This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
Proposed Rules Federal Register
12148
Vol. 70, No. 47
Friday, March 11, 2005
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 25
[Docket No. 05–04]
RIN 1557–AB98
FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Regulation BB; Docket No. R–1225]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 345
RIN 3064–AC89
Community Reinvestment Act
Regulations
AGENCIES: Office of the Comptroller of
the Currency, Treasury (OCC); Board of
Governors of the Federal Reserve
System (Board); and Federal Deposit
Insurance Corporation (FDIC).
ACTION: Joint notice of proposed
rulemaking.
SUMMARY: The OCC, Board, and FDIC
(collectively, ‘‘federal banking agencies’’
or ‘‘the Agencies’’) are issuing this
notice of proposed rulemaking that
would revise certain provisions of our
rules implementing the Community
Reinvestment Act (CRA). We plan to
take this action in response to public
comments received by the federal
banking agencies and the Office of
Thrift Supervision (OTS) on a February
2004 inter-agency CRA proposal and by
the FDIC on its August 2004 CRA
proposal. The current proposal would
address regulatory burden imposed on
some smaller banks by revising the
eligibility requirements for CRA
evaluation under the lending,
investment, and service tests.
Specifically, the proposal would
provide a simplified lending test and a
flexible new community development
test for small banks with an asset size
between $250 million and $1 billion.
Holding company affiliation would not
be a factor in determining which CRA
evaluation standards applied to a bank.
In addition, the proposal would revise
the term ‘‘community development’’ to
include certain community
development activities, including
affordable housing, in underserved rural
areas and designated disaster areas.
DATES: Comments must be received by
May 10, 2005.
ADDRESSES: Comments should be
directed to:
OCC: You should include OCC and
Docket Number 05–04 in your comment.
You may submit comments by any of
the following methods:
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• OCC Web Site: http://
www.occ.treas.gov. Click on ‘‘Contact
the OCC,’’ scroll down and click on
‘‘Comments on Proposed Regulations.’’
• E-mail Address:
regs.comments@occ.treas.gov.
• Fax: (202) 874–4448.
• Mail: Office of the Comptroller of
the Currency, 250 E Street, SW., Mail
Stop 1–5, Washington, DC 20219.
• Hand Delivery/Courier: 250 E
Street, SW., Attn: Public Information
Room, Mail Stop 1–5, Washington, DC
20219.
Instructions: All submissions received
must include the agency name (OCC)
and docket number or Regulatory
Information Number (RIN) for this
notice of proposed rulemaking. In
general, the OCC will enter all
comments received into the docket
without change, including any business
or personal information that you
provide. You may review comments and
other related materials by any of the
following methods:
• Viewing Comments Personally: You
may personally inspect and photocopy
comments at the OCC’s Public
Information Room, 250 E Street, SW.,
Washington, DC. You can make an
appointment to inspect comments by
calling (202) 874–5043.
• Viewing Comments Electronically:
You may request e-mail or CD–ROM
copies of comments that the OCC has
received by contacting the OCC’s Public
Information Room at
regs.comments@occ.treas.gov.
• Docket: You may also request
available background documents and
project summaries using the methods
described above.
Board: You may submit comments,
identified by Docket No. R–1225, by any
of the following methods:
• Agency Web Site: http://
www.federalreserve.gov. Follow the
instructions for submitting comments at
http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail:
regs.comments@federalreserve.gov.
Include docket number in the subject
line of the message.
• Fax: 202/452–3819 or 202/452–
3102.
• Mail: Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551.
All public comments are available
from the Board’s Web site at http://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
except as necessary for technical
reasons. Accordingly, your comments
will not be edited to remove any
identifying or contact information.
Public comments may also be viewed
electronically or in paper in Room MP–
500 of the Board’s Martin Building (20th
and C Streets, NW.) between 9 a.m. and
5 p.m. on weekdays.
FDIC: You may submit comments,
identified by RIN number by any of the
following methods:
• Agency Web site: http://
www.fdic.gov/regulations/laws/federal/
propose.html. Follow instructions for
submitting comments on the Agency
Web Site.
• E-mail: Comments@FDIC.gov.
Include the RIN number in the subject
line of the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
• Hand Delivery/Courier: Guard
station at the rear of the 550 17th Street
Building (located on F Street) on
business days between 7 a.m. and 5 p.m.
