permitted--(i) In general. If a NGEP allocated and used funds received
under a covered agreement for a specific purpose, the NGEP may fulfill
the requirements of paragraph (d)(1)(iv) of this section with respect
to such funds by providing--
(A) A brief description of each specific purpose for which the
funds or other resources were used; and
(B) The amount of funds or resources used during the fiscal year
for each specific purpose.
(ii) Specific purpose defined. A NGEP allocates and uses funds for
a specific purpose if the NGEP receives and uses the funds for a
purpose that is more specific and limited than the categories listed in
paragraph (d)(1)(iv) of this section.
(3) Use of other reports. The annual report filed by a NGEP may
consist of or incorporate a report prepared for any other purpose, such
as the Internal Revenue Service Return of Organization Exempt From
Income Tax on Form 990, or any other Internal Revenue Service form,
state tax form, report to members or shareholders, audited or unaudited
financial statements, audit report, or other report, so long as the
annual report filed by the NGEP contains all of the information
required by this paragraph (d).
(4) Consolidated reports permitted. A NGEP that is a party to 2 or
more covered agreements may file with each relevant supervisory agency
a single consolidated annual report covering all the covered
agreements. Any consolidated report must contain all the information
required by this paragraph (d). The information reported under
paragraphs (d)(1)(iv) and (d)(2) of this section may be reported on an
aggregate basis for all covered agreements.
(5) Examples of annual report requirements for NGEPs--(i) Example
1. A NGEP receives an unrestricted grant of $15,000 under a covered
agreement, includes the funds in its general operating budget and uses
the funds during its fiscal year. The NGEP's annual report for the
fiscal year must provide the name and mailing address of the NGEP,
information sufficient to identify the covered agreement, and state
that the NGEP received $15,000 during the fiscal year. The report must
also indicate the total expenditures made by the NGEP during the fiscal
year for compensation, administrative expenses, travel expenses,
entertainment expenses, consulting and professional fees, and other
expenses and uses. The NGEP's annual report may provide this
information by submitting an Internal Revenue Service Form 990 that
includes the required information. If the Internal Revenue
[[Page 2097]]
Service Form does not include information for all of the required
categories listed in this part, the NGEP must report the total
expenditures in the remaining categories either by providing that
information directly or by providing another form or report that
includes the required information.
(ii) Example 2. An organization receives $15,000 from an insured
depository institution under a covered agreement and allocates and uses
the $15,000 during the fiscal year to purchase computer equipment to
support its functions. The organization's annual report must include
the name and address of the organization, information sufficient to
identify the agreement, and a statement that the organization received
$15,000 during the year. In addition, since the organization allocated
and used the funds for a specific purpose that is more narrow and
limited than the categories of expenses included in the detailed,
itemized list of expenses, the organization would have the option of
providing either the total amount it used during the year for each
category of expenses included in paragraph (d)(1)(iv) of this section,
or a statement that it used the $15,000 to purchase computer equipment
and a brief description of the equipment purchased.
(iii) Example 3. A community group receives $50,000 from an insured
depository institution under a covered agreement. During its fiscal
year, the community group specifically allocates and uses $5,000 of the
funds to pay for a particular business trip and uses the remaining
$45,000 for general operating expenses. The group's annual report for
the fiscal year must include the name and address of the group,
information sufficient to identify the agreement, and a statement that
the group received $50,000. Because the group did not allocate and use
all of the funds for a specific purpose, the group's annual report must
provide the total amount of funds it used during the year for each
category of expenses included in paragraph (d)(1)(iv) of this section.
The group's annual report also could state that it used $5,000 for a
particular business trip and include a brief description of the trip.
(iv) Example 4. A community development organization is a party to
two separate covered agreements with two unaffiliated insured
depository institutions. Under each agreement, the organization
receives $15,000 during its fiscal year and uses the funds to support
its activities during that year. If the organization elects to file a
consolidated annual report, the consolidated report must identify the
organization and the two covered agreements, state that the
organization received $15,000 during the fiscal year under each
agreement, and provide the total amount that the organization used
during the year for each category of expenses included in paragraph
(d)(1)(iv) of this section.
(e) Annual report filed by insured depository institution or
affiliate--(1) General. The annual report filed by an insured
depository institution or affiliate must include the following--
(i) The name and principal place of business of the insured
depository institution or affiliate filing the report;
(ii) Information sufficient to identify the covered agreement for
which the annual report is being filed, such as by providing the names
of the parties to the agreement and the date the agreement was entered
into or by providing a copy of the agreement;
(iii) The aggregate amount of payments, aggregate amount of fees,
and aggregate amount of loans provided by the insured depository
institution or affiliate under the covered agreement to any other party
to the agreement during the fiscal year;
(iv) The aggregate amount of payments, aggregate amount of fees,
and aggregate amount of loans received by the insured depository
institution or affiliate under the covered agreement from any other
party to the agreement during the fiscal year;
(v) A general description of the terms and conditions of any
payments, fees, or loans reported under paragraphs (e)(1)(iii) and (iv)
of this section, or, in the event such terms and conditions are set
forth--
(A) In the covered agreement, a statement identifying the covered
agreement and the date the agreement (or a list identifying the
agreement) was filed with the relevant supervisory agency; or
(B) In a previous annual report filed by the insured depository
institution or affiliate, a statement identifying the date the report
was filed with the relevant supervisory agency; and
(vi) The aggregate amount and number of loans, aggregate amount and
number of investments, and aggregate amount of services provided under
the covered agreement to any individual or entity not a party to the
agreement--
(A) By the insured depository institution or affiliate during its
fiscal year; and
(B) By any other party to the agreement, unless such information is
not known to the insured depository institution or affiliate filing the
report or such information is or will be contained in the annual report
filed by another party under this section.
(2) Consolidated reports permitted--(i) Party to multiple
agreements. An insured depository institution or affiliate that is a
party to 2 or more covered agreements may file a single consolidated
annual report with each relevant supervisory agency concerning all the
covered agreements.
(ii) Affiliated entities party to the same agreement. An insured
depository institution and its affiliates that are parties to the same
covered agreement may file a single consolidated annual report relating
to the agreement with each relevant supervisory agency for the covered
agreement.
(iii) Content of report. Any consolidated annual report must
contain all the information required by this paragraph (e). The amounts
and data required to be reported under paragraphs (e)(1)(iv) and (vi)
of this section may be reported on an aggregate basis for all covered
agreements.
(f) Time and place of filing.--(1) General. Each party must file
its annual report with each relevant supervisory agency for the covered
agreement no later than six months following the end of the fiscal year
covered by the report.
(2) Alternative method of fulfilling annual reporting requirement
for a NGEP--(i) A NGEP may fulfill the filing requirements of this
section by providing the following materials to an insured depository
institution or affiliate that is a party to the agreement no later than
six months following the end of the NGEP's fiscal year--
(A) A copy of the NGEP's annual report required under paragraph (d)
of this section for the fiscal year; and
(B) Written instructions that the insured depository institution or
affiliate promptly forward the annual report to the relevant
supervisory agency or agencies on behalf of the NGEP.
(ii) An insured depository institution or affiliate that receives
an annual report from a NGEP pursuant to paragraph (f)(2)(i) of this
section must file the report with the relevant supervisory agency or
agencies on behalf of the NGEP within 30 days.
Sec. 207.8 Release of information under FOIA.
The Board will make covered agreements and annual reports available
to the public in accordance with the Freedom of Information Act (5
U.S.C. 552 et seq.) and the Board's Rules Regarding the Availability of
Information (12 CFR part 261). A party to a covered agreement may
request confidential treatment of proprietary and confidential
information in a covered agreement or an annual report under those
procedures.
[[Page 2098]]
Sec. 207.9 Compliance provisions.
(a) Willful failure to comply with disclosure and reporting
obligations--(1) If the Board determines that a NGEP has willfully
failed to comply in a material way with Secs. 207.6 or 207.7, the Board
will notify the NGEP in writing of that determination and provide the
NGEP a period of 90 days (or such longer period as the Board finds to
be reasonable under the circumstances) to comply.
(2) If the NGEP does not comply within the time period established
by the Board, the agreement shall thereafter be unenforceable by that
NGEP by operation of section 48 of the Federal Deposit Insurance Act
(12 U.S.C. 1831y).
(3) The Board may assist any insured depository institution or
affiliate that is a party to a covered agreement that is unenforceable
by a NGEP by operation of section 48 of the Federal Deposit Insurance
Act (12 U.S.C. 1831y) in identifying a successor to assume the NGEP's
responsibilities under the agreement.
(b) Diversion of funds. If a court or other body of competent
jurisdiction determines that funds or resources received under a
covered agreement have been diverted contrary to the purposes of the
covered agreement for an individual's personal financial gain, the
Board may take either or both of the following actions--
(1) Order the individual to disgorge the diverted funds or
resources received under the agreement;
(2) Prohibit the individual from being a party to any covered
agreement for a period not to exceed 10 years.
(c) Notice and opportunity to respond. Before making a
determination under paragraph (a)(1) of this section, or taking any
action under paragraph (b) of this section, the Board will provide
written notice and an opportunity to present information to the Board
concerning any relevant facts or circumstances relating to the matter.
(d) Inadvertent or de minimis errors. Inadvertent or de minimis
errors in annual reports or other documents filed with the Board under
Secs. 207.6 or 207.7 will not subject the reporting party to any
penalty.
(e) Enforcement of provisions in covered agreements. No provision
of this part shall be construed as authorizing the Board to enforce the
provisions of any covered agreement.
Sec. 207.10 Transition provisions.
(a) Disclosure of covered agreements entered into before the
effective date of this part. The following disclosure requirements
apply to covered agreements that were entered into after November 12,
1999, and that terminated before April 1, 2001.
(1) Disclosure to the public. Each NGEP and each insured depository
institution or affiliate that was a party to the agreement must make
the agreement available to the public under Sec. 207.6 until at least
April 1, 2002.
(2) Disclosure to the relevant supervisory agency--(i) Each NGEP
that was a party to the agreement must make the agreement available to
the relevant supervisory agency under Sec. 207.6 until at least April
1, 2002.
(ii) Each insured depository institution or affiliate that was a
party to the agreement must, by June 30, 2001, provide each relevant
supervisory agency either--
(A) A copy of the agreement under Sec. 207.6(d)(1)(i); or
(B) The information described in Sec. 207.6(d)(1)(ii) for each
agreement.
(b) Filing of annual reports that relate to fiscal years ending on
or before December 31, 2000. In the event that a NGEP, insured
depository institution or affiliate has any information to report under
Sec. 207.7 for a fiscal year that ends on or before December 31, 2000,
and that concerns a covered agreement entered into between May 12,
2000, and December 31, 2000, the annual report for that fiscal year
must be provided no later than June 30, 2001, to--
(1) Each relevant supervisory agency; or
(2) In the case of a NGEP, to an insured depository institution or
affiliate that is a party to the agreement in accordance with
Sec. 207.7(f)(2).
Sec. 207.11 Other definitions and rules of construction used in this
part.
(a) Affiliate. "Affiliate'' means--
(1) Any company that controls, is controlled by, or is under common
control with another company; and
(2) For the purpose of determining whether an agreement is a
covered agreement under Sec. 207.2, an "affiliate'' includes any
company that would be under common control or merged with another
company on consummation of any transaction pending before a Federal
banking agency at the time--
(i) The parties enter into the agreement; and
(ii) The NGEP that is a party to the agreement makes a CRA
communication, as described in Sec. 207.3.
(b) Control. "Control'' is defined in section 2(a) of the Bank
Holding Company Act (12 U.S.C. 1841(a)).
(c) CRA affiliate. A "CRA affiliate'' of an insured depository
institution is any company that is an affiliate of an insured
depository institution to the extent, and only to the extent, that the
activities of the affiliate were considered by the appropriate Federal
banking agency when evaluating the CRA performance of the institution
at its most recent CRA examination prior to the agreement. An insured
depository institution or affiliate also may designate any company as a
CRA affiliate at any time prior to the time a covered agreement is
entered into by informing the NGEP that is a party to the agreement of
such designation.
