31962 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 35

[Docket No. 00–11]

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. 2000–44]

RIN 1550–AB32

Disclosure and Reporting of CRARelated 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 notice of proposed

rulemaking.

SUMMARY: The OCC, Board, FDIC, and

OTS (collectively, the agencies) are

requesting comment on a proposed rule

that implements provisions of the

recently enacted Gramm-Leach-Bliley

Act (the GLB Act or the Act). These

provisions require nongovernmental

entities or persons, 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 are contained in section 711

of the Act and are codified as section 48

of the Federal Deposit Insurance Act

(FDI Act).

The rule identifies the types of

written agreements that are covered by

section 711 of the GLB Act (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.

The agencies solicit comments on all

aspects of the proposed rule, including

the specific areas discussed below. The

agencies will issue a final rule after

considering comments received.

DATES: Comments must be received on

or before July 21, 2000.

ADDRESSES:

OCC: Comments should be addressed

to Communications Division, Office of

the Comptroller of the Currency, 250 E

Street, SW, Third floor, Washington, DC

20219, Attention: Docket No. 00–11. In

addition, comments may be sent by

facsimile transmission to fax number

(202) 874–5274 or by Internet mail to

regs.comments@occ.treas.gov.

Comments will be available for public

inspection and photocopying at the

same location.

Board: Comments directed to the

Board should refer to Docket No. R–

1069 and may be mailed to Ms. Jennifer

J. Johnson, Secretary, Board of

Governors of the Federal Reserve

System, 20th and C Streets, NW,

Washington, DC 20551 or mailed

electronically to

regs.comments@federalreserve.gov.

Comments addressed to Ms. Johnson

also may be delivered to the Board’s

mailroom between 8:45 a.m. and 5:15

p.m. and, outside those hours, to the

security control room. Both the

mailroom and the security control room

are accessible from the Eccles Building

courtyard entrance, located on 20th

Street between Constitution Avenue and

C Street, NW. Members of the public

may inspect comments in room MP–500

of the Martin Building between 9:00

a.m. and 5 p.m. on weekdays.

FDIC: Written comments should be

addressed to Robert E. Feldman,

Executive Secretary, Attention:

Comments/OES, Federal Deposit

Insurance Corporation, 550 17th Street,

NW, Washington, DC 20429. Comments

may be hand delivered to the 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.

(Fax number: (202) 898–3838).

Comments may be inspected and

photocopied in the FDIC Public

Information Center, Room 100, 801 17th

Street, NW, Washington, DC, between 9

a.m. and 4:30 p.m. on business days.

Comments may be submitted

electronically over the Internet at

www.fdic.gov. Further information

concerning this option may be found

below at the ‘‘FDIC’s Electronic Public

Comment Site.’’ Comments also may be

mailed electronically to

comments@fdic.gov.

OTS: Send comments to Manager,

Dissemination Branch, Information

Management & Services Division, Office

of Thrift Supervision, 1700 G Street,

NW, Washington, DC 20552, Attention

Docket No. 2000–44. Hand deliver

comments to Public Reference Room,

1700 G Street, NW, lower level, from 9

a.m. to 5 p.m. on business days. Send

facsimile transmissions to FAX number

(202) 906–7755 or (202) 906–6959 (if the

comment is over 25 pages). Send e-mails

to public.info@ots.treas.gov and include

your name and telephone number.

Interested persons may inspect

comments at 1700 G Street, NW, from

10 a.m. until 4 p.m. on Tuesdays and

Thursdays.

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.

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, or James H.

Mann, Attorney (202) 452–3667,

Division of Consumer and Community

Affairs; Board of Governors of the

Federal Reserve System, 20th Street and

Constitution Avenue, NW, Washington,

DC 20551. For users of

Telecommunications Device for the Deaf

(‘‘TDD’’) only, contact Janice Simms at

(202) 452–4984.

FDIC: Deanna S. Caldwell,

Community Affairs Officer (202) 736–

0141; A. Ann Johnson, Counsel,

Regulation and Legislation Section (202)

898–3573; or Joan M. Bateman, Review

Examiner (202) 736–0187.

OTS: Richard Bennett, Counsel

(Banking and Finance), (202) 906–7409;

Karen Osterloh, Assistant Chief

Counsel, (202) 906–6639; or Richard R.

Riese, Director, Compliance Policy,

(202) 906–6134, Office of Thrift

Supervision, 1700 G Street, NW,

Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Executive Summary of Proposed Rule

Section 711 of the GLB Act (Pub. L.

106–102, 113 Stat. 1338 (1999)) added a

new section 48 to the FDI Act (12 U.S.C.

1831y) entitled ‘‘CRA Sunshine

Requirements.’’ Section 711 applies to

written agreements that (1) are made in

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31963

1 12 U.S.C. 2901 et seq.

2See 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).

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 711 does not,

however, cover any agreement with a

nongovernmental entity or person that

has not had a CRA contact with the

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 711,

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.

The proposed rule defines various

terms necessary for determining which

agreements are covered agreements and

provides guidance for determining

when a CRA contact has been made for

purposes of identifying the parties

whose agreements are covered by the

rule. The proposed rule also describes

the manner and scope of the Act’s

disclosure and annual reporting

requirements.

Section 711 and the proposed rule

apply only to agreements that are in

writing. To be covered, a written

agreement may be an understanding or

agreement and need not be a legally

binding contract.

Importantly, section 711 applies only

to written agreements that are ‘‘made

pursuant to, or in connection with, the

fulfillment of the Community

Reinvestment Act.’’ Section 711 defines

‘‘fulfillment’’ of the CRA as a ‘‘list of

factors’’ that the appropriate agency

determines have a material impact on

the agency’s decision to approve or

disapprove an application for a deposit

facility under the CRA or to assign a

CRA examination rating. The agencies

propose to adopt for this purpose the

list of factors identified by the agencies

in the CRA regulations jointly issued by

the agencies (CRA Regulations).2 These

factors include providing the types of

loans considered in evaluating CRA

performance, providing community

development services, making CRA

qualified investments, fulfilling a CRA

strategic plan, providing retail banking

services as described in the CRA

Regulations, and providing or refraining

from providing comments or testimony

to an agency concerning the CRA

performance of an insured depository

institution.

The GLB Act exempts specific types

of agreements from coverage, even if

these agreements would otherwise meet

the definition of a covered agreement. In

particular, the Act and the proposed

rule do not apply to any individual

mortgage loan. The Act and proposed

rule also do not apply to any specific

contract or commitment for any type of

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 the purpose of the loan or

extension of credit does not include any

re-lending of the borrowed funds to

third parties.

In addition, as noted above, the Act

exempts from coverage any agreement

with a nongovernmental entity or

person that has not commented on,

testified about, or discussed with the

insured depository institution, or

otherwise contacted the institution,

concerning the CRA. The proposed rule

adopts the exemption as written in the

statute and includes several examples of

contacts that would be exempt under

this provision as well as contacts that

would not qualify for this exemption.

An example of a contact that would

qualify for this exemption is the

dissemination of a similar fundraising

letter to insured depository institutions

and other businesses in the community

encouraging all businesses in the

community to meet their obligation to

assist in making the community a better

place to live and work. A CRA contact

would be made, and a related agreement

would not be exempt under this

provision, if the entity or person had,

for example, submitted comments to an

agency concerning the CRA

performance of the insured depository

institution, contacted the institution or

any affiliate about providing (or

refraining from providing) CRA-related

comments to an agency concerning the

institution, or contacted the institution

or any affiliate about the CRA

performance of the institution.

The GLB Act requires those

agreements that are covered by section

711, and that are not exempt, to be made

available to the public and the

appropriate agency. Section 711

provides that these disclosure

obligations apply only to covered

agreements entered into after November

12, 1999. Section 711 also requires that

the agencies’ rules for ensuring

compliance with the Act’s requirements

not impose undue burden on the

parties. Accordingly, the rule proposes

to require disclosure of covered

agreements and to define the scope of

annual reports in a manner that fulfills

the requirements of section 711 while at

the same time adopting simple

procedures that reduce duplicative

reporting and rely on existing reports

prepared by the parties for their own

use or to fulfill other requirements.

The rule proposes that each party to

a covered agreement be allowed to

fulfill the public disclosure requirement

of section 711 by making the agreement

available to any member of the public

on request, and allows each party to

recover reasonable copying and mailing

costs in responding to these requests.

An insured depository institution may

fulfill its public disclosure obligation by

placing a copy of the agreement in the

institution’s CRA public file and making

it available in the same manner as other

information in the CRA public file.

The proposed rule also requires that

each insured depository institution or

affiliate that enters into a covered

agreement file a complete copy of the

agreement with the appropriate agency

within 30 days of entering into the

agreement. To avoid duplication of

efforts and reduce burden, the rule

would allow a nongovernmental entity

or person to fulfill its obligation to make

a covered agreement available to the

appropriate agency by providing a copy

to the agency upon the agency’s request.

In addition to making covered

agreements available, the GLB Act

requires that annual reports be filed

regarding resources provided and used

under the agreement. These annual

reporting obligations apply only to

covered agreements entered into on or

after May 12, 2000. For

nongovernmental entities or persons,

the type of information required to be

included in an annual report depends

on how the entity or person used the

funds or resources received under the

covered agreement. If a

nongovernmental entity or person

allocates and uses the funds or

resources received under a covered

agreement for a specific purpose, the

person’s annual report would have to

provide a description of the specific

purpose and state the amount used for

the specific purpose. If the entity or

person uses the funds or resources

received under the covered agreement

for other or general purposes (e.g.,

general operating expenses), the rule

proposes that the annual report provide

31964 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

3The OTS rule, however, refers to a

‘‘nongovernmental entity or person’’ as a ‘‘NGEP.’’

the detailed, itemized list described in

section 711 of how such funds were

used during the year. This list involves

disclosure of the total amount of

resources used by the person or entity

for compensation of officers, directors,

and employees; administrative

expenses; travel expenses;

entertainment expenses; consulting and

professional fees; and other expenses or

uses.