• Instructions: All submissions
received must include the agency name
and RIN for this rulemaking. All
comments received will be posted
without change to http://www.fdic.gov/
regulations/laws/federal/propose.html
VerDate jul<14>2003 16:22 Mar 10, 2005 Jkt 205001 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 E:\FR\FM\11MRP1.SGM 11MRP1
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
Proposed Rules Federal Register
12148
Vol. 70, No. 47
Friday, March 11, 2005
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 25
[Docket No. 05–04]
RIN 1557–AB98
FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Regulation BB; Docket No. R–1225]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 345
RIN 3064–AC89
Community Reinvestment Act
Regulations
AGENCIES: Office of the Comptroller of
the Currency, Treasury (OCC); Board of
Governors of the Federal Reserve
System (Board); and Federal Deposit
Insurance Corporation (FDIC).
ACTION: Joint notice of proposed
rulemaking.
SUMMARY: The OCC, Board, and FDIC
(collectively, ‘‘federal banking agencies’’
or ‘‘the Agencies’’) are issuing this
notice of proposed rulemaking that
would revise certain provisions of our
rules implementing the Community
Reinvestment Act (CRA). We plan to
take this action in response to public
comments received by the federal
banking agencies and the Office of
Thrift Supervision (OTS) on a February
2004 inter-agency CRA proposal and by
the FDIC on its August 2004 CRA
proposal. The current proposal would
address regulatory burden imposed on
some smaller banks by revising the
eligibility requirements for CRA
evaluation under the lending,
investment, and service tests.
Specifically, the proposal would
provide a simplified lending test and a
flexible new community development
test for small banks with an asset size
between $250 million and $1 billion.
Holding company affiliation would not
be a factor in determining which CRA
evaluation standards applied to a bank.
In addition, the proposal would revise
the term ‘‘community development’’ to
include certain community
development activities, including
affordable housing, in underserved rural
areas and designated disaster areas.
DATES: Comments must be received by
May 10, 2005.
ADDRESSES: Comments should be
directed to:
OCC: You should include OCC and
Docket Number 05–04 in your comment.
You may submit comments by any of
the following methods:
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• OCC Web Site: http://
www.occ.treas.gov. Click on ‘‘Contact
the OCC,’’ scroll down and click on
‘‘Comments on Proposed Regulations.’’
• E-mail Address:
regs.comments@occ.treas.gov.
• Fax: (202) 874–4448.
• Mail: Office of the Comptroller of
the Currency, 250 E Street, SW., Mail
Stop 1–5, Washington, DC 20219.
• Hand Delivery/Courier: 250 E
Street, SW., Attn: Public Information
Room, Mail Stop 1–5, Washington, DC
20219.
Instructions: All submissions received
must include the agency name (OCC)
and docket number or Regulatory
Information Number (RIN) for this
notice of proposed rulemaking. In
general, the OCC will enter all
comments received into the docket
without change, including any business
or personal information that you
provide. You may review comments and
other related materials by any of the
following methods:
• Viewing Comments Personally: You
may personally inspect and photocopy
comments at the OCC’s Public
Information Room, 250 E Street, SW.,
Washington, DC. You can make an
appointment to inspect comments by
calling (202) 874–5043.
• Viewing Comments Electronically:
You may request e-mail or CD–ROM
copies of comments that the OCC has
received by contacting the OCC’s Public
Information Room at
regs.comments@occ.treas.gov.
• Docket: You may also request
available background documents and
project summaries using the methods
described above.
Board: You may submit comments,
identified by Docket No. R–1225, by any
of the following methods:
• Agency Web Site: http://
www.federalreserve.gov. Follow the
instructions for submitting comments at
http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail:
regs.comments@federalreserve.gov.
Include docket number in the subject
line of the message.
• Fax: 202/452–3819 or 202/452–
3102.
• Mail: Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551.
All public comments are available
from the Board’s Web site at http://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
except as necessary for technical
reasons. Accordingly, your comments
will not be edited to remove any
identifying or contact information.
Public comments may also be viewed
electronically or in paper in Room MP–
500 of the Board’s Martin Building (20th
and C Streets, NW.) between 9 a.m. and
5 p.m. on weekdays.
FDIC: You may submit comments,
identified by RIN number by any of the
following methods:
• Agency Web site: http://
www.fdic.gov/regulations/laws/federal/
propose.html. Follow instructions for
submitting comments on the Agency
Web Site.
• E-mail: Comments@FDIC.gov.
Include the RIN number in the subject
line of the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
• Hand Delivery/Courier: Guard
station at the rear of the 550 17th Street
Building (located on F Street) on
business days between 7 a.m. and 5 p.m.