(d) CRA public file. "CRA public file'' means the public file
maintained by an insured depository institution and described in
Sec. 228.43 of Regulation BB (12 CFR 228.43).
(e) Executive officer. The term "executive officer'' has the same
meaning as in Sec. 215.2(e)(1) of the Board's Regulation O (12 CFR
215.2(e)(1)).
(f) Federal banking agency; appropriate Federal banking agency. The
terms "Federal banking agency'' and "appropriate Federal banking
agency'' have the same meanings as in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813).
(g) Fiscal year. (1) The fiscal year for a NGEP that does not have
a fiscal year shall be the calendar year.
(2) Any NGEP, insured depository institution, or affiliate that has
a fiscal year may elect to have the calendar year be its fiscal year
for purposes of this part.
(h) Insured depository institution. "Insured depository
institution'' has the same meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813).
(i) NGEP. "NGEP'' means a nongovernmental entity or person.
(j) Nongovernmental entity or person--(1) General. A
"nongovernmental entity or person'' is any partnership, association,
trust, joint venture, joint stock company, corporation, limited
liability corporation, company, firm, society, other organization, or
individual.
(2) Exclusions. A nongovernmental entity or person does not
include--
(i) The United States government, a state government, a unit of
local government (including a county, city, town, township, parish,
village, or other general-purpose subdivision of a state) or an Indian
tribe or tribal organization established under Federal, state or Indian
tribal law (including the Department of Hawaiian Home Lands), or a
department, agency, or instrumentality of any such entity;
(ii) A federally-chartered public corporation that receives Federal
funds
[[Page 2099]]
appropriated specifically for that corporation;
(iii) An insured depository institution or affiliate of an insured
depository institution; or
(iv) An officer, director, employee, or representative (acting in
his or her capacity as an officer, director, employee, or
representative) of an entity listed in paragraphs (i)(2)(i) through
(iii) of this section.
(k) Party. The term "party'' with respect to a covered agreement
means each NGEP and each insured depository institution or affiliate
that entered into the agreement.
(l) Relevant supervisory agency. The "relevant supervisory
agency'' for a covered agreement means the appropriate Federal banking
agency for--
(1) Each insured depository institution (or subsidiary thereof)
that is a party to the covered agreement;
(2) Each insured depository institution (or subsidiary thereof) or
CRA affiliate that makes payments or loans or provides services that
are subject to the covered agreement; and
(3) Any company (other than an insured depository institution or
subsidiary thereof) that is a party to the covered agreement.
(m) Term of agreement. An agreement that does not have a fixed
termination date is considered to terminate on the last date on which
any party to the agreement makes any payment or provides any loan or
other resources under the agreement, unless the relevant supervisory
agency for the agreement otherwise notifies each party in writing.
By order of the Board of Governors of the Federal Reserve
System, December 21, 2000.
Jennifer J. Johnson,
Secretary of the Board.
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
For the reasons set out in the joint preamble, Title 12, Chapter
III, of the Code of Federal Regulations is amended by adding a new part
346 to read as follows:
PART 346--DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS
Sec.
346.1 Purpose and scope of this part.
346.2 Definition of covered agreement.
346.3 CRA communications.
346.4 Fulfillment of the CRA.
346.5 Related agreements considered a single agreement.
346.6 Disclosure of covered agreements.
346.7 Annual reports.
346.8 Release of information under FOIA.
346.9 Compliance provisions.
346.10 Transition provisions.
346.11 Other definitions and rules of construction used in this
part.
Authority: 12 U.S.C. 1831y.
Sec. 346.1 Purpose and scope of this part.
(a) General. This part implements section 711 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1831y). That section requires any nongovernmental
entity or person, insured depository institution, or affiliate of an
insured depository institution that enters into a covered agreement
to--
(1) Make the covered agreement available to the public and the
appropriate Federal banking agency; and
(2) File an annual report with the appropriate Federal banking
agency concerning the covered agreement.
(b) Scope of this part. The provisions of this part apply to--
(1) State nonmember insured banks;
(2) Subsidiaries of state nonmember insured banks;
(3) Nongovernmental entities or persons that enter into covered
agreements with any company listed in paragraph (b)(1) and (2) of this
section.
(c) Relation to Community Reinvestment Act. This part does not
affect in any way the Community Reinvestment Act of 1977 (12 U.S.C.
2901 et seq.) or the FDIC's Community Reinvestment regulation found at
12 CFR part 345, or the FDIC's interpretations or administration of
that Act or regulation.
(d) Examples.--(1) The examples in this part are not exclusive.
Compliance with an example, to the extent applicable, constitutes
compliance with this part.
(2) Examples in a paragraph illustrate only the issue described in
the paragraph and do not illustrate any other issues that may arise in
this part.
Sec. 346.2 Definition of covered agreement.
(a) General definition of covered agreement. A covered agreement is
any contract, arrangement, or understanding that meets all of the
following criteria--
(1) The agreement is in writing.
(2) The parties to the agreement include--
(i) One or more insured depository institutions or affiliates of an
insured depository institution; and
(ii) One or more nongovernmental entities or persons (referred to
hereafter as NGEPs).
(3) The agreement provides for the insured depository institution
or any affiliate to--
(i) Provide to one or more individuals or entities (whether or not
parties to the agreement) cash payments, grants, or other consideration
(except loans) that have an aggregate value of more than $10,000 in any
calendar year; or
(ii) Make to one or more individuals or entities (whether or not
parties to the agreement) loans that have an aggregate principal amount
of more than $50,000 in any calendar year.
(4) The agreement is made pursuant to, or in connection with, the
fulfillment of the Community Reinvestment Act of 1977 (12 U.S.C. 2901
et seq.) (CRA), as defined in Sec. 346.4.
(5) The agreement is with a NGEP that has had a CRA communication
as described in Sec. 346.3 prior to entering into the agreement.
(b) Examples concerning written arrangements or understandings--(1)
Example 1. A NGEP meets with an insured depository institution and
states that the institution needs to make more community development
investments in the NGEP's community. The NGEP and insured depository
institution do not reach an agreement concerning the community
development investments the institution should make in the community,
and the parties do not reach any mutual arrangement or understanding.
Two weeks later, the institution unilaterally issues a press release
announcing that it has established a general goal of making $100
million of community development grants in low- and moderate-income
neighborhoods served by the insured depository institution over the
next 5 years. The NGEP is not identified in the press release. The
press release is not a written arrangement or understanding.
(2) Example 2. A NGEP meets with an insured depository institution
and states that the institution needs to offer new loan programs in the
NGEP's community. The NGEP and the insured depository institution reach
a mutual arrangement or understanding that the institution will provide
additional loans in the NGEP's community. The institution tells the
NGEP that it will issue a press release announcing the program. Later,
the insured depository institution issues a press release announcing
the loan program. The press release incorporates the key terms of the
understanding reached between the NGEP and the insured depository
institution. The written press release reflects the mutual arrangement
or understanding of the NGEP and the insured depository institution and
is, therefore, a written arrangement or understanding.
(3) Example 3. An NGEP sends a letter to an insured depository
institution requesting that the institution provide a
[[Page 2100]]
$15,000 grant to the NGEP. The insured depository institution responds
in writing and agrees to provide the grant in connection with its
annual grant program. The exchange of letters constitutes a written
arrangement or understanding.
(c) Loan agreements that are not covered agreements. A covered
agreement does not include--
(1) Any individual loan that is secured by real estate; or
(2) Any specific contract or commitment for a loan or extension of
credit to an individual, business, farm, or other entity, or group of
such individuals or entities if--
(i) The funds are loaned at rates that are not substantially below
market rates; and
(ii) The loan application or other loan documentation does not
indicate that the borrower intends or is authorized to use the borrowed
funds to make a loan or extension of credit to one or more third
parties.
(d) Examples concerning loan agreements.--(1) Example 1. An insured
depository institution provides an organization with a $1 million loan
that is documented in writing and is secured by real estate owned or
to-be-acquired by the organization. The agreement is an individual
mortgage loan and is exempt from coverage under paragraph (c)(1) of
this section, regardless of the interest rate on the loan or whether
the organization intends or is authorized to re-loan the funds to a
third party.
(2) Example 2. An insured depository institution commits to provide
a $500,000 line of credit to a small business that is documented by a
written agreement. The loan is made at rates that are within the range
of rates offered by the institution to similarly situated small
businesses in the market and the loan documentation does not indicate
that the small business intends or is authorized to re-lend the
borrowed funds. The agreement is exempt from coverage under paragraph
(c)(2) of this section.
(3) Example 3. An insured depository institution offers small
business loans that are guaranteed by the Small Business Administration
(SBA). A small business obtains a $75,000 loan, documented in writing,
from the institution under the institution's SBA loan program. The loan
documentation does not indicate that the borrower intends or is
authorized to re-lend the funds. Although the rate charged on the loan
is well below that charged by the institution on commercial loans, the
rate is within the range of rates that the institution would charge a
similarly situated small business for a similar loan under the SBA loan
program. Accordingly, the loan is not made at substantially below
market rates and is exempt from coverage under paragraph (c)(2) of this
section.
(4) Example 4. A bank holding company enters into a written
agreement with a community development organization that provides that
insured depository institutions owned by the bank holding company will
make $250 million in small business loans in the community over the
next 5 years. The written agreement is not a specific contract or
commitment for a loan or an extension of credit and, thus, is not
exempt from coverage under paragraph (c)(2) of this section. Each small
business loan made by the insured depository institution pursuant to
this general commitment would, however, be exempt from coverage if the
loan is made at rates that are not substantially below market rates and
the loan documentation does not indicate that the borrower intended or
was authorized to re-lend the funds.
(e) Agreements that include exempt loan agreements. If an agreement
includes a loan, extension of credit or loan commitment that, if
documented separately, would be exempt under paragraph (c) of this
section, the exempt loan, extension of credit or loan commitment may be
excluded for purposes of determining whether the agreement is a covered
agreement.
(f) Determining annual value of agreements that lack schedule of
disbursements. For purposes of paragraph (a)(3) of this section, a
multi-year agreement that does not include a schedule for the
disbursement of payments, grants, loans or other consideration by the
insured depository institution or affiliate, is considered to have a
value in the first year of the agreement equal to all payments, grants,
loans and other consideration to be provided at any time under the
agreement.
Sec. 346.3 CRA communications.
(a) Definition of CRA communication. A CRA communication is any of
the following--
(1) Any written or oral comment or testimony provided to a Federal
banking agency concerning the adequacy of the performance under the CRA
of the insured depository institution, any affiliated insured
depository institution, or any CRA affiliate.
(2) Any written comment submitted to the insured depository
institution that discusses the adequacy of the performance under the
CRA of the institution and must be included in the institution's CRA
public file.
(3) Any discussion or other contact with the insured depository
institution or any affiliate about--
(i) Providing (or refraining from providing) written or oral
comments or testimony to any Federal banking agency concerning the
adequacy of the performance under the CRA of the insured depository
institution, any affiliated insured depository institution, or any CRA
affiliate;
(ii) Providing (or refraining from providing) written comments to
the insured depository institution that concern the adequacy of the
institution's performance under the CRA and must be included in the
institution's CRA public file; or
(iii) The adequacy of the performance under the CRA of the insured
depository institution, any affiliated insured depository institution,
or any CRA affiliate.
(b) Discussions or contacts that are not CRA communications--(1)
Timing of contacts with a Federal banking agency. An oral or written
communication with a Federal banking agency is not a CRA communication
if it occurred more than 3 years before the parties entered into the
agreement.