In keeping with section 711, the

proposed rule includes a number of

provisions designed to reduce the

potential reporting burden of

nongovernmental entities or persons.

For example, the rule requires a

nongovernmental entity or person to file

an annual report only for a year in

which the entity or person has received

funds under a covered agreement. In

addition, the annual report filed by a

nongovernmental entity or person may

consist of, or incorporate, a report that

the entity or person has prepared for

other purposes—such as a Federal or

state tax return or annual financial

statements—if the report provides the

information required by the rule. To

facilitate the use of reports that are

prepared for other purposes, the rule

would allow parties to file their annual

reports on either a fiscal year or

calendar year basis. If a

nongovernmental entity or person is a

party to five or more covered

agreements, the entity or person may

file a single, consolidated annual report

relating to all of the agreements.

Furthermore, a nongovernmental entity

or person may fulfill its annual

reporting requirements by sending its

annual reports to the insured depository

institution or affiliate that is a party to

the agreement with a request that the

institution or affiliate file the reports

with the appropriate agency.

Under the GLB Act, the annual report

filed by an insured depository

institution or affiliate generally must

include information on the amount,

terms and conditions of any payments,

fees, or loans provided by the institution

or affiliate under the covered agreement,

as well as payments, fees or loans

received by the institution or affiliate

under the agreement. The annual report

of an insured depository institution or

affiliate also must provide aggregate

data on any loans, investments, or

services provided under the covered

agreement by each party to the

agreement. The rule includes these

requirements. The rule would allow an

insured depository institution or

affiliate that is a party to 5 or more

covered agreements to file a single,

consolidated annual report for all of the

agreements. In addition, if an insured

depository institution and affiliate are

parties to the same covered agreement,

the institution and affiliate may file a

consolidated annual report for the

agreement.

Section 711 does not authorize any

agency to enforce the provisions of any

covered agreement, and the proposed

rule adopts this provision. The GLB Act,

however, provides that a covered

agreement may become unenforceable if

the appropriate agency determines that

a nongovernmental entity or person that

is a party to the agreement has willfully

failed to comply in a material way with

the Act’s disclosure and reporting

requirements and the entity or person,

after receiving notice, fails to comply

with the Act after a reasonable period of

time. The proposed rule includes this

provision and clarifies that, in these

circumstances, the covered agreement

becomes unenforceable only by the

nongovernmental entity or person that

has willfully and materially failed to

comply with section 711.

The Act requires the agencies to

consult and coordinate with each other

in drafting the proposed rule to assure,

to the extent possible, that the

regulations of each agency are

consistent and comparable. The

agencies have gone beyond these

requirements and have developed the

proposed rule on an interagency basis.

The agencies believe the adoption of a

uniform rule should assist the public in

complying with the requirements of the

Act. Furthermore, as required by the

Act, the agencies have sought to ensure

that the proposed rule does not place an

undue burden on the parties to covered

agreements and protects proprietary and

confidential information to the

maximum extent consistent with the

language and purpose of the Act.

The agencies request comment on all

aspects of the proposed rule, including

the specific provisions and issues

highlighted in this preamble, and will

incorporate comments received into the

final rule as appropriate. The agencies

recognize that insured depository

institutions, affiliates, and

nongovernmental entities and persons

can not identify agreements that are

covered by section 711 until, in

particular, the agencies adopt the list of

factors that are considered to be in

‘‘fulfillment’’ of the CRA. Accordingly,

the agencies propose to act

expeditiously to adopt a rule in final

form following conclusion of the

comment period. Once a final rule is

adopted, the parties to covered

agreements will be expected promptly

to disclose any agreement that is

covered by section 711 and was entered

into after November 12, 1999, and file

an annual report for any covered

agreement entered into on or after May

12, 2000, in accordance with the

requirements of the final rule. The

agencies request comment on how the

parties to covered agreements entered

into after these dates, but before

issuance of the final rule, should be

required to comply with the

requirements of the final rule.

II. Detailed Explanation of Proposed

Rule

This section provides a more detailed

discussion of the proposed rule and

includes examples that are designed to

assist users in understanding the scope

and application of the proposed rule.

The examples included in the preamble

are not exclusive. The agencies request

comment on whether the examples

included in the preamble are useful and

whether additional examples would

prove helpful. The proposed rule

includes examples only of situations

that would and would not constitute a

CRA contact by a nongovernmental

entity or person. These examples

relating to CRA contact are part of the

rule. The agencies request comment on

whether examples illustrating other

parts of the rule should be incorporated

into the text of the regulation.

In keeping with the goal of

consistency among the agencies’ rules

and to facilitate compliance, the

proposed rule uses the term ‘‘insured

depository institution’’ rather than

‘‘bank’’ or ‘‘savings association.’’ 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.

For ease of reference, the rule and the

remaining portions of this preamble

refer to a ‘‘nongovernmental entity or

person’’ as a ‘‘person.’’ 3 The terms

‘‘nongovernmental entity or person’’

and ‘‘person,’’ as well as several other

terms used in the rule, are defined in

section ll.8 of the proposed rule. The

rule generally defines a

nongovernmental entity or person to

mean any company or individual other

than the Federal government, a state,

local or tribal government, or an insured

depository institution or affiliate. The

agencies request comment on whether

users would find it more helpful to have

this section of definitions at the

beginning of the rule.

The following description applies to

each agency’s proposed rule. Since the

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31965

4 12 U.S.C. 1831y(e)(1)(B)(ii).

rule of each agency will be codified at

a different part of the Code of Federal

Regulations, the following description

references the proposed rule using only

the proposed rule’s section numbers.

A. Definition of Covered Agreement

Section ll.2 of the proposed rule

defines which agreements are covered

by the rule and the term ‘‘fulfillment of

the CRA.’’ The Act’s exemptions from

the definition of a covered agreement

also are set forth in section ll.2.

1. Covered Agreements

The proposed rule defines 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 in section ll.2(c)

of the proposed rule;

• The parties to the agreement

include (1) an insured depository

institution or an affiliate of an insured

depository institution, and (2) a person;

and

• The agreement provides for the

insured depository institution or

affiliate to provide cash payments,

grants, or other consideration (other

than 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 proposed rule clarifies that an

agreement may be a covered agreement

even if the agreement is not legally

binding on the parties. Under the

proposed rule, an exchange of written

correspondence reflecting a mutual

agreement or a written agreement that

lacks the consideration necessary for it

to be a legally binding contract would

constitute a covered agreement if the

agreement meets the four criteria

discussed above. Moreover, to be

covered, an 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.

The following examples illustrate

when a written contract, arrangement or

understanding may exist under the rule.

The proposed rule does not attempt to

specifically define what constitutes a

‘‘contract,’’ ‘‘arrangement,’’ or

‘‘understanding.’’

Example 1: An organization sends a letter

to an insured depository institution

requesting that the institution provide a

$15,000 grant to the organization. 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

understanding. This written understanding

would be a covered agreement under the

proposed rule if the agreement is made

pursuant to, or in connection with, the

fulfillment of the CRA and the agreement is

not otherwise exempt under section

ll.2(b).

Example 2: An organization issues a

general, written solicitation for charitable

contributions to businesses in its local

community. An insured depository

institution makes a $20,000 charitable

contribution by check to the organization in

response to the solicitation. The insured

depository institution does not have any

written contract, arrangement or

understanding with the organization

concerning the donation. The general request

for funds and the check are not themselves

a contract, arrangement or understanding.

Since there is no other written agreement

between the insured depository institution

and the organization, there is no covered

agreement between the entities.

Example 3: A bank holding company

unilaterally issues a press release announcing

that its subsidiary banks have established a

goal of making $100 million of community

development grants in low-and moderateincome (LMI) neighborhoods over the next 5

years. The unilateral pledge is not a contract,

arrangement or understanding entered into

with a person and, therefore, is not a covered

agreement.

Example 4: An association of community

groups and an affiliate of an insured

depository institution orally agree that the

affiliate will seek to make $100,000 in grants

available to the organization’s constituent

members over the next year. The oral

agreement is not reduced to writing. Oral

agreements are not within the scope of the

statute and, accordingly, the agreement is not

a covered agreement.

The agencies invite comment on

whether the rule should define the

terms ‘‘contract,’’ ‘‘arrangement’’ and

‘‘understanding’’ and, if so, what those

definitions should be. The agencies also

request comment on whether any of the

examples provided above should be

modified or amended, and whether

additional examples would be useful.

2. Exemptions for Certain Agreements

Section 711 specifically exempts

certain types of agreements from

coverage even if they otherwise meet the

definition of a covered agreement.

Section ll.2(b) of the proposed rule

implements these exemptions.

a. Qualifying 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

711. This exemption is available for any

mortgage loan, regardless of the identity

of the borrower, the type of real estate

securing the loan, or the rate charged on

the loan.

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.’’ 4 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.

The agencies request comment on the

application of this exemption to

agreements that involve a commitment

to make one or more loans or extensions

of credit that meet the market rate and

re-lending restrictions of the statute. In

particular, comment is requested on

whether this exemption provides an

exemption only for a specific

commitment to make a loan or

extension or credit. Under this

interpretation, the exemption would be

available for a commitment by an

insured depository institution or

affiliate to provide a specific loan or

extension of credit to one or more

individuals or entities that is on market

terms and not for purposes of relending, such as a loan commitment

typically made in the course of

providing a line of credit to a small

business. The agencies also request

comment on whether this exemption

includes an exemption for a

commitment to make multiple loans

that meet the Act’s restrictions. Under

this interpretation, a commitment to

make any number or amount of loans

that meet the Act’s restrictions over a

period of time would be exempt from

coverage. The agencies request comment

on which interpretation of the

exemption is more consistent with the

language and purposes of the Act.