• Instructions: All submissions
received must include the agency name
and RIN for this rulemaking. All
comments received will be posted
without change to http://www.fdic.gov/
regulations/laws/federal/propose.html
VerDate jul<14>2003 16:22 Mar 10, 2005 Jkt 205001 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 E:\FR\FM\11MRP1.SGM 11MRP1
12149Federal Register / Vol. 70, No. 47 / Friday, March 11, 2005 / Proposed Rules
including any personal information
provided.
FOR FURTHER INFORMATION CONTACT:
OCC: Michael Bylsma, Director, or
Margaret Hesse, Special Counsel,
Community and Consumer Law
Division, (202) 874–5750; Karen Tucker,
National Bank Examiner, Compliance
Division, (202) 874–4428; or Patrick T.
Tierney, Attorney, Legislative and
Regulatory Activities (202) 874–5090,
Office of the Comptroller of the
Currency, 250 E Street, SW.,
Washington, DC 20219.
Board: William T. Coffey, Senior
Review Examiner, (202) 452–3946;
Catherine M.J. Gates, Oversight Team
Leader, (202) 452–3946; Kathleen C.
Ryan, Counsel, (202) 452–3667; or Dan
S. Sokolov, Senior Attorney, (202) 452–
2412, Division of Consumer and
Community Affairs, Board of Governors
of the Federal Reserve System, 20th
Street and Constitution Avenue, NW.,
Washington, DC 20551.
FDIC: Richard M. Schwartz, Counsel,
Legal Division, (202) 898–7424; Susan
van den Toorn, Counsel, Legal Division,
(202) 898–8707; or Robert W. Mooney,
Chief, CRA and Fair Lending Policy
Section, Division of Supervision and
Consumer Protection, (202) 898–3911;
Federal Deposit Insurance Corporation,
550 17th Street, NW., Washington, DC
20429.
SUPPLEMENTARY INFORMATION:
Background
Advance Notice of Proposed
Rulemaking. In 1995, when the OCC,
the Board, the OTS, and the FDIC
(collectively, ‘‘federal banking and thrift
agencies’’ or ‘‘four agencies’’) adopted
major amendments to regulations
implementing the Community
Reinvestment Act, they committed to
reviewing the amended regulations in
2002 for their effectiveness in placing
performance over process, promoting
consistency in evaluations, and
eliminating unnecessary burden. (60 FR
22156, 22177, May 4, 1995). The review
was initiated in July 2001 with the
publication in the Federal Register of an
advance notice of proposed rulemaking
(66 FR 37602, July 19, 2001). The
federal banking and thrift agencies
indicated that they would determine
whether and, if so, how the regulations
should be amended to better evaluate
financial institutions’ performance
under CRA, consistent with the Act’s
authority, mandate, and intent. The four
agencies solicited comment on the
fundamental issue of whether any
change to the regulations would be
beneficial or warranted, and on eight
discrete aspects of the regulations.
About 400 comment letters were
received, most from banks and thrifts of
varying sizes and their trade
associations (‘‘financial institutions’’)
and local and national nonprofit
community advocacy and community
development organizations
(‘‘community organizations’’).
The comments reflected a consensus
that certain fundamental elements of the
regulations are sound, but demonstrated
a disagreement over the need and
reasons for change. Community
organizations advocated that the
regulations needed to be changed to
reflect developments in the industry
and marketplace; financial institutions
were concerned principally with
reducing burden consistent with
maintaining or improving the
regulations’ effectiveness. In reviewing
these comments, the federal banking
and thrift agencies were particularly
mindful of the need to balance the
desire to make changes that might ‘‘fine
tune’’ the regulations, with the need to
avoid unnecessary and costly disruption
to reasonable CRA policies and
procedures that the industry has put
into place under the current rules.
Joint Agency Regulatory Proposal to
Address Small Institution Regulatory
Burden and Illegal or Predatory Lending
Practices. In February 2004, the federal
banking and thrift agencies issued
identical proposals to amend their
respective CRA regulations to increase
the limit on the asset size of institutions
classified as ‘‘small institutions’’ that
are eligible for streamlined CRA
evaluations and exempt from CRA data
reporting obligations. (69 FR 5729, Feb.
6, 2004). Under the current rule, a
‘‘small institution’’ is an institution that
has less than $250 million in assets and
is either independent or a member of a
holding company with less than $1
billion in assets. The four agencies
proposed to re-define a ‘‘small
institution’’ as one with fewer than $500
million in assets. The holding company
criterion would have been eliminated
under the proposal.