(2) Timing of contacts with insured depository institutions and
affiliates. A communication with an insured depository institution or
affiliate is not a CRA communication if the communication occurred--
(i) More than 3 years before the parties entered into the
agreement, in the case of any written communication;
(ii) More than 3 years before the parties entered into the
agreement, in the case of any oral communication in which the NGEP
discusses providing (or refraining from providing) comments or
testimony to a Federal banking agency or written comments that must be
included in the institution's CRA public file in connection with a
request to, or agreement by, the institution or affiliate to take (or
refrain from taking) any action that is in fulfillment of the CRA; or
(iii) More than 1 year before the parties entered into the
agreement, in the case of any other oral communication not described in
paragraph (b)(2)(ii) of this section.
(3) Knowledge of communication by insured depository institution or
affiliate.--(i) A communication is only a CRA communication under
paragraph (a) of this section if the insured depository institution or
its affiliate has knowledge of the communication under this paragraph
(b)(3)(ii) or (b)(3)(iii) of this section.
(ii) Communication with insured depository institution or
affiliate. An
[[Page 2101]]
insured depository institution or affiliate has knowledge of a
communication by the NGEP to the institution or its affiliate under
this paragraph only if one of the following representatives of the
insured depository institution or any affiliate has knowledge of the
communication--
(A) An employee who approves, directs, authorizes, or negotiates
the agreement with the NGEP; or
(B) An employee designated with responsibility for compliance with
the CRA or executive officer if the employee or executive officer knows
that the institution or affiliate is negotiating, intends to negotiate,
or has been informed by the NGEP that it expects to request that the
institution or affiliate negotiate an agreement with the NGEP.
(iii) Other communications. An insured depository institution or
affiliate is deemed to have knowledge of--
(A) Any testimony provided to a Federal banking agency at a public
meeting or hearing;
(B) Any comment submitted to a Federal banking agency that is
conveyed in writing by the agency to the insured depository institution
or affiliate; and
(C) Any written comment submitted to the insured depository
institution that must be and is included in the institution's CRA
public file.
(4) Communication where NGEP has knowledge. A NGEP has a CRA
communication with an insured depository institution or affiliate only
if any of the following individuals has knowledge of the
communication--
(i) A director, employee, or member of the NGEP who approves,
directs, authorizes, or negotiates the agreement with the insured
depository institution or affiliate;
(ii) A person who functions as an executive officer of the NGEP and
who knows that the NGEP is negotiating or intends to negotiate an
agreement with the insured depository institution or affiliate; or
(iii) Where the NGEP is an individual, the NGEP.
(c) Examples of CRA communications--(1) Examples of actions that
are CRA communications. The following are examples of CRA
communications. These examples are not exclusive and assume that the
communication occurs within the relevant time period as described in
paragraph (b)(1) or (b)(2) of this section and the appropriate
representatives have knowledge of the communication as specified in
paragraphs (b)(3) and (b)(4) of this section.
(i) Example 1. A NGEP files a written comment with a Federal
banking agency that states than an insured depository institution
successfully addresses the credit needs of its community. The written
comment is in response to a general request from the agency for
comments on an application of the insured depository institution to
open a new branch and a copy of the comment is provided to the
institution.
(ii) Example 2. A NGEP meets with an executive officer of an
insured depository institution and states that the institution must
improve its CRA performance.
(iii) Example 3. A NGEP meets with an executive officer of an
insured depository institution and states that the institution needs to
make more mortgage loans in low- and moderate-income neighborhoods in
its community.
(iv) Example 4. A bank holding company files an application with a
Federal banking agency to acquire an insured depository institution.
Two weeks later, the NGEP meets with an executive officer of the bank
holding company to discuss the adequacy of the performance under the
CRA of the target insured depository institution. The insured
depository institution was an affiliate of the bank holding company at
the time the NGEP met with the target institution. (See
Sec. 346.11(a).) Accordingly, the NGEP had a CRA communication with an
affiliate of the bank holding company.
(2) Examples of actions that are not CRA communications. The
following are examples of actions that are not by themselves CRA
communications. These examples are not exclusive.
(i) Example 1. A NGEP provides to a Federal banking agency comments
or testimony concerning an insured depository institution or affiliate
in response to a direct request by the agency for comments or testimony
from that NGEP. Direct requests for comments or testimony do not
include a general invitation by a Federal banking agency for comments
or testimony from the public in connection with a CRA performance
evaluation of, or application for a deposit facility (as defined in
section 803 of the CRA (12 U.S.C. 2902(3)) by, an insured depository
institution or an application by a company to acquire an insured
depository institution.
(ii) Example 2. A NGEP makes a statement concerning an insured
depository institution or affiliate at a widely attended conference or
seminar regarding a general topic. A public or private meeting, public
hearing, or other meeting regarding one or more specific institutions,
affiliates or transactions involving an application for a deposit
facility is not considered a widely attended conference or seminar.
(iii) Example 3. A NGEP, such as a civil rights group, community
group providing housing and other services in low- and moderate-income
neighborhoods, veterans organization, community theater group, or youth
organization, sends a fundraising letter to insured depository
institutions and to other businesses in its community. The letter
encourages all businesses in the community to meet their obligation to
assist in making the local community a better place to live and work by
supporting the fundraising efforts of the NGEP.
(iv) Example 4. A NGEP discusses with an insured depository
institution or affiliate whether particular loans, services,
investments, community development activities, or other activities are
generally eligible for consideration by a Federal banking agency under
the CRA. The NGEP and insured depository institution or affiliate do
not discuss the adequacy of the CRA performance of the insured
depository institution or affiliate.
(v) Example 5. A NGEP engaged in the sale or purchase of loans in
the secondary market sends a general offering circular to financial
institutions offering to sell or purchase a portfolio of loans. An
insured depository institution that receives the offering circular
discusses with the NGEP the types of loans included in the loan pool,
whether such loans are generally eligible for consideration under the
CRA, and which loans are made to borrowers in the institution's local
community. The NGEP and insured depository institution do not discuss
the adequacy of the institution's CRA performance.
(d) Multiparty covered agreements.--(1) A NGEP that is a party to a
covered agreement that involves multiple NGEPs is not required to
comply with the requirements of this part if--
(i) The NGEP has not had a CRA communication; and
(ii) No representative of the NGEP identified in paragraph (b)(4)
of this section has knowledge at the time of the agreement that another
NGEP that is a party to the agreement has had a CRA communication.
(2) An insured depository institution or affiliate that is a party
to a covered agreement that involves multiple insured depository
institutions or affiliates is not required to comply with the
disclosure and annual reporting requirements in Secs. 346.6 and 346.7
if--
[[Page 2102]]
(i) No NGEP that is a party to the agreement has had a CRA
communication concerning the insured depository institution or any
affiliate; and
(ii) No representative of the insured depository institution or any
affiliate identified in paragraph (b)(3) of this section has knowledge
at the time of the agreement that an NGEP that is a party to the
agreement has had a CRA communication concerning any other insured
depository institution or affiliate that is a party to the agreement.
Sec. 346.4 Fulfillment of the CRA.
(a) List of factors that are in fulfillment of the CRA. Fulfillment
of the CRA, for purposes of this part, means the following list of
factors--
(1) Comments to a Federal banking agency or included in CRA public
file. Providing or refraining from providing written or oral comments
or testimony to any Federal banking agency concerning the performance
under the CRA of an insured depository institution or CRA affiliate
that is a party to the agreement or an affiliate of a party to the
agreement or written comments that are required to be included in the
CRA public file of any such insured depository institution; or
(2) Activities given favorable CRA consideration. Performing any of
the following activities if the activity is of the type that is likely
to receive favorable consideration by a Federal banking agency in
evaluating the performance under the CRA of the insured depository
institution that is a party to the agreement or an affiliate of a party
to the agreement--
(i) Home-purchase, home-improvement, small business, small farm,
community development, and consumer lending, as described in 12 CFR
345.22, including loan purchases, loan commitments, and letters of
credit;
(ii) Making investments, deposits, or grants, or acquiring
membership shares, that have as their primary purpose community
development, as described in 12 CFR 345.23;
(iii) Delivering retail banking services, as described in 12 CFR
345.24(d);
(iv) Providing community development services, as described in 12
CFR 345.24(e);
(v) In the case of a wholesale or limited-purpose insured
depository institution, community development lending, including
originating and purchasing loans and making loan commitments and
letters of credit, making qualified investments, or providing community
development services, as described in 12 CFR 345.25(c);
(vi) In the case of a small insured depository institution, any
lending or other activity described in 12 CFR 345.26(a); or
(vii) In the case of an insured depository institution that is
evaluated on the basis of a strategic plan, any element of the
strategic plan, as described in 12 CFR 345.27(f).
(b) Agreements relating to activities of CRA affiliates. An insured
depository institution or affiliate that is a party to a covered
agreement that concerns any activity described in paragraph (a) of this
section of a CRA affiliate must, prior to the time the agreement is
entered into, notify each NGEP that is a party to the agreement that
the agreement concerns a CRA affiliate.
Sec. 346.5 Related agreements considered a single agreement.
The following rules must be applied in determining whether an
agreement is a covered agreement under Sec. 346.2.
(a) Agreements entered into by same parties. All written agreements
to which an insured depository institution or an affiliate of the
insured depository institution is a party shall be considered to be a
single agreement if the agreements--
(1) Are entered into with the same NGEP;
(2) Were entered into within the same 12-month period; and
(3) Are each in fulfillment of the CRA.
(b) Substantively related contracts. All written contracts to which
an insured depository institution or an affiliate of the insured
depository institution is a party shall be considered to be a single
agreement, without regard to whether the other parties to the contracts
are the same or whether each such contract is in fulfillment of the
CRA, if the contracts were negotiated in a coordinated fashion and a
NGEP is a party to each contract.
Sec. 346.6 Disclosure of covered agreements.
(a) Applicability date. This section applies only to covered
agreements entered into after November 12, 1999.
(b) Disclosure of covered agreements to the public--(1) Disclosure
required. Each NGEP and each insured depository institution or
affiliate that enters into a covered agreement must promptly make a
copy of the covered agreement available to any individual or entity
upon request.
(2) Nondisclosure of confidential and proprietary information
permitted. In responding to a request for a covered agreement from any
individual or entity under paragraph (b)(1) of this section, a NGEP,
insured depository institution, or affiliate may withhold from public
disclosure confidential or proprietary information that the party
believes the relevant supervisory agency could withhold from disclosure
under the Freedom of Information Act (5 U.S.C. 552 et seq.) (FOIA).
(3) Information that must be disclosed. Notwithstanding paragraph
(b)(2) of this section, a party must disclose any of the following
information that is contained in a covered agreement--
(i) The names and addresses of the parties to the agreement;
(ii) The amount of any payments, fees, loans, or other
consideration to be made or provided by any party to the agreement;
(iii) Any description of how the funds or other resources provided
under the agreement are to be used;
(iv) The term of the agreement (if the agreement establishes a
term); and
(v) Any other information that the relevant supervisory agency
determines is not properly exempt from public disclosure.
(4) Request for review of withheld information. Any individual or
entity may request that the relevant supervisory agency review whether
any information in a covered agreement withheld by a party must be
disclosed. Any requests for agency review of withheld information must
be filed, and will be processed in accordance with, the relevant
supervisory agency's rules concerning the availability of information
(see the FDIC's rules regarding Disclosure of Information (12 CFR part
309)).
(5) Duration of obligation. The obligation to disclose a covered
agreement to the public terminates 12 months after the end of the term
of the agreement.
(6) Reasonable copy and mailing fees. Each NGEP and each insured
depository institution or affiliate may charge an individual or entity
that requests a copy of a covered agreement a reasonable fee not to
exceed the cost of copying and mailing the agreement.
(7) Use of CRA public file by insured depository institution or
affiliate. An insured depository institution and any affiliate of an
insured depository institution may fulfill its obligation under this
paragraph (b) by placing a copy of the covered agreement in the insured
depository institution's CRA public file if the institution makes the
agreement available in accordance with the procedures set forth in 12
CFR 345.43.