To be entirely exempt under the

proposed rule, an agreement must be

exclusively a loan, extension of credit or

loan commitment that meets the

requirements of the exemption.

However, as discussed further below, if

an agreement includes a loan, extension

of credit or loan commitment that meets

the rule’s requirements to be exempt

and also provides for the insured

depository institution or affiliate to

provide other funds or resources, the

value of the exempt loan, extension of

credit or loan commitment may be

excluded in determining whether the

31966 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

5The agencies note, however, that if the other

consideration is provided to 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. 6See H.R. Conf. Rep. No. 106–434 at 179 (1999).

7As discussed further below, a contact

concerning the performance of a ‘‘CRA affiliate’’ of

an insured depository institution is considered to

be a contact concerning the CRA performance of the

insured depository institution.

agreement is in fulfillment of the CRA

and meets the Act’s dollar thresholds.5

The following examples illustrate

these provisions of the proposed rule:

Example 1: An insured depository

institution provides a $1 million mortgage

loan to an organization pursuant to a written

agreement. The agreement is an individual

mortgage loan and is exempt from coverage

under the rule, regardless of the interest rate

on the loan or whether the purpose of the

loan was for re-lending.

Example 2: An affiliate of an insured

depository institution provides a $500,000

working capital loan to a small business

pursuant to a written agreement. The loan is

made on market terms and the purposes of

the loan do not include re-lending. The

agreement is exempt from coverage under the

rule.

Example 3: An insured depository

institution enters into a written agreement

with a community development organization

to make $250 million in small business loans

in the community over the next five years.

The loans would be made on market terms

and not for purposes of re-lending. Each

small business loan made by the insured

depository institution pursuant to the

agreement is exempt from coverage. The

agreement by the insured depository

institution with the association, however, is

not a commitment to make a specific loan or

extension of credit and would not be exempt

under one interpretation of the exemption.

This commitment to make loans would be

exempt under the other interpretation of the

exemption.

Example 4: A business organization

receives a mortgage loan from an affiliate of

an insured depository institution pursuant to

a written agreement. The agreement also

provides that the affiliate will make a

$12,000 investment in a local community

development corporation the following

month. The agreement is not an exempt

agreement under the rule because it is not

exclusively a mortgage loan. Although the

mortgage loan may be excluded when

considering if the agreement meets the Act’s

dollar thresholds, the agreement would meet

these thresholds because it provides for the

affiliate to make other payments in excess of

$10,000 in a calendar year.

The agencies request comment on

these exemptions. In particular,

comment is invited on whether a

mortgage loan includes any loan

secured by real estate, or only a loan

that is secured by real estate and made

for the purchase or improvement of the

real estate or for the refinancing of such

a loan. Comment also is invited on

whether the agencies should define

when loans are made at ‘‘substantially

below market rates’’ and, if so, what that

definition should be. For example,

should the agencies provide that the

relevant market rate for a loan is the rate

that would be charged on a comparable

transaction (e.g., a construction loan,

permanent financing, a small business

loan, or an unsecured consumer loan)

with a comparable person (e.g., a person

with similar financial resources and

credit history) that is not a party to the

agreement? In addition, should the

agencies provide a formula for

determining whether a loan bears a rate

that is substantially below the market

rate? Such a formula could provide, for

example, that a rate is substantially

below the market rate if it is more than

a specified percentage (e.g., 10 percent)

or number of basis points (e.g., 200 basis

points) below the rate that would be

charged in a comparable transaction.

The agencies also request comment on

whether the rule should provide

guidance on when a loan is made ‘‘for

purposes of re-lending’’ and what

constitutes ‘‘re-lending’’ under the rule.

For example, should the rule provide

that the purposes of a loan are

determined by reference to the

underlying loan documents or by whom

the documents refer to as the lender?

b. Agreements With Persons Who Have

Not Made a CRA Contact

Section 711 also exempts from

coverage any agreement entered into by

an insured depository institution or

affiliate with a person who has not

commented on, testified about, or

discussed with the institution, or

otherwise contacted the institution,

concerning the CRA. This provision

broadly exempts from all of the

provisions of section 711 any agreement

by an insured depository institution or

affiliate with a person that has not had

a contact concerning the CRA (CRA

contact). The Conference Report for the

Act indicates that a wide range of

organizations that solicit funds without

regard to the CRA may benefit from this

exemption, including civil rights

groups, community groups providing

housing or other services in low-income

neighborhoods, the American Legion,

and community theater groups.6

The proposed rule adopts the

exemptive language contained in

section 711. In addition, the proposed

rule provides examples of actions by a

person that would constitute a CRA

contact under the rule and examples of

actions that would not constitute a CRA

contact under the rule. These examples

are intended to illustrate different types

of actions that are or are not CRA

contacts based on the wording and

purpose of the exemption and the scope

of the statutory exemption. These

examples are not exclusive. For ease of

reference, the proposed rule divides the

examples of actions that constitute a

CRA contact into two categories:

contacts with an agency and contacts

with an insured depository institution

or affiliate.

As discussed below, the agencies

request comment on various aspects of

this exemption. In particular, the

agencies invite comment on whether the

rule should provide a more detailed

definition of the exemption. The

agencies also request comment on

whether the examples provided are

appropriate and useful and, if so,

whether other examples should be

included or areas addressed with

examples.

CRA Contact with an Agency. As a

general matter, a person has made a

CRA contact if the person submits

written or oral comments or testimony

to an agency concerning the record of

performance or future performance

under the CRA of an insured depository

institution or CRA affiliate.7 If a person

had this type of contact with an agency

and subsequently enters into an

agreement with the insured depository

institution or any affiliate of the insured

depository institution that meets the

requirements of section 711, the

agreement is not exempt.

‘‘Comments’’ and ‘‘testimony’’ refer to

any type of written submission or oral

statement by a person to an agency. The

terms include the submission of written

materials to an agency in connection

with an application by an insured

depository institution or company for a

deposit facility or an examination of an

insured depository institution under the

CRA, and oral statements made by a

person to an agency during a public or

private meeting held concerning a

transaction or CRA examination.

The rule provides two examples of

contacts with an agency that would not

constitute a CRA contact. The first

example involves a person that provides

written or oral comments or testimony

to an agency in response to a direct

request by the agency for comments or

testimony from that person. In such

circumstances, the contact would result

due to an action by the agency and

imposing the rule’s requirements on the

person might impede the agency’s

ability to obtain necessary or useful

information. This example of a direct

request for comments or testimony does

not apply, however, to comments or

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31967

8See 12 CFR 25.43(a)(1) (OCC); 12 CFR

228.43(a)(1) (Board); 12 CFR 345.43(a)(1) (FDIC); 12

CFR 563e.43(a)(1) (OTS).

9A CRA contact would occur under the proposed

rule, however, if the offering materials indicated

that the loans in the mortgage pool would receive

favorable consideration by the agencies under the

CRA, or if the parties discussed how the transaction

would improve the institution’s CRA performance.

testimony that are provided in response

to a general invitation by an agency for

public comments (e.g., a Federal

Register notification) in connection with

a CRA performance evaluation or an

application for a deposit facility.

The second example provides that a

person does not make a CRA contact

with an agency by making a statement

concerning an insured depository

institution at a widely attended

conference or seminar on a general

topic, even if representatives of an

agency were in attendance at the

conference or seminar when the

statement was made. A public or private

meeting or hearing relating to one or

more insured depository institutions or

a transaction to acquire a deposit facility

is not considered a widely attended

conference or seminar on a general

topic.

CRA Contact with Insured Depository

Institution or Affiliate. Contacts by a

person with an insured depository

institution or affiliate will not cause an

agreement to become subject to the

requirements of section 711 unless the

contact is a CRA contact. The rule

provides several examples of the types

of contacts with an insured depository

institution or affiliate that are CRA

contacts and that would make the

exemption unavailable.

The first example involves a contact

with an insured depository institution

or affiliate about providing (or refraining

from providing) written or oral

comments or testimony to an agency

concerning the record of performance or

future performance under the CRA of

the insured depository institution.

The second example involves a

contact with an insured depository

institution or affiliate about providing

(or refraining from providing) written

comments to the institution that would

have to be included in the institution’s

CRA public file. Under the agencies’

CRA Regulations, a written comment

generally must be placed in an

institution’s CRA public file if it

specifically relates to the institution’s

performance in helping to meet

community credit needs.8 Because this

information is intended for

consideration by the agencies in the

course of a CRA examination or

evaluation of an application for a

deposit facility, the submission of

comments for inclusion in an

institution’s CRA public file is

considered a CRA contact.

The third example involves a contact

with an insured depository institution

or affiliate concerning the CRA rating of

the insured depository institution, or

the CRA record of performance of the

insured depository institution.

The fourth example involves a contact

with an insured depository institution

or affiliate concerning actions that

should be taken to improve the CRA

performance of the insured depository

institution.

The fifth example involves a contact

with an insured depository institution

or affiliate concerning any obligation or

responsibility that the insured

depository institution may have to meet

the banking needs of its community. In

this example, the contact occurs while

the insured depository institution or an

affiliate of the institution has an

application for a deposit facility

pending before an agency or is

undergoing a publicly announced CRA

performance examination.

If a person has one of the contacts

described above and subsequently

enters into a covered agreement with the

insured depository institution or any

affiliate of the insured depository

institution, the agreement is not exempt

under the rule. The rule and the

examples do not contemplate that a

discussion or contact must include any

particular words or phrases, such as

‘‘Community Reinvestment Act,’’

‘‘CRA’’ or ‘‘CRA rating’’ in order to be

a CRA contact. Instead, the substance

and context of the discussion or contact

are the controlling factors.