The commenters were deeply split on
the proposal. A majority of over 250
community bank commenters, and all of
the trade associations commenting on
behalf of community banks, urged the
federal banking and thrift federal
banking agencies to extend the proposed
burden relief to all institutions with
assets under $2 billion, or at least to all
institutions with assets under $1 billion;
a few favored the proposed $500 million
threshold. Virtually every one of over
250 community group commenters
strongly opposed changing the
definition of ‘‘small institution’’ or
exempting any more institutions from
the three-part test (lending, services,
and investments). These commenters
urged that the threshold not be changed
so that community development
activities continue to be evaluated, as
they are today, in banks with $250
million or more in assets.
The federal banking and thrift
agencies also proposed to revise and
clarify the regulations to provide that
evidence of certain abusive and illegal
credit practices will adversely affect an
agency’s evaluation of a bank’s CRA
performance, including evidence of a
pattern or practice of extending home
mortgage or consumer loans based
predominantly on the foreclosure or
liquidation value of the collateral by the
institution, where the borrower cannot
be expected to be able to make the
payments required under the terms of
the loan. The proposal clarified that a
bank’s evaluation will be adversely
affected by such abusive or illegal credit
practices regardless of whether the
practices involve loans in the bank’s
assessment area(s) or in any other
location or geography. It also provided
that a bank’s CRA evaluation can be
adversely affected by evidence of such
practices by any affiliate, if any loans of
that affiliate have been considered in
the institution’s CRA evaluation.
While commenters differed in their
reaction to many aspects of the
proposal, many commenters, including
community organizations and financial
institutions, opposed—as either
inadequate or inappropriate—the
provision that evidence of collateral-
based mortgage lending would
adversely affect a bank’s CRA
evaluation.
Recent OTS Rulemaking. On August
18, 2004, the OTS published a final rule
that expanded the category of ‘‘small
savings associations’’ subject to OTS
CRA regulations to those under $1
billion, regardless of holding-company
affiliation. The OTS announced that it
was taking this action on July 16, 2004,
and that same day, the OCC and the
Board announced separately that they
would not proceed with their respective
proposals. The Board formally withdrew
its proposal. The OCC did not formally
withdraw its proposal, but did not adopt
it.
On November 24, 2004, the OTS
issued another proposed rulemaking to
revise the definition of ‘‘community
development’’ to permit consideration
of such activities in underserved non-
metropolitan areas, and to solicit
comment on the appropriate
consideration of such community
development activities in any areas
affected by natural disasters or major
community disruptions. The OTS
VerDate jul<14>2003 16:22 Mar 10, 2005 Jkt 205001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 E:\FR\FM\11MRP1.SGM 11MRP1
including any personal information
provided.
FOR FURTHER INFORMATION CONTACT:
OCC: Michael Bylsma, Director, or
Margaret Hesse, Special Counsel,
Community and Consumer Law
Division, (202) 874–5750; Karen Tucker,
National Bank Examiner, Compliance
Division, (202) 874–4428; or Patrick T.
Tierney, Attorney, Legislative and
Regulatory Activities (202) 874–5090,
Office of the Comptroller of the
Currency, 250 E Street, SW.,
Washington, DC 20219.
Board: William T. Coffey, Senior
Review Examiner, (202) 452–3946;
Catherine M.J. Gates, Oversight Team
Leader, (202) 452–3946; Kathleen C.
Ryan, Counsel, (202) 452–3667; or Dan
S. Sokolov, Senior Attorney, (202) 452–
2412, Division of Consumer and
Community Affairs, Board of Governors
of the Federal Reserve System, 20th
Street and Constitution Avenue, NW.,
Washington, DC 20551.
FDIC: Richard M. Schwartz, Counsel,
Legal Division, (202) 898–7424; Susan
van den Toorn, Counsel, Legal Division,
(202) 898–8707; or Robert W. Mooney,
Chief, CRA and Fair Lending Policy
Section, Division of Supervision and
Consumer Protection, (202) 898–3911;
Federal Deposit Insurance Corporation,
550 17th Street, NW., Washington, DC
20429.
SUPPLEMENTARY INFORMATION:
Background
Advance Notice of Proposed
Rulemaking. In 1995, when the OCC,
the Board, the OTS, and the FDIC
(collectively, ‘‘federal banking and thrift
agencies’’ or ‘‘four agencies’’) adopted
major amendments to regulations
implementing the Community
Reinvestment Act, they committed to
reviewing the amended regulations in
2002 for their effectiveness in placing
performance over process, promoting
consistency in evaluations, and
eliminating unnecessary burden. (60 FR
22156, 22177, May 4, 1995). The review
was initiated in July 2001 with the
publication in the Federal Register of an
advance notice of proposed rulemaking
(66 FR 37602, July 19, 2001). The
federal banking and thrift agencies
indicated that they would determine
whether and, if so, how the regulations
should be amended to better evaluate
financial institutions’ performance
under CRA, consistent with the Act’s
authority, mandate, and intent. The four
agencies solicited comment on the
fundamental issue of whether any
change to the regulations would be
beneficial or warranted, and on eight
discrete aspects of the regulations.