(c) Disclosure by NGEPs of covered agreements to the relevant
supervisory agency--(1) Each NGEP that is a party to a covered
agreement must provide the
[[Page 2103]]
following within 30 days of receiving a request from the relevant
supervisory agency--
(i) A complete copy of the agreement; and
(ii) In the event the NGEP proposes the withholding of any
information contained in the agreement in accordance with paragraph
(b)(2) of this section, a public version of the agreement that excludes
such information and an explanation justifying the exclusions. Any
public version must include the information described in paragraph
(b)(3) of this section.
(2) The obligation of a NGEP to provide a covered agreement to the
relevant supervisory agency terminates 12 months after the end of the
term of the covered agreement.
(d) Disclosure by insured depository institution or affiliate of
covered agreements to the relevant supervisory agency--(1) In general.
Within 60 days of the end of each calendar quarter, each insured
depository institution and affiliate must provide each relevant
supervisory agency with--
(i)(A) A complete copy of each covered agreement entered into by
the insured depository institution or affiliate during the calendar
quarter; and
(B) In the event the institution or affiliate proposes the
withholding of any information contained in the agreement in accordance
with paragraph (b)(2) of this section, a public version of the
agreement that excludes such information (other than any information
described in paragraph (b)(3) of this section) and an explanation
justifying the exclusions; or
(ii) A list of all covered agreements entered into by the insured
depository institution or affiliate during the calendar quarter that
contains--
(A) The name and address of each insured depository institution or
affiliate that is a party to the agreement;
(B) The name and address of each NGEP that is a party to the
agreement;
(C) The date the agreement was entered into;
(D) The estimated total value of all payments, fees, loans and
other consideration to be provided by the institution or any affiliate
of the institution under the agreement; and
(E) The date the agreement terminates.
(2) Prompt filing of covered agreements contained in list
required.--(i) If an insured depository institution or affiliate files
a list of the covered agreements entered into by the institution or
affiliate pursuant to paragraph (d)(1)(ii) of this section, the
institution or affiliate must provide any relevant supervisory agency a
complete copy and public version of any covered agreement referenced in
the list within 7 calendar days of receiving a request from the agency
for a copy of the agreement.
(ii) The obligation of an insured depository institution or
affiliate to provide a covered agreement to the relevant supervisory
agency under this paragraph (d)(2) terminates 36 months after the end
of the term of the agreement.
(3) Joint filings. In the event that 2 or more insured depository
institutions or affiliates are parties to a covered agreement, the
insured depository institution(s) and affiliate(s) may jointly file the
documents required by this paragraph (d). Any joint filing must
identify the insured depository institution(s) and affiliate(s) for
whom the filings are being made.
Sec. 346.7 Annual reports.
(a) Applicability date. This section applies only to covered
agreements entered into on or after May 12, 2000.
(b) Annual report required. Each NGEP and each insured depository
institution or affiliate that is a party to a covered agreement must
file an annual report with each relevant supervisory agency concerning
the disbursement, receipt, and uses of funds or other resources under
the covered agreement.
(c) Duration of reporting requirement--(1) NGEPs. A NGEP must file
an annual report for a covered agreement for any fiscal year in which
the NGEP receives or uses funds or other resources under the agreement.
(2) Insured depository institutions and affiliates. An insured
depository institution or affiliate must file an annual report for a
covered agreement for any fiscal year in which the institution or
affiliate--
(i) provides or receives any payments, fees, or loans under the
covered agreement that must be reported under paragraphs (e)(1)(iii)
and (iv) of this section; or
(ii) has data to report on loans, investments, and services
provided by a party to the covered agreement under the covered
agreement under paragraph (e)(1)(vi) of this section.
(d) Annual reports filed by NGEP--(1) Contents of report. The
annual report filed by a NGEP under this section must include the
following--
(i) The name and mailing address of the NGEP filing the report;
(ii) Information sufficient to identify the covered agreement for
which the annual report is being filed, such as by providing the names
of the parties to the agreement and the date the agreement was entered
into or by providing a copy of the agreement;
(iii) The amount of funds or resources received under the covered
agreement during the fiscal year; and
(iv) A detailed, itemized list of how any funds or resources
received by the NGEP under the covered agreement were used during the
fiscal year, including the total amount used for--
(A) Compensation of officers, directors, and employees;
(B) Administrative expenses;
(C) Travel expenses;
(D) Entertainment expenses;
(E) Payment of consulting and professional fees; and
(F) Other expenses and uses (specify expense or use).
(2) More detailed reporting of uses of funds or resources
permitted--(i) In general. If a NGEP allocated and used funds received
under a covered agreement for a specific purpose, the NGEP may fulfill
the requirements of paragraph (d)(1)(iv) of this section with respect
to such funds by providing--
(A) A brief description of each specific purpose for which the
funds or other resources were used; and
(B) The amount of funds or resources used during the fiscal year
for each specific purpose.
(ii) Specific purpose defined. A NGEP allocates and uses funds for
a specific purpose if the NGEP receives and uses the funds for a
purpose that is more specific and limited than the categories listed in
paragraph (d)(1)(iv) of this section.
(3) Use of other reports. The annual report filed by a NGEP may
consist of or incorporate a report prepared for any other purpose, such
as the Internal Revenue Service Return of Organization Exempt From
Income Tax on Form 990, or any other Internal Revenue Service form,
state tax form, report to members or shareholders, audited or unaudited
financial statements, audit report, or other report, so long as the
annual report filed by the NGEP contains all of the information
required by this paragraph (d).
(4) Consolidated reports permitted. A NGEP that is a party to 2 or
more covered agreements may file with each relevant supervisory agency
a single consolidated annual report covering all the covered
agreements. Any consolidated report must contain all the information
required by this paragraph (d). The information reported under
paragraphs (d)(1)(iv) and (d)(2) of this section may be reported on an
aggregate basis for all covered agreements.
(5) Examples of annual report requirements for NGEPs.--(i) Example
1. A NGEP receives an unrestricted
[[Page 2104]]
grant of $15,000 under a covered agreement, includes the funds in its
general operating budget, and uses the funds during its fiscal year.
The NGEP's annual report for the fiscal year must provide the name and
mailing address of the NGEP, information sufficient to identify the
covered agreement, and state that the NGEP received $15,000 during the
fiscal year. The report must also indicate the total expenditures made
by the NGEP during the fiscal year for compensation, administrative
expenses, travel expenses, entertainment expenses, consulting and
professional fees, and other expenses and uses. The NGEP's annual
report may provide this information by submitting an Internal Revenue
Service Form 990 that includes the required information. If the
Internal Revenue Service Form does not include information for all of
the required categories listed in this part, the NGEP must report the
total expenditures in the remaining categories either by providing that
information directly or by providing another form or report that
includes the required information.
(ii) Example 2. An organization receives $15,000 from an insured
depository institution under a covered agreement and allocates and uses
the $15,000 during the fiscal year to purchase computer equipment to
support its functions. The organization's annual report must include
the name and address of the organization, information sufficient to
identify the agreement, and a statement that the organization received
$15,000 during the year. In addition, since the organization allocated
and used the funds for a specific purpose that is more narrow and
limited than the categories of expenses included in the detailed,
itemized list of expenses, the organization would have the option of
providing either the total amount it used during the year for each
category of expenses included in paragraph (d)(1)(iv) of this section,
or a statement that it used the $15,000 to purchase computer equipment
and a brief description of the equipment purchased.
(iii) Example 3. A community group receives $50,000 from an insured
depository institution under a covered agreement. During its fiscal
year, the community group specifically allocates and uses $5,000 of the
funds to pay for a particular business trip and uses the remaining
$45,000 for general operating expenses. The group's annual report for
the fiscal year must include the name and address of the group,
information sufficient to identify the agreement, and a statement that
the group received $50,000. Because the group did not allocate and use
all of the funds for a specific purpose, the group's annual report must
provide the total amount of funds it used during the year for each
category of expenses included in paragraph (d)(1)(iv) of this section.
The group's annual report also could state that it used $5,000 for a
particular business trip and include a brief description of the trip.
(iv) Example 4. A community development organization is a party to
two separate covered agreements with two unaffiliated insured
depository institutions. Under each agreement, the organization
receives $15,000 during its fiscal year and uses the funds to support
its activities during that year. If the organization elects to file a
consolidated annual report, the consolidated report must identify the
organization and the two covered agreements, state that the
organization received $15,000 during the fiscal year under each
agreement, and provide the total amount that the organization used
during the year for each category of expenses included in paragraph
(d)(1)(iv) of this section.
(e) Annual report filed by insured depository institution or
affiliate.--(1) General. The annual report filed by an insured
depository institution or affiliate must include the following--
(i) The name and principal place of business of the insured
depository institution or affiliate filing the report;
(ii) Information sufficient to identify the covered agreement for
which the annual report is being filed, such as by providing the names
of the parties to the agreement and the date the agreement was entered
into or by providing a copy of the agreement;
(iii) The aggregate amount of payments, aggregate amount of fees,
and aggregate amount of loans provided by the insured depository
institution or affiliate under the covered agreement to any other party
to the agreement during the fiscal year;
(iv) The aggregate amount of payments, aggregate amount of fees,
and aggregate amount of loans received by the insured depository
institution or affiliate under the covered agreement from any other
party to the agreement during the fiscal year;
(v) A general description of the terms and conditions of any
payments, fees, or loans reported under paragraphs (e)(1)(iii) and (iv)
of this section, or, in the event such terms and conditions are set
forth--
(A) In the covered agreement, a statement identifying the covered
agreement and the date the agreement (or a list identifying the
agreement) was filed with the relevant supervisory agency; or
(B) In a previous annual report filed by the insured depository
institution or affiliate, a statement identifying the date the report
was filed with the relevant supervisory agency; and
(vi) The aggregate amount and number of loans, aggregate amount and
number of investments, and aggregate amount of services provided under
the covered agreement to any individual or entity not a party to the
agreement--
(A) By the insured depository institution or affiliate during its
fiscal year; and
(B) By any other party to the agreement, unless such information is
not known to the insured depository institution or affiliate filing the
report or such information is or will be contained in the annual report
filed by another party under this section.
(2) Consolidated reports permitted--(i) Party to multiple
agreements. An insured depository institution or affiliate that is a
party to 2 or more covered agreements may file a single consolidated
annual report with each relevant supervisory agency concerning all the
covered agreements.
(ii) Affiliated entities party to the same agreement. An insured
depository institution and its affiliates that are parties to the same
covered agreement may file a single consolidated annual report relating
to the agreement with each relevant supervisory agency for the covered
agreement.
(iii) Content of report. Any consolidated annual report must
contain all the information required by this paragraph (e). The amounts
and data required to be reported under paragraphs (e)(1)(iv) and (vi)
of this section may be reported on an aggregate basis for all covered
agreements.
(f) Time and place of filing--(1) General. Each party must file its
annual report with each relevant supervisory agency for the covered
agreement no later than six months following the end of the fiscal year
covered by the report.
(2) Alternative method of fulfilling annual reporting requirement
for a NGEP.--(i) A NGEP may fulfill the filing requirements of this
section by providing the following materials to an insured depository
institution or affiliate that is a party to the agreement no later than
six months following the end of the NGEP's fiscal year--
(A) A copy of the NGEP's annual report required under paragraph (d)
of this section for the fiscal year; and
(B) Written instructions that the insured depository institution or
affiliate promptly forward the annual report to the relevant
supervisory agency or agencies on behalf of the NGEP.
[[Page 2105]]
(ii) An insured depository institution or affiliate that receives
an annual report from a NGEP pursuant to paragraph (f)(2)(i) of this
section must file the report with the relevant supervisory agency or
agencies on behalf of the NGEP within 30 days.
Sec. 346.8 Release of information under FOIA.
The FDIC will make covered agreements and annual reports available
to the public in accordance with the Freedom of Information Act (5
U.S.C. 552 et seq.) and the FDIC's rules regarding Disclosure of
Information (12 CFR part 309). A party to a covered agreement may
request confidential treatment of proprietary and confidential
information in a covered agreement or an annual report under those
procedures.
Sec. 346.9 Compliance provisions.