Under the examples included in the

rule, a person would not have a CRA

contact by sending a similar fundraising

letter to an insured depository

institution or affiliate and other

businesses in the community

encouraging all businesses in the

community to meet their obligation to

assist in making the local community a

better place to live and work. In

addition, a person would not make a

CRA contact by sending a general

offering circular to financial institutions

offering to sell a portfolio of loans and

having discussions with a particular

insured depository institution

concerning the loan portfolio if no

reference to the CRA or the institution’s

CRA performance is made in the

offering circular or in the parties’

discussions.9 A person also would not

make a CRA contact with an insured

depository institution or affiliate by

making a statement concerning the

institution or affiliate before a widely

attended conference or seminar on a

general topic, even if representatives of

the institution or affiliate were in

attendance at the conference or seminar

when the statement was made.

The agencies request comment on

whether the rule should more

specifically define the terms of the

exemption for persons that have not

made a CRA contact or more specifically

define when a CRA contact has occurred

and, if so, how a CRA contact should be

defined. The agencies also request

comment on the examples of a CRA

contact included in the rule, including

whether any of the examples should be

amended or deleted or whether

additional examples should be

provided. For example, the agencies

request comment on whether a CRA

contact under the Act includes a general

discussion about the CRA that does not

involve any discussion of the

performance of an insured depository

institution under the CRA or obligation

of the institution to serve the banking

needs of its community.

In addition, the agencies request

comment on whether the rule can and

should be limited to exclude from the

scope of CRA contacts discussions with

an insured depository institution or

affiliate concerning whether particular

loans, services, investments or

community development activities are

generally eligible for consideration by

an agency under the CRA Regulations.

The marketing of products and services

to insured depository institutions

frequently may include a general

statement of whether the product or

service is eligible for credit under the

CRA. If the rule were limited in this

manner, then the situation described in

section ll.2(b)(2)(iii)(D) of the rule

would not be a CRA contact even if the

offering circular included a statement

that the loans included in the loan pool

were of the type that could be

considered by an agency under the CRA

Regulations. A discussion of whether or

how loans, services, investments or

activities would impact a particular

institution’s CRA rating or performance

would, however, continue to be

considered a CRA contact.

The agencies also request comment on

whether the rule can and should be

limited to cover only contacts that

involve providing CRA-related

comments or testimony to an agency or

discussions with an insured depository

institution or affiliate about providing

(or refraining from providing) such

comments or testimony to an agency. If

the rule was limited in this fashion, the

actions described in section

ll.2(b)(2)(ii)(B)(3), (4) and (5) would

not constitute a CRA contact because

31968 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

10 12 U.S.C. 1831y(e)(1)(A). 11 Id. at 1831y(e)(2). 12H.R. Conf. Rep. No. 106–434 at 179 (1999). 13See 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).

the person did not submit CRA-related

comments or testimony to an agency or

discuss with or contact the insured

depository institution or any affiliate

about providing (or refraining from

providing) CRA-related comments or

testimony to an agency.

Additionally, the agencies request

comment on whether there should be a

temporal relationship between a CRA

contact and when an agreement is made.

In this regard, under the proposed rule,

a covered agreement entered into in

2001 between an insured depository

institution and a person would not be

exempt if the person had submitted a

comment to an agency concerning the

CRA performance of the institution

several years earlier. Section 711,

however, appears to have been intended

to apply to agreements that result from,

or were influenced by, a CRA contact.

Where a CRA contact occurs a

significant period of time before the

negotiation of an agreement, however,

there may be no link or influence

between the CRA contact and the

agreement. Furthermore, the passage of

time may make it difficult for the parties

to a covered agreement to determine or

effectively track whether a CRA contact

occurred at all.

For these reasons, the agencies

specifically request comment on

whether the rule should require that a

CRA contact occur within a specified

period, such as two years (or a shorter

or longer period), before the parties

entered into the agreement. Similarly,

the agencies request comment on

whether a CRA contact should include

a contact that occurs after the parties

enter into an agreement, such as within

90 days after the beginning of the term

of the agreement, at any time during the

term of the agreement, or some other

period of time. For example, if a person

provides comments or testimony to an

agency concerning the CRA

performance of an insured depository

institution after entering into an

agreement with the institution, would

the person’s actions suggest that the

agreement and the comments or

testimony were linked?

The agencies also request comment on

how the rule and the exemption

discussed above should apply in

circumstances where a covered

agreement involves several parties and a

CRA contact has been made by or

concerning only one of the parties. For

example, how should the rule apply

where several nongovernmental entities

or persons enter into a covered

agreement with an insured depository

institution and only one of the entities

or persons has made a CRA contact?

Similarly, how should the rule apply

where a nongovernmental entity or

person has a CRA contact concerning

one insured depository institution and

subsequently enters into a covered

agreement jointly with the institution

and several other unaffiliated insured

depository institutions? In addition,

how should the rule and exemption

apply where a person has a CRA contact

with an agency but the relevant insured

depository institution or affiliate does

not know the contact occurred?

c. Request for Comment on Additional

Exemptions

The agencies recognize that the

language of section 711 and,

accordingly, the types of agreements

captured under the proposed rule are

broad. The agencies are concerned that,

in light of this breadth, certain

agreements that were not intended to be

covered by the Act may be considered

covered agreements under the proposed

rule. For example, supervisory

experience suggests that insured

depository institutions enter into a wide

variety of contracts in their normal dayto-day operations that, directly or

indirectly, relate to activities considered

by the agencies in connection with a

CRA evaluation. During the negotiation

of these contracts and as an incident to

the underlying business transaction, the

parties may discuss whether the

activities contemplated by the contract

are viewed favorably under the

agencies’ CRA Regulations, involve

loans within the institution’s CRA

assessment area, or would otherwise

improve the institution’s CRA

performance. These types of contacts

would be CRA contacts under the

proposed rule and a related business

agreement would be covered if the

agreement was in fulfillment of the CRA

and met the other criteria to be a

covered agreement.

The Act grants the Board the ability

to determine, by regulation, that specific

types of contacts are exempt and,

consequently, that a related agreement

is not covered by section 711. The

agencies specifically invite comment on

whether and how the Board should

exercise its exemptive authority in this

area, including whether there are

particular types of CRA contacts that

occur and that, given their context and

purpose, do not implicate the concerns

of the Act. For example, if the proposed

definition of CRA contact is retained in

the final rule, should the Board exercise

its discretion in this area to provide an

exemption for CRA contacts that occur

in connection with the purchase of

loans by an insured depository

institution or affiliate on an arm’s length

basis in the secondary market even

where the negotiation of the agreement

included a general discussion of the

effect of the transaction on the CRA

performance of the insured depository

institution? Are there other types of

contacts that occur in connection with

the ordinary day-to-day business of an

insured depository institution or

affiliate that should be exempted from

coverage because, for example, the CRA

contact does not involve any coercive

aspect or was initiated by the insured

depository institution? If so, how could

such an exemption or exemptions be

framed narrowly to exclude only those

types of contacts (and related

agreements) that are not within the

intended scope of the Act?

3. Fulfillment of the CRA

Under the GLB Act, a written

agreement is a covered agreement only

if it is ‘‘made pursuant to, or in

connection with the fulfillment of the

Community Reinvestment Act of

1977.’’ 10 The Act defines ‘‘fulfillment’’

of the CRA to mean ‘‘a list of factors that

the appropriate Federal banking agency

determines have a material impact on

the agency’s decision to (A) approve or

disapprove an application for a deposit

facility [under the CRA]; or (B) to assign

a rating to an insured depository

institution [under the CRA].’’ 11

The Conference Report for the GLB

Act indicates that the list of factors

should include ‘‘a full enumeration of

the relevant factors that [an] agency

reviews and considers in examining the

performance of an insured financial

institution in connection with the CRA,

including any and all items a regulator

would attach importance to in

determining the evaluation under the

[CRA] of the performance of a financial

institution.’’ 12 The agencies’ CRA

Regulations set forth the criteria that the

agencies consider in evaluating the CRA

performance of an insured depository

institution for purposes of assigning a

CRA rating to an institution and

evaluating an application by an

institution or company for a deposit

facility under the CRA.13 These

regulations permit the agencies to

consider broadly the lending,

investment and service activities of an

insured depository institution in

evaluating the institution’s performance

under the CRA.

For these reasons, the proposed rule

would define the list of factors for

purposes of section 711 generally by

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31969

14The terms wholesale insured depository

institution, limited-purpose insured depository

institution, and small insured depository institution

refer to a wholesale, limited-purpose or small bank

or savings association as defined in Subpart A of

the relevant agency’s CRA Regulations. See 12 CFR

25.12(o), (t) and (w) (OCC); 12 CFR 228.12(o), (t),

and (w) (Board); 12 CFR 345.12(o), (t), and (w)

(FDIC); and 12 CFR 563e.12(n), (s), and (v) (OTS).

An agreement that involves the performance of

activities by a wholesale, limited-purpose or small

insured depository institution is in fulfillment of

the CRA only if the agreement involves the

performance of one of the activities within the

scope of the relevant performance test or standard

for the particular type of institution.

15Thus, for example, an agreement that relates to

the consumer lending activities of an insured

depository institution would be considered to be in

fulfillment of the CRA if the institution’s consumer

lending activities were considered by the

appropriate agency at the institution’s most recent

CRA examination. Under the CRA Regulations, an

institution’s consumer lending activities are

considered in certain circumstances by an agency

if such lending constitutes a substantial majority of

the institution’s business or the institution has

elected to have its consumer lending activities

considered by the appropriate agency. See 12 CFR

25.22(a) (OCC); 12 CFR 228.22(d) (Board); 12 CFR

345.22(a) (FDIC); 12 CFR 563.22(a) (OTS).

16As discussed further below, a ‘‘CRA affiliate’’

of an insured depository institution is viewed as

part of the insured depository institution.

Accordingly, activities performed by a CRA affiliate

of an insured depository institution are considered

to be performed by the insured depository

institution.

17See 12 CFR 25.21(b)(6) and 25.43(a)(1) (OCC);

12 CFR 228.21(b)(6) and 228.43(a)(1) (Board); 12

CFR 345.21(b)(6) and 345.43(a)(1) (FDIC); 12 CFR

563e.21(b)(6) and 563e.43(a)(1) (OTS).