About 400 comment letters were
received, most from banks and thrifts of
varying sizes and their trade
associations (‘‘financial institutions’’)
and local and national nonprofit
community advocacy and community
development organizations
(‘‘community organizations’’).
The comments reflected a consensus
that certain fundamental elements of the
regulations are sound, but demonstrated
a disagreement over the need and
reasons for change. Community
organizations advocated that the
regulations needed to be changed to
reflect developments in the industry
and marketplace; financial institutions
were concerned principally with
reducing burden consistent with
maintaining or improving the
regulations’ effectiveness. In reviewing
these comments, the federal banking
and thrift agencies were particularly
mindful of the need to balance the
desire to make changes that might ‘‘fine
tune’’ the regulations, with the need to
avoid unnecessary and costly disruption
to reasonable CRA policies and
procedures that the industry has put
into place under the current rules.
Joint Agency Regulatory Proposal to
Address Small Institution Regulatory
Burden and Illegal or Predatory Lending
Practices. In February 2004, the federal
banking and thrift agencies issued
identical proposals to amend their
respective CRA regulations to increase
the limit on the asset size of institutions
classified as ‘‘small institutions’’ that
are eligible for streamlined CRA
evaluations and exempt from CRA data
reporting obligations. (69 FR 5729, Feb.
6, 2004). Under the current rule, a
‘‘small institution’’ is an institution that
has less than $250 million in assets and
is either independent or a member of a
holding company with less than $1
billion in assets. The four agencies
proposed to re-define a ‘‘small
institution’’ as one with fewer than $500
million in assets. The holding company
criterion would have been eliminated
under the proposal.
The commenters were deeply split on
the proposal. A majority of over 250
community bank commenters, and all of
the trade associations commenting on
behalf of community banks, urged the
federal banking and thrift federal
banking agencies to extend the proposed
burden relief to all institutions with
assets under $2 billion, or at least to all
institutions with assets under $1 billion;
a few favored the proposed $500 million
threshold. Virtually every one of over
250 community group commenters
strongly opposed changing the
definition of ‘‘small institution’’ or
exempting any more institutions from
the three-part test (lending, services,
and investments). These commenters
urged that the threshold not be changed
so that community development
activities continue to be evaluated, as
they are today, in banks with $250
million or more in assets.
The federal banking and thrift
agencies also proposed to revise and
clarify the regulations to provide that
evidence of certain abusive and illegal
credit practices will adversely affect an
agency’s evaluation of a bank’s CRA
performance, including evidence of a
pattern or practice of extending home
mortgage or consumer loans based
predominantly on the foreclosure or
liquidation value of the collateral by the
institution, where the borrower cannot
be expected to be able to make the
payments required under the terms of
the loan. The proposal clarified that a
bank’s evaluation will be adversely
affected by such abusive or illegal credit
practices regardless of whether the
practices involve loans in the bank’s
assessment area(s) or in any other
location or geography. It also provided
that a bank’s CRA evaluation can be
adversely affected by evidence of such
practices by any affiliate, if any loans of
that affiliate have been considered in
the institution’s CRA evaluation.
While commenters differed in their
reaction to many aspects of the
proposal, many commenters, including
community organizations and financial
institutions, opposed—as either
inadequate or inappropriate—the
provision that evidence of collateral-
based mortgage lending would
adversely affect a bank’s CRA
evaluation.
Recent OTS Rulemaking. On August
18, 2004, the OTS published a final rule
that expanded the category of ‘‘small
savings associations’’ subject to OTS
CRA regulations to those under $1
billion, regardless of holding-company
affiliation. The OTS announced that it
was taking this action on July 16, 2004,
and that same day, the OCC and the
Board announced separately that they
would not proceed with their respective
proposals. The Board formally withdrew
its proposal. The OCC did not formally
withdraw its proposal, but did not adopt
it.
On November 24, 2004, the OTS
issued another proposed rulemaking to
revise the definition of ‘‘community
development’’ to permit consideration
of such activities in underserved non-
metropolitan areas, and to solicit
comment on the appropriate
consideration of such community
development activities in any areas
affected by natural disasters or major
community disruptions. The OTS
VerDate jul<14>2003 16:22 Mar 10, 2005 Jkt 205001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 E:\FR\FM\11MRP1.SGM 11MRP1