(a) Willful failure to comply with disclosure and reporting
obligations.--(1) If the FDIC determines that a NGEP has willfully
failed to comply in a material way with Secs. 346.4 or 346.5, the FDIC
will notify the NGEP in writing of that determination and provide the
NGEP a period of 90 days (or such longer period as the FDIC finds to be
reasonable under the circumstances) to comply.
(2) If the NGEP does not comply within the time period established
by the FDIC, the agreement shall thereafter be unenforceable by that
NGEP by operation of section 48 of the Federal Deposit Insurance Act
(12 U.S.C. 1831y).
(3) The FDIC may assist any insured depository institution or
affiliate that is a party to a covered agreement that is unenforceable
by a NGEP by operation of section 48 of the Federal Deposit Insurance
Act (12 U.S.C. 1831y) in identifying a successor to assume the NGEP's
responsibilities under the agreement.
(b) Diversion of funds. If a court or other body of competent
jurisdiction determines that funds or resources received under a
covered agreement have been diverted contrary to the purposes of the
covered agreement for an individual's personal financial gain, the FDIC
may take either or both of the following actions--
(1) Order the individual to disgorge the diverted funds or
resources received under the agreement;
(2) Prohibit the individual from being a party to any covered
agreement for a period not to exceed 10 years.
(c) Notice and opportunity to respond. Before making a
determination under paragraph (a)(1) of this section, or taking any
action under paragraph (b) of this section, the FDIC will provide
written notice and an opportunity to present information to the FDIC
concerning any relevant facts or circumstances relating to the matter.
(d) Inadvertent or de minimis errors. Inadvertent or de minimis
errors in annual reports or other documents filed with the FDIC under
Secs. 346.6 or 346.7 will not subject the reporting party to any
penalty.
(e) Enforcement of provisions in covered agreements. No provision
of this part shall be construed as authorizing the FDIC to enforce the
provisions of any covered agreement.
Sec. 346.10 Transition provisions.
(a) Disclosure of covered agreements entered into before the
effective date of this part. The following disclosure requirements
apply to covered agreements that were entered into after November 12,
1999, and that terminated before April 1, 2001.
(1) Disclosure to the public. Each NGEP and each insured depository
institution or affiliate that was a party to the agreement must make
the agreement available to the public under Sec. 346.6 until at least
April 1, 2002.
(2) Disclosure to the relevant supervisory agency.--(i) Each NGEP
that was a party to the agreement must make the agreement available to
the relevant supervisory agency under Sec. 346.6 until at least April
1, 2002.
(ii) Each insured depository institution or affiliate that was a
party to the agreement must, by June 30, 2001, provide each relevant
supervisory agency either--
(A) A copy of the agreement under Sec. 346.6(d)(1)(i); or
(B) The information described in Sec. 346.6(d)(1)(ii) for each
agreement.
(b) Filing of annual reports that relate to fiscal years ending on
or before December 31, 2000. In the event that a NGEP, insured
depository institution or affiliate has any information to report under
Sec. 346.7 for a fiscal year that ends on or before December 31, 2000,
and that concerns a covered agreement entered into between May 12,
2000, and December 31, 2000, the annual report for that fiscal year
must be provided no later than June 30, 2001, to--
(1) Each relevant supervisory agency; or
(2) In the case of a NGEP, to an insured depository institution or
affiliate that is a party to the agreement in accordance with
Sec. 346.7(f)(2).
Sec. 346.11 Other definitions and rules of construction used in this
part.
(a) Affiliate. "Affiliate'' means--
(1) Any company that controls, is controlled by, or is under common
control with another company; and
(2) For the purpose of determining whether an agreement is a
covered agreement under Sec. 346.2, an "affiliate'' includes any
company that would be under common control or merged with another
company on consummation of any transaction pending before a Federal
banking agency at the time--
(i) The parties enter into the agreement; and
(ii) The NGEP that is a party to the agreement makes a CRA
communication, as described in Sec. 346.3.
(b) Control. "Control'' is defined in section 2(a) of the Bank
Holding Company Act (12 U.S.C. 1841(a)).
(c) CRA affiliate. A "CRA affiliate'' of an insured depository
institution is any company that is an affiliate of an insured
depository institution to the extent, and only to the extent, that the
activities of the affiliate were considered by the appropriate Federal
banking agency when evaluating the CRA performance of the institution
at its most recent CRA examination prior to the agreement. An insured
depository institution or affiliate also may designate any company as a
CRA affiliate at any time prior to the time a covered agreement is
entered into by informing the NGEP that is a party to the agreement of
such designation.
(d) CRA public file. "CRA public file'' means the public file
maintained by an insured depository institution and described in 12 CFR
345.43.
(e) Executive officer. The term "executive officer'' has the same
meaning as in Sec. 215.2(e)(1) of the Board of Governors of the Federal
Reserve System's Regulation O (12 CFR 215.2(e)(1)).
(f) Federal banking agency; appropriate Federal banking agency. The
terms "Federal banking agency'' and "appropriate Federal banking
agency'' have the same meanings as in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813).
(g) Fiscal year. (1) The fiscal year for a NGEP that does not have
a fiscal year shall be the calendar year.
(2) Any NGEP, insured depository institution, or affiliate that has
a fiscal year may elect to have the calendar year be its fiscal year
for purposes of this part.
(h) Insured depository institution. "Insured depository
institution'' has the same meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813).
(i) NGEP. "NGEP'' means a nongovernmental entity or person.
[[Page 2106]]
(j) Nongovernmental entity or person--(1) General. A
"nongovernmental entity or person'' is any partnership, association,
trust, joint venture, joint stock company, corporation, limited
liability corporation, company, firm, society, other organization, or
individual.
(2) Exclusions. A nongovernmental entity or person does not
include--
(i) The United States government, a state government, a unit of
local government (including a county, city, town, township, parish,
village, or other general-purpose subdivision of a state) or an Indian
tribe or tribal organization established under Federal, state or Indian
tribal law (including the Department of Hawaiian Home Lands), or a
department, agency, or instrumentality of any such entity;
(ii) A federally-chartered public corporation that receives Federal
funds appropriated specifically for that corporation;
(iii) An insured depository institution or affiliate of an insured
depository institution; or
(iv) An officer, director, employee, or representative (acting in
his or her capacity as an officer, director, employee, or
representative) of an entity listed in paragraphs (h)(2)(i) through
(iii) of this section.
(k) Party. The term "party''. The authority citation for part 405
continues to read as follows: with respect to a covered agreement means
each NGEP and each insured depository institution or affiliate that
entered into the agreement.
(l) Relevant supervisory agency. The "relevant supervisory
agency'' for a covered agreement means the appropriate Federal banking
agency for--
(1) Each insured depository institution (or subsidiary thereof)
that is a party to the covered agreement;
(2) Each insured depository institution (or subsidiary thereof) or
CRA affiliate that makes payments or loans or provides services that
are subject to the covered agreement; and
(3) Any company (other than an insured depository institution or
subsidiary thereof) that is a party to the covered agreement.
(m) Term of agreement. An agreement that does not have a fixed
termination date is considered to terminate on the last date on which
any party to the agreement makes any payment or provides any loan or
other resources under the agreement, unless the relevant supervisory
agency for the agreement otherwise notifies each party in writing.
By order of the Board of Directors, Federal Deposit Insurance
Corporation.
Dated at Washington, DC, this 21st day of December, 2000.
Robert E. Feldman,
Executive Secretary.
Department of Treasury
Office of Thrift Supervision
12 CFR Chapter V
Authority and Issuance
For the reasons set out in the joint preamble, Title 12, Chapter V,
of the Code of Federal Regulations is amended by adding a new part 533
to read as follows:
PART 533--DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS
Sec.
533.1 Purpose and scope of this part.
533.2 Definition of covered agreement.
533.3 CRA communications.
533.4 Fulfillment of the CRA.
533.5 Related agreements considered a single agreement.
533.6 Disclosure of covered agreements.
533.7 Annual reports.
533.8 Release of information under FOIA.
533.9 Compliance provisions.
533.10 Transition provisions.
533.11 Other definitions and rules of construction used in this
part.
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, and 1831y.
Sec. 533.1 Purpose and scope of this part.
(a) General. This part implements section 711 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1831y). That section requires any nongovernmental
entity or person (NGEP), insured depository institution, or affiliate
of an insured depository institution that enters into a covered
agreement to--
(1) Make the covered agreement available to the public and the
appropriate Federal banking agency; and
(2) File an annual report with the appropriate Federal banking
agency concerning the covered agreement.
(b) Scope of this part. The provisions of this part apply to--
(1) Savings associations and their subsidiaries;
(2) Savings and loan holding companies;
(3) Affiliates of savings associations and savings and loan holding
companies, other than bank holding companies, banks, and subsidiaries
of bank holding companies and banks; and
(4) NGEPs that enter into covered agreements with any company
listed in paragraphs (b)(1) through (b)(3) of this section.
(c) Relation to Community Reinvestment Act. This part does not
affect in any way the Community Reinvestment Act of 1977 (CRA) (12
U.S.C. 2901 et seq.), OTS's Community Reinvestment rule (12 CFR Part
563e), or OTS's interpretations or administration of the CRA or
Community Reinvestment rule.
(d) Examples. (1) The examples in this part are not exclusive.
Compliance with an example, to the extent applicable, constitutes
compliance with this part.
(2) Examples in a paragraph illustrate only the issue described in
the paragraph and do not illustrate any other issues that may arise in
this part.
Sec. 533.2 Definition of covered agreement.
(a) General definition of covered agreement. A covered agreement is
any contract, arrangement, or understanding that meets all of the
following criteria--
(1) The agreement is in writing.
(2) The parties to the agreement include--
(i) One or more insured depository institutions or affiliates of an
insured depository institution; and
(ii) One or more NGEPs.
(3) The agreement provides for the insured depository institution
or any affiliate to--
(i) Provide to one or more individuals or entities (whether or not
parties to the agreement) cash payments, grants, or other consideration
(except loans) that have an aggregate value of more than $10,000 in any
calendar year; or
(ii) Make to one or more individuals or entities (whether or not
parties to the agreement) loans that have an aggregate principal amount
of more than $50,000 in any calendar year.
(4) The agreement is made pursuant to, or in connection with, the
fulfillment of the CRA, as defined in Sec. 533.4 of this part.
(5) The agreement is with a NGEP that has had a CRA communication
as described in Sec. 533.3 of this part prior to entering into the
agreement.
(b) Examples concerning written arrangements or understandings. (1)
Example 1. A NGEP meets with an insured depository institution and
states that the institution needs to make more community development
investments in the NGEP's community. The NGEP and insured depository
institution do not reach an agreement concerning the community
development investments the institution should make in the community,
and the parties do not reach any mutual arrangement or understanding.
Two weeks later, the institution unilaterally issues a press release
announcing that it has established a general goal of making $100
million of community development grants in low- and
[[Page 2107]]
moderate-income neighborhoods served by the insured depository
institution over the next 5 years. The NGEP is not identified in the
press release. The press release is not a written arrangement or
understanding.
(2) Example 2. A NGEP meets with an insured depository institution
and states that the institution needs to offer new loan programs in the
NGEP's community. The NGEP and the insured depository institution reach
a mutual arrangement or understanding that the institution will provide
additional loans in the NGEP's community. The institution tells the
NGEP that it will issue a press release announcing the program. Later,
the insured depository institution issues a press release announcing
the loan program. The press release incorporates the key terms of the
understanding reached between the NGEP and the insured depository
institution. The written press release reflects the mutual arrangement
or understanding of the NGEP and the insured depository institution and
is, therefore, a written arrangement or understanding.
(3) Example 3. An NGEP sends a letter to an insured depository
institution requesting that the institution provide a $15,000 grant to
the NGEP. The insured depository institution responds in writing and
agrees to provide the grant in connection with its annual grant
program. The exchange of letters constitutes a written arrangement or
understanding.