18See 12 CFR 25.29(c) (OCC); 12 CFR 228.29(b)

(Board); 12 CFR 345.29(c) (FDIC); 12 CFR 563e.29(c)

(OTS).

reference to the criteria enumerated in

Subpart B of the CRA Regulations

jointly issued by the agencies. These

criteria reflect the factors that the

agencies previously have determined

have a material impact on an agency’s

assignment of a CRA rating and

assessment of the CRA factor in

decisions to approve or disapprove an

application for a deposit facility. These

factors are summarized in the proposed

rule as follows:

(1) Home purchase, home

improvement, small business, small

farm, community development, and

consumer lending as described in the

lending test portion of the CRA

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 small insured depository

institutions, the lending and other

activities described in the small insured

depository institution performance

standard of the CRA Regulations; 14

(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;

(8) Providing or refraining from

providing written or oral comments or

testimony to any agency concerning the

record of performance or future

performance under the CRA of an

insured depository institution that is a

party to the agreement or an affiliate of

a party to the agreement; and

(9) Providing or refraining from

providing written comments to an

insured depository institution that is a

party to the agreement or an affiliate of

a party to the agreement that would

have to be included in the institution’s

CRA public file.

An activity is within the factors

enumerated in paragraphs (1) through

(7) if it would be considered by the

agencies under the relevant performance

test or standard in the CRA

Regulations.15 These activities may be

conducted by an insured depository

institution that is a party to the

agreement or an affiliate of a party to the

agreement.16 In addition, an agreement

would be considered in fulfillment of

the CRA if any of these activities is

performed by a nongovernmental entity

or person that is a party to the

agreement and an insured depository

institution receives favorable

consideration for the activities under

the CRA.

The proposed rule’s list of factors also

includes providing (or refraining from

providing) CRA-related comments or

testimony to an agency or written

comments to an insured depository

institution that must be included in the

institution’s CRA public file. The

agencies’ CRA Regulations generally

require the agencies to consider

comments received from the public or

included in an insured depository

institution’s CRA public file when

evaluating the CRA performance of the

institution.17 The CRA Regulations also

require an agency to consider written or

oral comments submitted to the agency

when acting on applications for a

deposit facility.18 Accordingly, such

comments and testimony are among the

factors that may have a material impact

on an agency’s decision to assign a CRA

rating or evaluation under the CRA of an

application for a deposit facility.

While the level of activity that will

have a material effect on a CRA rating

or an application decision varies with

the circumstances involving the

particular insured depository

institution, the GLB Act by its terms

requires that the agencies identify the

list of factors that have a material

impact on an agency’s decision to assign

a CRA rating or to approve an

application for a deposit facility under

the CRA. The Act does not appear to

incorporate a quantitative threshold for

the agencies to use in defining the list

of factors that are material to such a

decision. Instead, the GLB Act explicitly

sets a threshold dollar level for the

minimum amount of activities that must

be performed in order for an agreement

to be covered by section 711. As

discussed below, these value thresholds

are $10,000 in cash payments, grants or

other consideration and $50,000 in

loans. For these reasons, the proposed

rule provides that an agreement is in

fulfillment of the CRA if it pertains to

a ‘‘factor’’ that the agencies determine is

‘‘material’’ to an institution’s rating or

application—such as the institution’s

lending—rather than to a level of

performance that the agencies determine

is material to the CRA evaluation of that

insured depository institution.

The agencies request comment on this

reading of section 711 and on whether

the list of factors properly identifies the

‘‘factors’’ that are material to a CRA

evaluation. The agencies also request

comment on whether the agencies have

interpreted the statutory mandate to

identify the ‘‘list of factors that * * *

have a material impact’’ on an agency’s

decision to assign a CRA rating and to

approve or disapprove an application

under the CRA in a manner consistent

with the language and purposes of

section 711. In particular, comment is

invited on whether the proposed list of

factors that are considered to be in

fulfillment of the CRA can and should

be expanded, restricted, or altered

consistent with the language and

purpose of the Act. For example,

although the agencies consider an

insured depository institution’s lending

in all geographic areas and to borrowers

of all income ranges for certain purposes

in evaluating the institution’s CRA

performance, can and should the rule’s

31970 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

19For example, a requirement that an insured

depository institution publicly disclose an

agreement to use ‘‘mystery shoppers’’ to test the

institution’s compliance with the fair lending laws

or to settle a fair lending complaint could deter the

institution from entering into such agreements.

20See 12 U.S.C. 1831y(e)(1)(A)(i).

list of factors focus on those types of

lending (and other activities) that are

reasonably likely to receive favorable

consideration under the CRA

Regulations, such as certain types of

lending in LMI areas or to LMI

borrowers?

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 evade coverage under the Act by

reaching an oral 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. In addition, 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

insured depository 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 is in fulfillment of the CRA.

The following are examples of

agreements that would be in fulfillment

of the CRA under the proposed rule.

Unlike the examples of CRA contacts,

these examples are not included in the

proposed rule. Each example illustrates

only the fulfillment criteria of the rule

and assumes that the agreement meets

the other requirements necessary to be

considered a covered agreement. In this

regard, even if an agreement is in

fulfillment of the CRA, it may still be

exempt from coverage under the rule if

it is an exempt loan or loan

commitment, or if the person that is a

party to the agreement has not had a

CRA contact.

Example 1: An insured depository

institution enters into an agreement with a

local business organization that provides for

the institution to make $500,000 in small

business loans to third parties in the

institution’s assessment area in the next two

years. The agreement is in fulfillment of the

CRA because an institution’s small business

lending activity is considered as part of the

lending test under the CRA Regulations. The

agreement might still be exempt from

coverage depending on the scope of the

exemption for loan commitments.

Example 2: An insured depository

institution enters into an agreement with a

development corporation to invest $1 million

in a project the purpose of which is the

revitalization of an LMI neighborhood within

the institution’s assessment area. The

agreement is in fulfillment of the CRA

because the investment is a qualified

investment under the CRA Regulations and

would be considered as part of the

investment test under the CRA Regulations.

Example 3: An insured depository

institution enters into an agreement with a

supermarket chain that provides for the

institution to open a branch in certain of the

chain’s stores. The agreement is in

fulfillment of the CRA because an

institution’s record of opening and closing

branches is evaluated in the context of the

distribution of its branches as part of the

service test under the CRA Regulations.

Example 4: An insured depository

institution enters into a written agreement

with an organization to provide the

organization with a $25,000 donation to

assist in covering the organization’s general

operating expenses. A representative of the

organization orally agrees that, in return for

the contribution, the organization will submit

a comment to or testify before the appropriate

agency in support of the institution’s recently

announced proposal to merge with another

insured depository institution. The written

agreement is in fulfillment of the CRA

because the organization orally agreed in

connection with the agreement to provide

comments or testimony to an agency

concerning the CRA record of performance of

the institution.

The following are examples of

agreements that would not be in

fulfillment of the CRA under the

proposed rule:

Example 5: An insured depository

institution enters into an agreement with a

local theater company for the institution to

make a $20,000 charitable donation to the

company for each of the next five years. The

agreement is not in fulfillment of the CRA

because the donation does not have

community development as its primary

purpose and, thus, would not be considered

a qualified investment under the CRA

Regulations.

Example 6: An insured depository

institution enters into an agreement with a

neighborhood association to donate 100

hours of employee time to the organization’s

annual effort to clean up the neighborhood.

The agreement is not in fulfillment of the

CRA because the services are not considered

community development services or other

qualifying services under the CRA

Regulations.

The agencies note that the proposed

rule’s list of factors does not include

performance of activities designed to

ensure compliance with 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.). Although the

agencies consider evidence of these

practices in evaluating an insured

depository institution’s performance

under the CRA, the agencies are

concerned that including such activities

in the list of factors could have an

unintended and detrimental impact on

compliance and enforcement of the fair

lending laws.19 The agencies

specifically request comment on

whether this view is correct, or whether

the list of factors should be expanded to

include activities designed to ensure

compliance with the fair lending laws.

Comment also is solicited on whether

the list of factors should be expanded to

include other activities. For example,

the proposed rule’s list of factors does

not specifically include the provision of

advisory or consulting services

concerning CRA-related activities.

Should the rule include a reference to

these or other activities?

4. Value

A written agreement is a covered

agreement 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

under the agreement and does not

require that these payments or loans be

made to a party to the agreement.20

Accordingly, under the proposed rule,

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, would

be considered in determining whether

an agreement meets the rule’s dollar

thresholds. However, 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

discussion under II.A.2.a. above

concerning qualifying loans.

Under the proposal, 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

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31971

21See 12 U.S.C.1831y(e)(1) and (2). 22See 12 U.S.C. 1831y(e)(1)(A)(ii).

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 agencies invite comment on

whether another 12-month period

would provide a more appropriate basis

for these calculations.

The following are examples of the

value provisions of the proposed rule.

These examples illustrate only the

application of the dollar thresholds of

the proposed rule.

Example 1: An insured depository

institution enters into an agreement with a

small business investment company pursuant

to which the institution will invest $25,000

in the company. The agreement meets the

dollar threshold criterion to be a covered

agreement because the institution will

provide more than $10,000 in funds (other

than loans) under the 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

LMI individuals. The community

organization will not receive any funds or

other resources from the insured depository

institution or its affiliates under the

agreement. The agreement meets the dollar

threshold criterion for a covered agreement

under the proposed rule.

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 relending. 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 relending, the loan would be an exempt

agreement under the proposed rule if it were

a separate agreement. 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 community development

corporation 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 2000,

$8,000 in 2001, and $11,000 in 2002. The

agreement exceeds the dollar threshold

criterion of the rule because the agreement

provides for payments in excess of $10,000

during 2002. 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.