(c) Loan agreements that are not covered agreements. A covered
agreement does not include--
(1) Any individual loan that is secured by real estate; or
(2) Any specific contract or commitment for a loan or extension of
credit to an individual, business, farm, or other entity, or group of
such individuals or entities, if--
(i) The funds are loaned at rates that are not substantially below
market rates; and
(ii) The loan application or other loan documentation does not
indicate that the borrower intends or is authorized to use the borrowed
funds to make a loan or extension of credit to one or more third
parties.
(d) Examples concerning loan agreements. (1) Example 1. An insured
depository institution provides an organization with a $1 million loan
that is documented in writing and is secured by real estate owned or
to-be-acquired by the organization. The agreement is an individual
mortgage loan and is exempt from coverage under paragraph (c)(1) of
this section, regardless of the interest rate on the loan or whether
the organization intends or is authorized to re-loan the funds to a
third party.
(2) Example 2. An insured depository institution commits to provide
a $500,000 line of credit to a small business that is documented by a
written agreement. The loan is made at rates that are within the range
of rates offered by the institution to similarly situated small
businesses in the market and the loan documentation does not indicate
that the small business intends or is authorized to re-lend the
borrowed funds. The agreement is exempt from coverage under paragraph
(c)(2) of this section.
(3) Example 3. An insured depository institution offers small
business loans that are guaranteed by the Small Business Administration
(SBA). A small business obtains a $75,000 loan, documented in writing,
from the institution under the institution's SBA loan program. The loan
documentation does not indicate that the borrower intends or is
authorized to re-lend the funds. Although the rate charged on the loan
is well below that charged by the institution on commercial loans, the
rate is within the range of rates that the institution would charge a
similarly situated small business for a similar loan under the SBA loan
program. Accordingly, the loan is not made at substantially below
market rates and is exempt from coverage under paragraph (c)(2) of this
section.
(4) Example 4. A bank holding company enters into a written
agreement with a community development organization that provides that
insured depository institutions owned by the bank holding company will
make $250 million in small business loans in the community over the
next 5 years. The written agreement is not a specific contract or
commitment for a loan or an extension of credit and, thus, is not
exempt from coverage under paragraph (c)(2) of this section. Each small
business loan made by the insured depository institution pursuant to
this general commitment would, however, be exempt from coverage if the
loan is made at rates that are not substantially below market rates and
the loan documentation does not indicate that the borrower intended or
was authorized to re-lend the funds.
(e) Agreements that include exempt loan agreements. If an agreement
includes a loan, extension of credit or loan commitment that, if
documented separately, would be exempt under paragraph (c) of this
section, the exempt loan, extension of credit or loan commitment may be
excluded for purposes of determining whether the agreement is a covered
agreement.
(f) Determining annual value of agreements that lack schedule of
disbursements. For purposes of paragraph (a)(3) of this section, a
multi-year agreement that does not include a schedule for the
disbursement of payments, grants, loans or other consideration by the
insured depository institution or affiliate, is considered to have a
value in the first year of the agreement equal to all payments, grants,
loans and other consideration to be provided at any time under the
agreement.
Sec. 533.3 CRA communications.
(a) Definition of CRA communication. A CRA communication is any of
the following--
(1) Any written or oral comment or testimony provided to a Federal
banking agency concerning the adequacy of the performance under the CRA
of the insured depository institution, any affiliated insured
depository institution, or any CRA affiliate.
(2) Any written comment submitted to the insured depository
institution that discusses the adequacy of the performance under the
CRA of the institution and must be included in the institution's CRA
public file.
(3) Any discussion or other contact with the insured depository
institution or any affiliate about--
(i) Providing (or refraining from providing) written or oral
comments or testimony to any Federal banking agency concerning the
adequacy of the performance under the CRA of the insured depository
institution, any affiliated insured depository institution, or any CRA
affiliate;
(ii) Providing (or refraining from providing) written comments to
the insured depository institution that concern the adequacy of the
institution's performance under the CRA and must be included in the
institution's CRA public file; or
(iii) The adequacy of the performance under the CRA of the insured
depository institution, any affiliated insured depository institution,
or any CRA affiliate.
(b) Discussions or contacts that are not CRA communications. (1)
Timing of contacts with a Federal banking agency. An oral or written
communication with a Federal banking agency is not a CRA communication
if it occurred more than 3 years before the parties entered into the
agreement.
(2) Timing of contacts with insured depository institutions and
affiliates. A communication with an insured depository institution or
affiliate is not a CRA communication if the communication occurred--
[[Page 2108]]
(i) More than 3 years before the parties entered into the
agreement, in the case of any written communication;
(ii) More than 3 years before the parties entered into the
agreement, in the case of any oral communication in which the NGEP
discusses providing (or refraining from providing) comments or
testimony to a Federal banking agency or written comments that must be
included in the institution's CRA public file in connection with a
request to, or agreement by, the institution or affiliate to take (or
refrain from taking) any action that is in fulfillment of the CRA; or
(iii) More than 1 year before the parties entered into the
agreement, in the case of any other oral communication not described in
paragraph (b)(2)(ii).
(3) Knowledge of communication by insured depository institution or
affiliate. (i) A communication is only a CRA communication under
paragraph (a) of this section if the insured depository institution or
its affiliate has knowledge of the communication under paragraph
(b)(3)(ii) or (b)(3)(iii) of this section.
(ii) Communication with insured depository institution or
affiliate. An insured depository institution or affiliate has knowledge
of a communication by the NGEP to the institution or its affiliate
under this paragraph only if one of the following representatives of
the insured depository institution or any affiliate has knowledge of
the communication--
(A) An employee who approves, directs, authorizes, or negotiates
the agreement with the NGEP; or
(B) An employee designated with responsibility for compliance with
the CRA or executive officer if the employee or executive officer knows
that the institution or affiliate is negotiating, intends to negotiate,
or has been informed by the NGEP that it expects to request that the
institution or affiliate negotiate an agreement with the NGEP.
(iii) Other communications. An insured depository institution or
affiliate is deemed to have knowledge of--
(A) Any testimony provided to a Federal banking agency at a public
meeting or hearing;
(B) Any comment submitted to a Federal banking agency that is
conveyed in writing by the agency to the insured depository institution
or affiliate; and
(C) Any written comment submitted to the insured depository
institution that must be and is included in the institution's CRA
public file.
(4) Communication where NGEP has knowledge. A NGEP has a CRA
communication with an insured depository institution or affiliate only
if any of the following individuals has knowledge of the
communication--
(i) A director, employee, or member of the NGEP who approves,
directs, authorizes, or negotiates the agreement with the insured
depository institution or affiliate;
(ii) A person who functions as an executive officer of the NGEP and
who knows that the NGEP is negotiating or intends to negotiate an
agreement with the insured depository institution or affiliate; or
(iii) Where the NGEP is an individual, the NGEP.
(c) Examples of CRA communications--(1) Examples of actions that
are CRA communications. The following are examples of CRA
communications. These examples are not exclusive and assume that the
communication occurs within the relevant time period as described in
paragraph (b)(1) or (b)(2) of this section and the appropriate
representatives have knowledge of the communication as specified in
paragraphs (b)(3) and (b)(4) of this section.
(i) Example 1. A NGEP files a written comment with a Federal
banking agency that states than an insured depository institution
successfully addresses the credit needs of its community. The written
comment is in response to a general request from the agency for
comments on an application of the insured depository institution to
open a new branch and a copy of the comment is provided to the
institution.
(ii) Example 2. A NGEP meets with an executive officer of an
insured depository institution and states that the institution must
improve its CRA performance.
(iii) Example 3. A NGEP meets with an executive officer of an
insured depository institution and states that the institution needs to
make more mortgage loans in low- and moderate-income neighborhoods in
its community.
(iv) Example 4. A bank holding company files an application with a
Federal banking agency to acquire an insured depository institution.
Two weeks later, the NGEP meets with an executive officer of the bank
holding company to discuss the adequacy of the performance under the
CRA of the target insured depository institution. The insured
depository institution was an affiliate of the bank holding company at
the time the NGEP met with the target institution. (See Sec. 533.11(a)
of this part.) Accordingly, the NGEP had a CRA communication with an
affiliate of the bank holding company.
(2) Examples of actions that are not CRA communications. The
following are examples of actions that are not by themselves CRA
communications. These examples are not exclusive.
(i) Example 1. A NGEP provides to a Federal banking agency comments
or testimony concerning an insured depository institution or affiliate
in response to a direct request by the agency for comments or testimony
from that NGEP. Direct requests for comments or testimony do not
include a general invitation by a Federal banking agency for comments
or testimony from the public in connection with a CRA performance
evaluation of, or application for a deposit facility (as defined in
section 803 of the CRA (12 U.S.C. 2902(3)) by, an insured depository
institution or an application by a company to acquire an insured
depository institution.
(ii) Example 2. A NGEP makes a statement concerning an insured
depository institution or affiliate at a widely attended conference or
seminar regarding a general topic. A public or private meeting, public
hearing, or other meeting regarding one or more specific institutions,
affiliates or transactions involving an application for a deposit
facility is not considered a widely attended conference or seminar.
(iii) Example 3. A NGEP, such as a civil rights group, community
group providing housing and other services in low- and moderate-income
neighborhoods, veterans organization, community theater group, or youth
organization, sends a fundraising letter to insured depository
institutions and to other businesses in its community. The letter
encourages all businesses in the community to meet their obligation to
assist in making the local community a better place to live and work by
supporting the fundraising efforts of the NGEP.
(iv) Example 4. A NGEP discusses with an insured depository
institution or affiliate whether particular loans, services,
investments, community development activities, or other activities are
generally eligible for consideration by a Federal banking agency under
the CRA. The NGEP and insured depository institution or affiliate do
not discuss the adequacy of the CRA performance of the insured
depository institution or affiliate.
(v) Example 5. A NGEP engaged in the sale or purchase of loans in
the secondary market sends a general offering circular to financial
institutions offering to sell or purchase a portfolio of loans. An
insured depository institution that receives the offering circular
discusses with the NGEP the types of
[[Page 2109]]
loans included in the loan pool, whether such loans are generally
eligible for consideration under the CRA, and which loans are made to
borrowers in the institution's local community. The NGEP and insured
depository institution do not discuss the adequacy of the institution's
CRA performance.
(d) Multiparty covered agreements. (1) A NGEP that is a party to a
covered agreement that involves multiple NGEPs is not required to
comply with the requirements of this part if--
(i) The NGEP has not had a CRA communication; and
(ii) No representative of the NGEP identified in paragraph (b)(4)
of this section has knowledge at the time of the agreement that another
NGEP that is a party to the agreement has had a CRA communication.
(2) An insured depository institution or affiliate that is a party
to a covered agreement that involves multiple insured depository
institutions or affiliates is not required to comply with the
requirements in Secs. 533.6 and 533.7 if--
(i) No NGEP that is a party to the agreement has had a CRA
communication concerning the insured depository institution or any
affiliate; and
(ii) No representative of the insured depository institution or any
affiliate identified in paragraph (b)(3) of this section has knowledge
at the time of the agreement that an NGEP that is a party to the
agreement has had a CRA communication concerning any other insured
depository institution or affiliate that is a party to the agreement.