The agencies request comment on

how the dollar thresholds in the statute

should be applied in situations where

an agreement does not have a specific

term or does not specify a timetable for

the disbursement of funds or resources

under the agreement. For example, if an

agreement provides that an insured

depository institution will make

$40,000 in grants over a 5-year period,

but does not specify the years in which

the grants will be made, should the rule

create a presumption that the entire sum

($40,000) is provided in the first year of

the agreement or assume that the value

is paid in equal yearly installments of

$8,000? An alternative approach would

rely on how the payments are actually

made under the agreement. Under this

alternative approach, if the payments

under the agreement actually exceeded

$10,000 in a calendar year, the

agreement would then become a

covered agreement.

The agencies also invite comment on

whether the rule should provide

guidance on how to determine the value

of 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.

5. Related Agreements Considered a

Single Agreement

In two circumstances, section 711 of

the GLB Act 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.21

Section ll.3 of the rule implements

these requirements. If separate

agreements are considered a single

agreement under section ll.3, the

combined agreement must still meet the

criteria to be a covered agreement to be

covered by the rule. Loans, extensions

of credit and loan commitments that are

specifically excluded from the

definition of covered agreement under

ll.2(b) of the rule are not required to

be aggregated with other agreements.

a. Agreements Entered Into by the Same

Parties

Section ll.3(a) provides that 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 person

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 person

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.

Example 1: In April, 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

November of the same 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 and considered in the

evaluation of the institution’s CRA

performance. 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 December, the

institution and organization enter into a

written agreement for the institution to make

a $5,000 CRA qualified investment in local

housing project that is eligible for lowincome 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 711 requires the aggregation

of separate but ‘‘substantively related

contracts’’ even where the contracts are

entered into with different persons. 22

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

31972 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

23See 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)).

24See Proposed Rule, section ll.8(c).

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 evading 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.

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.

The agencies request comment on the

aggregation rules included in section

ll.3, including the proposed

definition of ‘‘substantively related

contracts’’ and whether there are

alternative definitions that would

achieve the purposes of the statute. The

agencies also request comment on how

these aggregation rules should apply

when a CRA contact has not occurred

prior to one of the agreements or was

made by only one of the persons that is

a party to the agreements. For example,

when a single person enters into two

agreements with an insured depository

institution during a 12-month period,

but engages in a CRA contact between

the first and second agreement, should

the first agreement be excluded from

aggregation because a CRA contact had

not occurred at the time it was entered

into? Alternatively, should the

agreements be aggregated because a CRA

contact occurred prior to the second

agreement and the agreements otherwise

meet the requirements for aggregation

under the rule? Similarly, should

substantively related contracts entered

into by separate persons be aggregated

under the rule only if each person had

engaged in a CRA contact?

6. CRA Affiliate Treated as Insured

Depository Institution

The CRA Regulations provide that an

insured depository institution, at its

election, may request that an agency

consider certain activities conducted by

an affiliate in evaluating the CRA

performance of the insured depository

institution.23 In these circumstances, the

selected activities of the affiliate are

viewed as activities of the insured

depository institution.

The proposed rule generally considers

a contact concerning this type of

affiliate, referred to as a ‘‘CRA affiliate,’’

of an insured depository institution to

be the equivalent of a contact

concerning an insured depository

institution (see section ll.2(b)(2)).

Similarly, an agreement is considered to

be in fulfillment of the CRA if it

concerns the performance of any of the

activities listed in section ll.2(c) by a

‘‘CRA affiliate’’ of an insured depository

institution (see section ll.2(c)).

The proposed 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.24 Under the rule, a

company is considered a CRA affiliate

only to the extent its activities were

taken into account in the CRA

evaluation of an affiliated insured

depository institution.

Example 1: A person submits a written

comment to an agency concerning the

lending performance under the CRA of a

mortgage company that is affiliated with an

insured depository institution. 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. Accordingly, the agreement is in

fulfillment of the CRA for purposes of section

711 and the person has engaged in a CRA

contact under section ll.2(b)(2) 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.

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.

To assist persons in complying with

the rule, section ll.2(e) of the

proposed 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 if the affiliate is a CRA

affiliate at that time.

Because the status of an affiliate of an

insured depository institution may

change, an agreement that concerns the

activities of an affiliate may become a

covered agreement after the date the

parties enter into the agreement. For

example, a person may enter into an

agreement that concerns the lending

activities of a newly formed affiliate. If

an insured depository institution

subsequently elects to have the lending

activities of the new affiliate considered

during its next CRA performance

examination, the affiliate would become

a CRA affiliate. In such circumstances,

the proposed rule requires the insured

depository institution or affiliate to

inform the other parties to the

agreement that the affiliate has become

a CRA affiliate within a reasonable

period of time after the change of status

occurs.

Where an agreement concerns the

activities of an affiliate that becomes a

CRA affiliate, the agreement would be in

fulfillment of the CRA only once the

affiliate becomes a CRA affiliate. If the

agreement met the other requirements of

the rule, the agreement would become a

covered agreement at that time. Section

ll.2(e) clarifies that in these

circumstances the parties to the

agreement have no disclosure or

reporting obligations under the rule

until the agreement becomes a covered

agreement. In applying the disclosure

and reporting requirements of the rule,

the agreement would be considered to

have been entered into on the date it

became a covered agreement.

The agencies request comment on the

proposed rule’s treatment of CRA

affiliates, including whether the

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31973

25See footnote 15 above.

26See 12 CFR 25.43 (OCC); 12 CFR 228.43

(Board); 12 CFR 345.43 (FDIC); 12 CFR 563e.43

(OTS).

requirement that an insured depository

institution or affiliate inform the other

parties when an agreement concerns a

CRA affiliate is useful and practicable.

The agencies also request comment on

whether the rule should provide a

similar notice procedure for agreements

that involve an activity of an insured

depository institution, such as

consumer lending, that the institution

elects for the first time to be considered

under the CRA during the term of the

agreement. 25 In addition, the agencies

request comment on whether there is an

appropriate and less burdensome way

for the rule to determine whether an

affiliate is a CRA affiliate at the time the

parties enter into an agreement.

B. Disclosure of Covered Agreements

Section 711 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.

1. Disclosure to the Public

The proposed 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. The rule would permit an

insured depository institution to fulfill

its public disclosure obligation by

placing a copy of a covered agreement

in the institution’s CRA public file and

making it available in accordance with

the procedures set forth in the CRA

Regulations relating to public files. 26

A party may make a covered

agreement available to any individual or

entity that requests the agreement by

mailing it to the requestor, and the

proposal would specifically permit the

party to charge the requestor for the

costs of copying and mailing the

agreement, so long as the fees are

reasonable. The proposal does not

otherwise specify or require a party to

employ any particular method in

responding to requests from the public

for a covered agreement. For example, a

party also could 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 for

inspection at an office within that area.

The proposed rule provides that a

party’s obligation to make a covered

agreement available to the public

terminates 12 months after the end of

the term of the covered agreement. The

agencies believe that this time period

would permit interested members of the

public adequate time to obtain a covered

agreement from the parties, while not

placing an undue recordkeeping burden

on the parties to covered agreements.

Members of the public would continue

to be able to obtain copies of a covered

agreement from the relevant supervisory

agency under the Freedom of

Information Act (5 U.S.C. 552 et seq.)

after this 12-month period.

The agencies request comment on all

aspects of the proposed rule’s public

disclosure requirements. Comment is

sought on whether the rule should

include illustrative examples of how a

party may make an agreement available

to a member of the public and, if so,

whether there are additional methods

(other than those discussed above) that

should be allowed for making an

agreement available to the public. For

example, should the rule explicitly

allow a person to arrange for another

entity or individual to make the

person’s covered agreements available

to the public, or allow a party to recover

reasonable fees for searching its records

for a covered agreement? Comment also

is requested on whether affiliates of

insured depository institutions should

be permitted to disclose an agreement to

the public by placing the agreement in

the CRA public file of an affiliated

insured depository institution. In

addition, comment is invited on

whether it is reasonable, appropriate

and consistent with the statute to rely

on access to covered agreements

through the agencies for public

disclosure requests made more than 12

months after the term of the agreement

and whether this period should be

longer or shorter.

2. Filing of Covered Agreement by

Insured Depository Institutions With

Agencies

The rule requires each insured

depository institution and affiliate that

is a party to a covered agreement to

provide a complete copy of the

agreement to each relevant supervisory

agency (as defined below) within 30

days after the parties enter into the

agreement. If two or more insured

depository institutions or affiliates are

parties to the same agreement, the

institutions and affiliates may jointly

file a copy of the agreement with the

relevant supervisory agencies.

3. Persons Must Make Covered

Agreements Available to Agency

Section 711 requires each party to a

covered agreement to make the

agreement available to the appropriate

agency. Because the relevant

supervisory agencies would receive a

copy of any covered agreement from the

insured depository institution or

affiliate that is a party to the agreement,

the rule provides that a

nongovernmental entity or person may

fulfill its statutory obligation in this area

by providing, upon request from the

relevant supervisory agency, a complete

copy of the agreement to the agency.

The copy must be provided to the

agency within 30 days of the agency’s

request. As with disclosure to the

public, the rule provides that a person’s

obligation to make an agreement

available to an agency terminates 12

months after the end of the term of the

agreement.

The agencies believe this procedure

will reduce regulatory burden and avoid

duplicative filings. At the same time,

this procedure requires persons to make

copies of covered agreements available

to the agencies consistent with the

statute.

4. Relevant Supervisory Agency

The Act requires that parties to a

covered agreement make the agreement

available to, and file annual reports

with, the appropriate Federal banking

agency with supervisory responsibility

over the relevant insured depository

institution. The proposed rule uses the

term ‘‘relevant supervisory agency’’ to

identify the appropriate agency for a

particular covered agreement. Under the

rule, the ‘‘relevant supervisory agency’’

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

31974 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

27 12 U.S.C. 1831y(h)(2)(A).

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.

The agencies believe this definition will

ensure 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.