Sec. 533.4 Fulfillment of the CRA
(a) List of factors that are in fulfillment of the CRA. Fulfillment
of the CRA, for purposes of this part, means the following list of
factors--
(1) Comments to a Federal banking agency or included in CRA public
file. Providing or refraining from providing written or oral comments
or testimony to any Federal banking agency concerning the performance
under the CRA of an insured depository institution or CRA affiliate
that is a party to the agreement or an affiliate of a party to the
agreement or written comments that are required to be included in the
CRA public file of any such insured depository institution; or
(2) Activities given favorable CRA consideration. Performing any of
the following activities if the activity is of the type that is likely
to receive favorable consideration by a Federal banking agency in
evaluating the performance under the CRA of the insured depository
institution that is a party to the agreement or an affiliate of a party
to the agreement--
(i) Home-purchase, home-improvement, small business, small farm,
community development, and consumer lending, as described in
Sec. 563e.22 of this chapter, including loan purchases, loan
commitments, and letters of credit;
(ii) Making investments, deposits, or grants, or acquiring
membership shares, that have as their primary purpose community
development, as described in Sec. 563e.23 of this chapter;
(iii) Delivering retail banking services, as described in
Sec. 563.24(d) of this chapter;
(iv) Providing community development services, as described in
Sec. 563e.24(e) of this chapter;
(v) In the case of a wholesale or limited-purpose insured
depository institution, community development lending, including
originating and purchasing loans and making loan commitments and
letters of credit, making qualified investments, or providing community
development services, as described in Sec. 563e.25(c) of this chapter;
(vi) In the case of a small insured depository institution, any
lending or other activity described in Sec. 563e.26(a) of this chapter;
or
(vii) In the case of an insured depository institution that is
evaluated on the basis of a strategic plan, any element of the
strategic plan, as described in Sec. 563e.27(f) of this chapter.
(b) Agreements relating to activities of CRA affiliates. An insured
depository institution or affiliate that is a party to a covered
agreement that concerns any activity described in paragraph (a) of this
section of a CRA affiliate must, prior to the time the agreement is
entered into, notify each NGEP that is a party to the agreement that
the agreement concerns a CRA affiliate.
Sec. 533.5 Related agreements considered a single agreement.
The following rules must be applied in determining whether an
agreement is a covered agreement under Sec. 533.2 of this part.
(a) Agreements entered into by same parties. All written agreements
to which an insured depository institution or an affiliate of the
insured depository institution is a party shall be considered to be a
single agreement if the agreements--
(1) Are entered into with the same NGEP;
(2) Were entered into within the same 12-month period; and
(3) Are each in fulfillment of the CRA.
(b) Substantively related contracts. All written contracts to which
an insured depository institution or an affiliate of the insured
depository institution is a party shall be considered to be a single
agreement, without regard to whether the other parties to the contracts
are the same or whether each such contract is in fulfillment of the
CRA, if the contracts were negotiated in a coordinated fashion and a
NGEP is a party to each contract.
Sec. 533.6 Disclosure of covered agreements.
(a) Applicability date. This section applies only to covered
agreements entered into after November 12, 1999.
(b) Disclosure of covered agreements to the public. (1) Disclosure
required. Each NGEP and each insured depository institution or
affiliate that enters into a covered agreement must make a copy of the
covered agreement available to any individual or entity upon request.
(2) Nondisclosure of confidential and proprietary information
permitted. In responding to a request for a covered agreement from any
individual or entity under paragraph (b)(1) of this section, a NGEP,
insured depository institution, or affiliate may withhold from public
disclosure confidential or proprietary information that the party
believes the relevant supervisory agency could withhold from disclosure
under the Freedom of Information Act (5 U.S.C. 552 et seq.) (FOIA).
(3) Information that must be disclosed. Notwithstanding paragraph
(b)(2) of this section, a party must disclose any of the following
information that is contained in a covered agreement--
(i) The names and addresses of the parties to the agreement;
(ii) The amount of any payments, fees, loans, or other
consideration to be made or provided by any party to the agreement;
(iii) Any description of how the funds or other resources provided
under the agreement are to be used;
(iv) The term of the agreement (if the agreement establishes a
term); and
(v) Any other information that the relevant supervisory agency
determines is not properly exempt from public disclosure.
(4) Request for review of withheld information. Any individual or
entity may request that the relevant supervisory agency review whether
any information in a covered agreement withheld by a party must be
disclosed. Any requests for agency review of withheld information must
be filed, and will be processed in accordance with, the relevant
supervisory agency's rules concerning the availability of
[[Page 2110]]
information (see part 505 of this chapter and the Department of
Treasury's rules (31 CFR part 1)).
(5) Duration of obligation. The obligation to disclose a covered
agreement to the public terminates 12 months after the end of the term
of the agreement.
(6) Reasonable copy and mailing fees. Each NGEP and each insured
depository institution or affiliate may charge an individual or entity
that requests a copy of a covered agreement a reasonable fee not to
exceed the cost of copying and mailing the agreement.
(7) Use of CRA public file by insured depository institution or
affiliate. An insured depository institution and any affiliate of an
insured depository institution may fulfill its obligation under this
paragraph (b) by placing a copy of the covered agreement in the insured
depository institution's CRA public file if the institution makes the
agreement available in accordance with the procedures set forth in
Sec. 563e.43 of this chapter.
(c) Disclosure by NGEPs of covered agreements to the relevant
supervisory agency. (1) Each NGEP that is a party to a covered
agreement must provide the following within 30 days of receiving a
request from the relevant supervisory agency--
(i) A complete copy of the agreement; and
(ii) In the event the NGEP proposes the withholding of any
information contained in the agreement in accordance with paragraph
(b)(2) of this section, a public version of the agreement that excludes
such information and an explanation justifying the exclusions. Any
public version must include the information described in paragraph
(b)(3) of this section.
(2) The obligation to provide a covered agreement to the relevant
supervisory agency terminates 12 months after the end of the term of
the covered agreement.
(d) Disclosure by insured depository institution or affiliate of
covered agreements to the relevant supervisory agency. (1) In general.
Within 60 days of the end of each calendar quarter, each insured
depository institution and affiliate must provide each relevant
supervisory agency with--
(i)(A) A complete copy of each covered agreement entered into by
the insured depository institution or affiliate during the calendar
quarter; and
(B) In the event the institution or affiliate proposes the
withholding of any information contained in the agreement in accordance
with paragraph (b)(2) of this section, a public version of the
agreement that excludes such information (other than any information
described in paragraph (b)(3) of this section) and an explanation
justifying the exclusions; or
(ii) A list of all covered agreements entered into by the insured
depository institution or affiliate during the calendar quarter that
contains--
(A) The name and address of each insured depository institution or
affiliate that is a party to the agreement;
(B) The name and address of each NGEP that is a party to the
agreement;
(C) The date the agreement was entered into;
(D) The estimated total value of all payments, fees, loans and
other consideration to be provided by the institution or any affiliate
of the institution under the agreement; and
(E) The date the agreement terminates.
(2) Prompt filing of covered agreements contained in list required.
(i) If an insured depository institution or affiliate files a list of
the covered agreements entered into by the institution or affiliate
pursuant to paragraph (d)(1)(ii) of this section, the institution or
affiliate must provide any relevant supervisory agency a complete copy
and public version of any covered agreement referenced in the list
within 7 calendar days of receiving a request from the agency for a
copy of the agreement.
(ii) The obligation of an insured depository institution or
affiliate to provide a covered agreement to the relevant supervisory
agency under this paragraph (d)(2) terminates 36 months after the end
of the term of the covered agreement.
(3) Joint filings. In the event that 2 or more insured depository
institutions or affiliates are parties to a covered agreement, the
insured depository institution(s) and affiliate(s) may jointly file the
documents required by this paragraph (d) of this section. Any joint
filing must identify the insured depository institution(s) and
affiliate(s) for whom the filings are being made.
Sec. 533.7 Annual reports.
(a) Applicability date. This section applies only to covered
agreements entered into on or after May 12, 2000.
(b) Annual report required. Each NGEP and each insured depository
institution or affiliate that is a party to a covered agreement must
file an annual report with each relevant supervisory agency concerning
the disbursement, receipt, and uses of funds or other resources under
the covered agreement.
(c) Duration of reporting requirement. (1) NGEPs. A NGEP must file
an annual report for a covered agreement for any fiscal year in which
the NGEP receives or uses funds or other resources under the agreement.
(2) Insured depository institutions and affiliates. An insured
depository institution or affiliate must file an annual report for a
covered agreement for any fiscal year in which the institution or
affiliate--
(i) Provides or receives any payments, fees, or loans under the
covered agreement that must be reported under paragraphs (e)(1)(iii)
and (e)(1)(iv) of this section; or
(ii) Has data to report on loans, investments, and services
provided by a party to the covered agreement under the covered
agreement under paragraph (e)(1)(vi) of this section.
(d) Annual reports filed by NGEP. (1) Contents of report. The
annual report filed by a NGEP under this section must include the
following--
(i) The name and mailing address of the NGEP filing the report;
(ii) Information sufficient to identify the covered agreement for
which the annual report is being filed, such as by providing the names
of the parties to the agreement and the date the agreement was entered
into or by providing a copy of the agreement;
(iii) The amount of funds or resources received under the covered
agreement during the fiscal year; and
(iv) A detailed, itemized list of how the funds or resources
received by the NGEP under the covered agreement were used during the
fiscal year, including the total amount used for--
(A) Compensation of officers, directors, and employees;
(B) Administrative expenses;
(C) Travel expenses;
(D) Entertainment expenses;
(E) Payment of consulting and professional fees; and
(F) Other expenses and uses (specify expense or use).
(2) More detailed reporting of uses of funds or resources
permitted. (i) In general. If a NGEP allocated and used funds received
under a covered agreement for a specific purpose, the NGEP may fulfill
the requirements of paragraph (d)(1)(iv) of this section with respect
to such funds by providing--
(A) A brief description of each specific purpose for which the
funds or other resources were used; and
(B) The amount of funds or resources used during the fiscal year
for each specific purpose.
(ii) Specific purpose defined. A NGEP allocates and uses funds for
a specific purpose if the NGEP receives and uses the funds for a
purpose that is more specific and limited than the categories listed in
paragraph (d)(1)(iv) of this section.
[[Page 2111]]
(3) Use of other reports. The annual report filed by a NGEP may
consist of or incorporate a report prepared for any other purpose, such
as the Internal Revenue Service Return of Organization Exempt From
Income Tax on Form 990, or any other Internal Revenue Service form,
state tax form, report to members or shareholders, audited or unaudited
financial statements, audit report, or other report, so long as the
annual report filed by the NGEP contains all of the information
required by this paragraph (d).
(4) Consolidated reports permitted. A NGEP that is a party to 2 or
more covered agreements may file with each relevant supervisory agency
a single consolidated annual report covering all the covered
agreements. Any consolidated report must contain all the information
required by this paragraph (d). The information reported under
paragraphs (d)(1)(iv) and (d)(2) of this section may be reported on an
aggregate basis for all covered agreements.
(5) Examples of annual report requirements for NGEPs
(i) Example 1. A NGEP receives an unrestricted grant of $15,000
under a covered agreement, includes the funds in its general
operating budget and uses the funds during its fiscal year. The
NGEP's annual report for the fiscal year must provide the name and
mailing address of the NGEP, information sufficient to identify the
covered agreement, and state that the NGEP received $15,000 during
the fiscal year. The report must also indicate the total
expenditures made by the NGEP during the fiscal year for
compensation, administrative expenses, travel expenses,
entertainment expenses, consulting and professional fees, and other
expenses and uses. The NGEP's annual report may provide this
information by submitting an Internal Revenue Service Form 990 that
includes the required information. If the Internal Revenue Service
Form does not include information for all of the required categories
listed in this part, the NGEP must report the total expenditures in
the remaining categories either by providing that information
directly or by providing another form or report that includes the
required information.
(ii) Example 2. An organization receives $15,000 from an insured
depository institution under a covered agreement and allocates and
uses the $15,000 during the fiscal year to purchase computer
equipment to support its functions. The organization's annual report
must include the name and address of the organization, information
sufficient to identify the agreement, and a statement that the
organization received $15,000 during the year. In addition, since
the organization allocated and used the funds for a specific purpose
that is more narrow and limited than the categories of expenses
included in the detailed, itemized list of expenses, the
organization would have the option of providing either the total
amount it used during the year for each category of expenses
included in paragraph (d)(1)(iv) of this section, or a statement
that it used the $15,000 to purchase computer equipment and a brief
description of the equipment purchased.
(iii) Example 3. A community group receives $50,000 from an
insured depository institution under a covered agreement. During its
fiscal year, the community group specifically allocates and uses
$5,000 of the funds to pay for a particular business trip and uses
the remaining $45,000 for general operating expenses. The group's
annual report for the fiscal year must include the name and address
of the group, information sufficient to identify the agreement, and
a statement that the group received $50,000. Because the group did
not allocate and use all of the funds for a specific purpose, the
group's annual report must provide the total amount of funds it used
during the year for each category of expenses included in paragraph
(d)(1)(iv) of this section. The group's annual report also could
state that it used $5,000 for a particular business trip and include
a brief description of the trip.
(iv) Example 4. A community development organization is a party
to two separate covered agreements with two unaffiliated insured
depository institutions. Under each agreement, the organization
receives $15,000 during its fiscal year and uses the funds to
support its activities during that year. If the organization elects
to file a consolidated annual report, the consolidated report must
identify the organization and the two covered agreements, state that
the organization received $15,000 during the fiscal year under each
agreement, and provide the total amount that the organization used
during the year for each category of expenses included in paragraph
(d)(1)(iv) of this section.
(e) Annual report filed by insured depository institution or
affiliate--(1) General. The annual report filed by an insured
depository institution or affiliate must include the following--
(i) The name and principal place of business of the insured
depository institution or affiliate filing the report;
(ii) Information sufficient to identify the covered agreement for
which the annual report is being filed, such as by providing the names
of the parties to the agreement and the date the agreement was entered
into or by providing a copy of the agreement;
(iii) The aggregate amount of payments, aggregate amount of fees,
and aggregate amount of loans provided by the insured depository
institution or affiliate under the covered agreement to any other party
to the agreement during the fiscal year;
(iv) The aggregate amount of payments, aggregate amount of fees,
and aggregate amount of loans received by the insured depository
institution or affiliate under the covered agreement from any other
party to the agreement during the fiscal year;
(v) A general description of the terms and conditions of any
payments, fees, or loans reported under paragraphs (e)(1)(iii) and
(e)(1)(iv) of this section, or, in the event such terms and conditions
are set forth--
(A) In the covered agreement, a statement identifying the covered
agreement and the date the agreement (or a list identifying the
agreement) was filed with the relevant supervisory agency; or
(B) In a previous annual report filed by the insured depository
institution or affiliate, a statement identifying the date the report
was filed with the relevant supervisory agency; and
(vi) The aggregate amount and number of loans, aggregate amount and
number of investments, and aggregate amount of services provided under
the covered agreement to any individual or entity not a party to the
agreement--
(A) By the insured depository institution or affiliate during its
fiscal year; and
(B) By any other party to the agreement, unless such information is
not known to the insured depository institution or affiliate filing the
report or such information is or will be contained in the annual report
filed by another party under this section.
(2) Consolidated reports permitted. (i) Party to multiple
agreements. An insured depository institution or affiliate that is a
party to 2 or more covered agreements may file a single consolidated
annual report with each relevant supervisory agency concerning all the
covered agreements.
(ii) Affiliated entities party to the same agreement. An insured
depository institution and its affiliates that are parties to the same
covered agreement may file a single consolidated annual report relating
to the agreement with each relevant supervisory agency for the covered
agreement.
(iii) Content of report. Any consolidated annual report must
contain all the information required by this paragraph (e). The amounts
and data required to be reported under paragraphs (e)(1)(iv) and
(e)(1)(vi) of this section may be reported on an aggregate basis for
all covered agreements.
(f) Time and place of filing. (1) General. Each party must file its
annual report with each relevant supervisory agency for the covered
agreement no later than six months following the end of the fiscal year
covered by the report.
(2) Alternative method of fulfilling annual reporting requirement
for a NGEP. (i) A NGEP may fulfill the filing requirements of this
section by providing the following materials to an insured depository
institution or affiliate that is a party to the agreement
[[Page 2112]]
no later than six months following the end of the NGEP's fiscal year--
(A) A copy of the NGEP's annual report required under paragraph (d)
of this section for the fiscal year; and
(B) Written instructions that the insured depository institution or
affiliate promptly forward the annual report to the relevant
supervisory agency or agencies on behalf of the NGEP.
(ii) An insured depository institution or affiliate that receives
an annual report from a NGEP pursuant to paragraph (f)(2)(i) of this
section must file the report with the relevant supervisory agency or
agencies on behalf of the NGEP within 30 days.
Sec. 533.8 Release of information under FOIA.
OTS will make covered agreements and annual reports available to
the public in accordance with the Freedom of Information Act (5 U.S.C.
552 et seq.), OTS's rules (part 505 of this chapter), and the
Department of Treasury's rules (31 CFR part 1). A party to a covered
agreement may request confidential treatment of proprietary and
confidential information in a covered agreement or an annual report
under those procedures.
Sec. 533.9 Compliance provisions.
(a) Willful failure to comply with disclosure and reporting
obligations. (1) If OTS determines that a NGEP has willfully failed to
comply in a material way with Secs. 533.6 or 533.7 of this part, OTS
will notify the NGEP in writing of that determination and provide the
NGEP a period of 90 days (or such longer period as OTS finds to be
reasonable under the circumstances) to comply.
(2) If the NGEP does not comply within the time period established
by OTS, the agreement shall thereafter be unenforceable by that NGEP by
operation of section 48 of the Federal Deposit Insurance Act (12 U.S.C.
1831y).
(3) OTS may assist any insured depository institution or affiliate
that is a party to a covered agreement that is unenforceable by a NGEP
by operation of section 48 of the Federal Deposit Insurance Act (12
U.S.C. 1831y) in identifying a successor to assume the NGEP's
responsibilities under the agreement.
(b) Diversion of funds. If a court or other body of competent
jurisdiction determines that funds or resources received under a
covered agreement have been diverted contrary to the purposes of the
covered agreement for an individual's personal financial gain, OTS may
take either or both of the following actions--
(1) Order the individual to disgorge the diverted funds or
resources received under the agreement;
(2) Prohibit the individual from being a party to any covered
agreement for a period not to exceed 10 years.
(c) Notice and opportunity to respond. Before making a
determination under paragraph (a)(1) of this section, or taking any
action under paragraph (b) of this section, OTS will provide written
notice and an opportunity to present information to OTS concerning any
relevant facts or circumstances relating to the matter.
(d) Inadvertent or de minimis errors. Inadvertent or de minimis
errors in annual reports or other documents filed with OTS under
Secs. 533.6 or 533.7 of this part will not subject the reporting party
to any penalty.
(e) Enforcement of provisions in covered agreements. No provision
of this part shall be construed as authorizing OTS to enforce the
provisions of any covered agreement.
Sec. 533.10 Transition provisions.
(a) Disclosure of covered agreements entered into before the
effective date of this part. The following disclosure requirements
apply to covered agreements that were entered into after November 12,
1999, and that terminated before April 1, 2001.
(1) Disclosure to the public. Each NGEP and each insured depository
institution or affiliate that was a party to the agreement must make
the agreement available to the public under Sec. 533.6 of this part
until at least April 1, 2002.
(2) Disclosure to the relevant supervisory agency. (i) Each NGEP
that was a party to the agreement must make the agreement available to
the relevant supervisory agency under Sec. 533.6 of this part until at
least April 1, 2002.
(ii) Each insured depository institution or affiliate that was a
party to the agreement must, by June 30, 2001, provide each relevant
supervisory agency either--
(A) A copy of the agreement under Sec. 533.6(d)(1)(i) of this part;
or
(B) The information described in Sec. 533.6(d)(1)(ii) of this part
for each agreement.
(b) Filing of annual reports that relate to fiscal years ending on
or before December 31, 2000. In the event that a NGEP, insured
depository institution or affiliate has any information to report under
Sec. 533.7 of this part for a fiscal that ends on or before December
31, 2000, and that concerns a covered agreement entered into between
May 12, 2000, and December 31, 2000, the annual report for that fiscal
year must be provided, no later than June 30, 2001, to--
(1) Each relevant supervisory agency; or
(2) In the case of a NGEP, to an insured depository institution or
affiliate that is a party to the agreement in accordance with
Sec. 533.7(f)(2) of this part.
Sec. 533.11 Other definitions and rules of construction used in this
part.
(a) Affiliate. Affiliate means--
(1) Any company that controls, is controlled by, or is under common
control with another company; and
(2) For the purpose of determining whether an agreement is a
covered agreement under Sec. 533.2, an affiliate includes any company
that would be under common control or merged with another company on
consummation of any transaction pending before a Federal banking agency
at the time--
(i) The parties enter into the agreement; and
(ii) The NGEP that is a party to the agreement makes a CRA
communication, as described in Sec. 533.3 of this part.
(b) Control. Control is defined in section 2(a) of the Bank Holding
Company Act (12 U.S.C. 1841(a)).
(c) CRA affiliate. A CRA affiliate of an insured depository
institution is any company that is an affiliate of an insured
depository institution to the extent, and only to the extent, that the
activities of the affiliate were considered by the appropriate Federal
banking agency when evaluating the CRA performance of the institution
at its most recent CRA examination prior to the agreement. An insured
depository institution or affiliate also may designate any company as a
CRA affiliate at any time prior to the time a covered agreement is
entered into by informing the NGEP that is a party to the agreement of
such designation.
(d) CRA public file. CRA public file means the public file
maintained by an insured depository institution and described in
Sec. 563.43 of this chapter.
(e) Executive officer. The term executive officer has the same
meaning as in Sec. 215.2(e)(1) of the Board of Governors of the Federal
Reserve's Regulation O (12 CFR 215.2(e)(1)). In applying this
definition under this part, the term savings association shall be used
in place of the term bank.
(f) Federal banking agency; appropriate Federal banking agency. The
terms Federal banking agency and appropriate Federal banking agency
have the same meanings as in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813).
[[Page 2113]]
(g) Fiscal year. (1) The fiscal year for a NGEP that does not have
a fiscal year shall be the calendar year.
(2) Any NGEP, insured depository institution, or affiliate that has
a fiscal year may elect to have the calendar year be its fiscal year
for purposes of this part.
(h) Insured depository institution. Insured depository institution
has the same meaning as in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813).
(i) Nongovernmental entity or person or NGEP--(1) General. A
nongovernmental entity or person or NGEP is any partnership,
association, trust, joint venture, joint stock company, corporation,
limited liability corporation, company, firm, society, other
organization, or individual.
(2) Exclusions. A nongovernmental entity or person does not
include--
(i) The United States government, a state government, a unit of
local government (including a county, city, town, township, parish,
village, or other general-purpose subdivision of a state) or an Indian
tribe or tribal organization established under Federal, state or Indian
tribal law (including the Department of Hawaiian Home Lands), or a
department, agency, or instrumentality of any such entity;
(ii) A federally-chartered public corporation that receives Federal
funds appropriated specifically for that corporation;
(iii) An insured depository institution or affiliate of an insured
depository institution; or
(iv) An officer, director, employee, or representative (acting in
his or her capacity as an officer, director, employee, or
representative) of an entity listed in paragraphs (i)(2)(i),
(i)(2)(ii), or (i)(2)(iii) of this section.
(j) Party. The term party with respect to a covered agreement means
each NGEP and each insured depository institution or affiliate that
entered into the agreement.
(k) Relevant supervisory agency. The relevant supervisory agency
for a covered agreement means the appropriate Federal banking agency
for--
(1) Each insured depository institution (or subsidiary thereof)
that is a party to the covered agreement;
(2) Each insured depository institution (or subsidiary thereof) or
CRA affiliate that makes payments or loans or provides services that
are subject to the covered agreement; and
(3) Any company (other than an insured depository institution or
subsidiary thereof) that is a party to the covered agreement.
(l) Term of agreement. An agreement that does not have a fixed
termination date is considered to terminate on the last date on which
any party to the agreement makes any payment or provides any loan or
other resources under the agreement, unless the relevant supervisory
agency for the agreement otherwise notifies each party in writing.
Dated: December 20, 2000.
By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 01-3 Filed 1-9-01; 8:45 am]
BILLING CODE 4810-33-U; 6210-01-U; 6714-01-U; 6720-01-U