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. The agencies solicit

comment on the proposed rule’s

definition of ‘‘relevant supervisory

agency,’’ including whether there are

alternative definitions that might reduce

the filing burdens of parties while

ensuring the appropriate agencies

receive the filings contemplated by the

Act.

5. Treatment of Confidential or

Proprietary Information

Covered agreements may contain

confidential or proprietary information

the disclosure of which may cause

competitive or other harm to one or

more of the parties to the agreement.

Section 711 of the Act directs the

agencies to ensure that the

implementing regulations ‘‘do not

impose an undue burden on the parties

[to a covered agreement] and that

proprietary and confidential

information is protected.’’ 27 This

provision must be read in harmony with

other provisions of section 711 that

require that a covered agreement ‘‘shall

be in its entirety fully disclosed, and the

full text thereof made available * * * to

the public.’’ Other provisions of section

711 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.

In light of these provisions, and in

order to ensure the uniform disclosure

of covered agreements under the Act by

the parties and the agencies, the

proposed rule would allow a party to a

covered agreement to request a

determination from the relevant

supervisory agency whether the agency

could withhold specific portions of the

agreement from public disclosure. In

considering these requests, the agencies

will apply the procedures and standards

of the Freedom of Information Act (5

U.S.C. 552 et seq.) (FOIA), which

governs public access to all records of

an agency, including documents filed

with the agency by third parties. If the

relevant supervisory agency determines

that it could withhold specific portions

of the covered agreement from public

disclosure under FOIA, the proposed

rule would permit the parties to the

agreement to also withhold those

specific portions of the agreement from

any copies of the agreement directly

made available to the public. A party

could withhold from public disclosure

only those limited portions of a covered

agreement determined to be exempt

from public disclosure under FOIA by

the relevant supervisory agency.

In applying the standards under

FOIA, the agencies note that section 711

may require disclosure of some types of

information that an agency might

normally be able to withhold from

disclosure under FOIA. In light of the

directive of section 711, the agencies

may not be able to withhold under

FOIA—or permit a party to withhold

from public disclosure—many of the

provisions contained in a covered

agreement. For example, the agencies

might not be able to permit a party to

withhold the amount of payments or

loans to be made under the agreement,

the persons receiving such payments or

loans, and the terms of any such

payments or loans. It may be possible

that only limited types of information

could be withheld from public

disclosure under the proposed rule.

Such information might include, for

example, individual account numbers or

information detailing a particular

institution’s proprietary underwriting

criteria.

The agencies welcome comment on

whether covered agreements are likely

to contain confidential or proprietary

information the disclosure of which

would harm the parties to the agreement

given the definition of covered

agreements. The agencies also request

comment on whether, and if so to what

degree, such information may be

withheld from public disclosure under

section 711. If covered agreements

typically contain particular types of

information that may properly be

withheld from public disclosure under

section 711, should the rule specify

these types of information and allow the

parties to withhold this information

without seeking prior agency review or

in lieu of the agency review process?

The agencies also invite comment on

whether the proposed agency review

process is useful and practicable and

whether there are alternative or

additional procedures that the agencies

can and should implement under

section 711 to protect confidential and

proprietary information. The agencies

also invite comment on whether the rule

should specifically permit a party that

has requested agency review of a

covered agreement to delay disclosing

the agreement to the public until the

agency rules on the request.

6. Disclosure Limited to Covered

Agreements Entered Into After

November 12, 1999

The proposed rule’s disclosure

obligations apply only to covered

agreements entered into after November

12, 1999, the effective date of section

711 of the GLB Act. Under the rule, 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 if it otherwise meets the

criteria to be a covered agreement.

Disclosure is not required if the preNovember 12, 1999, agreement

expressly provided for the renewal or

extension and established the terms of

the agreement during the renewal or

extension period.

Example: An insured depository

institution and a community organization

enter into a written agreement in January

1999 that calls for the institution to place an

ATM in the local community by December

2000. In September 2000, the parties enter

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, the modified agreement

must be disclosed in accordance with the

rule.

C. Annual Reports

The Act requires each person, insured

depository institution, or affiliate of an

insured depository institution that is a

party to a covered agreement to file a

report relating to the covered agreement.

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31975

28See the discussion above concerning the

treatment of agreements entered into prior to May

12, 2000, that are modified, amended, renewed, or

extended after that date.

These annual reporting obligations

apply only to covered agreements

entered into on or after May 12, 2000.28

1. No Report Required by Person That

Does Not Receive Funds or Resources

The proposed rule requires that each

party to a covered agreement file an

annual report for the fiscal years during

the term of the agreement. The rule does

not, however, require a

nongovernmental entity or person to file

an annual report with respect to a

particular covered agreement for any

fiscal year during which the person did

not receive any funds under the covered

agreement. The agencies believe that

requiring an annual report in such

circumstances would not further the

purpose of the statute because the

person would not have received any

funds or resources under the agreement

during the fiscal year. Under the

proposed rule, however, each insured

depository institution and affiliate that

is a party to a covered agreement must

file an annual report each year during

the term of the agreement. The agencies

request comment on whether this

reporting exemption for persons is

appropriate.

Example 1: A savings association and a

community development organization that

rehabilitates affordable housing in the

association’s assessment area enter into a

covered agreement pursuant to which the

association will invest $100,000 in the

organization over three years. The investment

will be used to support a rehabilitation

project that is expected to take three years to

complete. If the savings association provides

the full $100,000 in the first year of the

agreement, the organization must file an

annual report with the OTS for the fiscal year

in which it received the $100,000. The

organization is not required to file an annual

report with the OTS for its subsequent fiscal

years during the term of the agreement.

Example 2: A state non-member bank

enters into a covered agreement with a

community organization to make $1 million

in community development grants in the

community over the next two years. The

community organization will not receive any

funds or other resources under the agreement

(including under the grants as they are

made). The agreement is a covered agreement

and must be made available to the public and

the FDIC. In addition, the state non-member

bank must file annual reports 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 no funds or resources

under the agreement.

Example 3: An insured depository

institution and an organization enter into a

written agreement pursuant to which the

institution commits to make $10 million in

small business loans in the local community

over the next three years. The loans would

be made at market rates and would not be for

purposes of re-lending. The organization

would not receive any funds or resources

under the agreement, including under the

loans as they are made. Even if a

commitment by an insured depository

institution to make multiple loans on market

terms and not for purposes of re-lending is

a covered agreement (see Part I.A.2 above),

the organization would not have to file any

annual report concerning the agreement

because it would receive no funds or

resources under the agreement. Under the

proposed rule, the institution would have to

file an annual report during the term of the

agreement indicating the aggregate amount

and number of loans made during the year

under the agreement. Each individual loan

made pursuant to the commitment would be

exempt from coverage and, accordingly, each

borrower would have no reporting obligation

under the rule.

2. Contents of Annual Report Filed by

Persons

Section 711 requires that the annual

report filed by a nongovernmental entity

or person provide a detailed, itemized

accounting of how the person used any

funds or resources received under the

covered agreement during the previous

year. The proposed rule would allow

this detailed accounting to be provided

in two ways: a description of the

specific purpose or purposes for which

the funds were used, or a segmentation

of funds used for general purposes in a

pre-defined list of expense categories.

a. Specific Purpose Funds and

Resources

The first reporting method applies to

funds or other resources that a person

receives under a covered agreement and

allocates and uses for a specific

purpose. Specific purpose funds or

resources are those that a person targets

and uses for a distinct program, the

purchase of a distinct asset, or the

payment of a distinct expense. For

example, a person would use this

reporting method if, pursuant to the

terms of the covered agreement or

otherwise, the person specifically

allocated and used the funds received

under a covered agreement for a

particular loan program, to purchase

computers, to sponsor a particular

seminar, or to pay the salary of a

particular person. A specific purpose

must be a purpose that is more limited

than the categories of expenses

enumerated below for the reporting of

general purpose funds. In other words,

funds or resources are not allocated or

used for a specific purpose if they are

allocated or used for general operational

expenses, to support the organization’s

general activities in the community, or

to cover general compensation,

administrative, travel, entertainment,

consulting or professional expenses.

Under the proposed rule, funds or

resources allocated and used for a

specific purpose must be segregated in

the annual report from funds used for

general purposes. For funds received

under a covered agreement and

allocated and used for a specific

purpose, a person’s annual report must

provide the following information: (1) A

description of each specific purpose for

which the funds or resources were used

during the fiscal year; and (2) the

amount of funds or resources used for

each specific purpose during the fiscal

year.

Example 1: An organization receives

$15,000 from an insured depository

institution under a covered agreement. The

organization allocates and uses the $15,000

to sponsor a seminar on affordable housing

initiatives. The organization’s annual report

for the fiscal year would report that it

received $15,000, that it used the $15,000 to

sponsor the seminar, and provide a brief

description of the seminar.

Example 2: 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 $45,000 of the

funds to purchase computer equipment and

the remaining $5,000 is used for general

operating expenses. The group’s annual

report for the fiscal year must state that the

group received $50,000 under the agreement

during the fiscal year and that $45,000 was

used to purchase computer equipment. In

addition, the annual report must provide the

detailed, itemized list of expenses described

below because some funds were used for

general purposes.

b. All Other Funds and Resources

Funds or other resources received

under a covered agreement may be used

for general purposes or unspecified

purposes. The second reporting method

addresses funds or resources that are

received under a covered agreement and

that are not allocated and used for a

specific purpose. Under this method,

the reporting person must provide a

detailed, itemized list of how the

reporting person has used its funds

during the fiscal year. This list 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.

The annual report may reflect the total

amount of funds from all sources that

31976 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

29See H.R. Conf. Rep. No. 106–434 at 179 (1999). 30See 12 U.S.C. 1831y(h)(2)(B).

the person used during the fiscal year

for the types of expenses listed above.

The annual report must, however,

specify the total amount of funds that

the person received under the covered

agreement and that were used for

general or unspecified purposes. The

agencies may determine from this

information the proportion of general

purpose funds received under the

covered agreement that were used for

each category of expenses listed above.

Example: In March, a person receives an

unrestricted grant of $15,000 under a covered

agreement. The person includes the funds in

its general operating budget and does not

allocate and use the funds for a specific

purpose. The person’s annual report for the

fiscal year must state that the person received

$15,000 of general purpose funds. The

annual report also must indicate the total

amount of funds and resources that the

person used during the fiscal year for

compensation, administrative expenses,

travel expenses, entertainment expenses,

consulting and professional fees, and other

expenses and uses.

c. Use of Other Reports

As noted above, section 711 directs

the agencies to ensure that regulations

implementing that section ‘‘do not

impose an undue burden on the

parties.’’ The legislative history also

indicates that the agencies should allow

reporting parties to use reports prepared

for other purposes to fulfill the annual

reporting requirements.29 Accordingly,

the proposed rule does not require that

a person’s annual report be prepared on

a special form or in a particular format.

Instead, the rule provides that a person’s

annual report may consist of or

incorporate reports or documents that

the person 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. For

example, a person’s annual report may

consist of a Federal or state tax return,

a report prepared for the person’s

members or shareholders, or the

person’s financial statements if such

documents provide the information

required by the rule.

In this regard, the agencies have

reviewed several tax forms commonly

filed by tax-exempt nonprofit

organizations. Internal Revenue Form

990, which is the Federal tax return

form for certain tax-exempt nonprofit

organizations, requires the filing

organization to provide information that

is at least as detailed, and in some cases

more detailed, than the list of expenses

contained in section 711. In particular,

Form 990 requires a tax-exempt

organization to separately state the

amount that the organization spent

during the tax year on compensation of

officers, directors, trustees and key

employees; salaries and wages of other

employees; professional fundraising

fees; accounting fees; legal fees;

supplies; telephone; postage and

shipping; occupancy; printing and

publications; travel; conferences,

conventions and meetings; and an

itemized list of other uses. Since these

categories of expenses include and are

more specific than the list of expenses

required to be provided for general

purpose funds, a person may use a

properly completed Form 990 to fulfill

the rule’s reporting requirements for

general purpose funds. Other forms or

reports also may be used, separately or

in combination, to fulfill the rule’s

reporting requirements so long as they

contain, in total, the information

required by the rule.

d. Consolidated Annual Reports

Permitted

The GLB Act requires the agencies to

permit persons that are parties to a large

number of covered agreements to file a

consolidated annual report relating to

all of the covered agreements.30

Accordingly, section ll.5 of the

proposed rule permits a person that is

a party to 5 or more covered agreements

to file a single consolidated report

covering all of the person’s covered

agreements. A person’s consolidated

report must identify the person filing

the report and each agreement covered

by the report. 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.

Example: A community development

organization is a party to six separate covered

agreements with six unaffiliated insured

depository institutions. Under each

agreement, the organization receives $15,000

to fund the rehabilitation of a specific lowincome housing project identified in the

agreement. The organization allocates and

uses all of the funds for the specified

purpose. If the organization elects to file a

consolidated annual report, the consolidated

report must (1) identify the organization and

the six covered agreements, (2) state that the

organization received $90,000 under the

agreements, and (3) state that the person

allocated and used the $90,000 to fund the

rehabilitation project and provide a

description of the project.

e. Specific Request for Comments

The agencies invite comment on all

aspects of the proposed rule’s annual

reporting requirements for

nongovernmental entities and persons.

The agencies also specifically request

comment on the following:

• Are the rule’s reporting

requirements for specific purpose funds

and resources reasonable and

appropriate? Would the proposed rule

limit the burden associated with

reporting funds or resources received for

a specific purpose? Should the

regulation provide additional guidance

as to when a person has allocated and

used funds or resources for a specific

purpose or allow, rather than require, a

person to use this reporting method

when it allocates and uses funds for a

specific purpose?

• Should the detailed, itemized list of

uses contained in the proposed rule be

expanded to include other categories of

uses or expenses, such as grants or loans

made, or services provided, to others?

• Are there additional information

items that should be included in annual

reports? For example, should a person

be required to state in each annual

report the aggregate amount of funds or

resources that the person has received to

date under the covered agreement?

• Should the agencies permit a

person to file a consolidated annual

report if the person is a party to 2 or

more covered agreements?

• Where a covered agreement

provides for an institution or affiliate to

take several actions including making a

specific loan that, if agreed to

separately, would be exempt from

coverage under the rule, can and should

the agencies allow the person’s annual

report to exclude information

concerning the loan that would

otherwise be exempt under the rule?

• Are there additional ways that the

agencies could reduce the reporting

burden on persons consistent with the

language and purposes of the Act? For

example, should the agencies issue

optional sample reporting forms that

might be used by a person, insured

depository institution or affiliate?

3. Contents of Annual Report of Insured

Depository Institutions and Affiliates

The annual reporting requirements for

insured depository institutions and

affiliates are largely specified in section

711. 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)

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31977

31As discussed in II.C.1. above, the proposed rule

would not require a nongovernmental entity or

person to file an annual report during the term of

a covered agreement if the entity or person did not

receive any funds or resources under the agreement

in that fiscal year.

32See Proposed Rule section l.8(f). The rule also

provides that the ‘‘fiscal year’’ for an individual or

entity that does not have a fiscal year is the

calendar year.

33See 12 U.S.C. 1818.

34Other Federal statutes outside the banking laws

also may provide for penalties if an insured

depository institution, affiliate, or person fails to

comply with the disclosure and reporting

requirements of the Act. See 18 U.S.C. 1001.

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 person 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

a person.

These informational requirements track

those established by the statute.

The rule would allow an insured

depository institution and an affiliate

that are parties to the same covered

agreement to file a single, consolidated

report for the agreement. In addition, to

reduce burden, the proposed rule would

allow 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.

The agencies request comment on

whether an insured depository

institution or affiliate should be

permitted to file a consolidated report if

it is a party to 2 or more covered

agreements, and whether the rule can

and should allow an insured depository

institution or affiliate to not file an

annual report for any fiscal year in

which the institution or affiliate did not

provide or receive any payments, fees or

loans under the agreement. The agencies

invite comment on whether the rule

should provide additional guidance

concerning the level of detail required

to be provided in the annual report of

an insured depository institution or

affiliate, and whether there are

additional ways the agencies could

reduce the reporting burden of insured

depository institutions and affiliates

consistent with the Act. For example,

are there ways the agencies could

reduce the reporting burden for

agreements that involve loans that are

themselves exempt from coverage?

4. When and Where Must Annual

Reports Be Filed

The proposed rule provides that each

party to a covered agreement must

prepare and file an annual report with

the relevant supervisory agency for the

fiscal year in which the party enters into

the agreement and each subsequent

fiscal year during the term of the

covered agreement. 31 The agencies have

adopted a fiscal year reporting period to

allow the parties to coordinate

preparation of their annual reports with

other documents or reports that

typically are prepared on a fiscal year

basis, such as income tax returns and

financial statements. However, to

provide parties with maximum

flexibility, the rule also permits a party

to elect to use the calendar year as their

fiscal year for purposes of the rule. 32

The agencies request comment on

whether providing the option of fiscal

year or calendar year reporting would

reduce regulatory burden or whether the

rule should require reporting on a

calendar year basis. In addition, the

agencies request comment on whether a

person should be required to file an

annual report after the end of a covered

agreement’s term if, by that time, the

person has not completely used all the

funds or resources received under the

agreement.

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. Under section

711 and the rule, a person may fulfill

this filing requirement by providing its

annual report to the insured depository

institution or affiliate that is a party to

the agreement within 5 months of the

end of the person’s fiscal year with

instructions for the institution or

affiliate to file the report with all of the

relevant supervisory agencies on behalf

of the person. An insured depository

institution or affiliate that receives an

annual report from a person in this

manner must forward it to the relevant

supervisory agencies within 30 days.

This method of filing allows the

annual reports of a person and an

insured depository institution or

affiliate that relate to the same covered

agreement to be filed together. It also

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

nongovernmental entity or person may

not.

The agencies invite comment on the

filing requirements of the rule. In

particular, the agencies request

comment on whether the 5- and 6-

month filing windows will provide the

parties sufficient time to prepare their

annual reports and whether there are

additional ways that the agencies might

reduce the filing burdens of parties

consistent with the Act.

D. Compliance Provisions

Section 711 specifically provides that

nothing in that section authorizes the

agencies to enforce the provisions of any

covered agreement. The proposed rule

incorporates this provision. (See section

ll.7(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 persons are

private matters between the parties and

are not enforced by the agencies.

The agencies may enforce compliance

by insured depository institutions and

affiliates with the disclosure and

reporting requirements of section 711

using the cease and desist and other

enforcement powers granted in section

8 of the FDI Act. 33 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 nongovernmental entities

or persons that are parties to a covered

agreement. Section 711 instead includes

special compliance provisions

applicable to nongovernmental entities

or persons that are party to a covered

agreement. 34

Under these provisions, the material

and willful failure of a person to comply

with section 711 may cause the related

covered agreement to be unenforceable.

In particular, under the Act, if the

appropriate agency determines that a

person has willfully failed to comply

with section 711 in a material way, and

the person does not comply with the

law after receiving notice and a

reasonable period of time, the agreement

thereafter is unenforceable by operation

of section 711. The Act specifically

provides that inadvertent or de minimis

31978 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

35The agencies note that the definition of

‘‘insured depository institution’’ in the FDI Act

includes special-purpose insured depository

institutions that are not subject to the CRA. See,

e.g., 12 CFR 228.11(c)(3). An agreement that relates

to the activities of a special-purpose insured

depository institution, however, would not be in

fulfillment of the CRA and, thus, would not be a

covered agreement under the rule.

reporting errors will not subject the

filing party to any penalty. The rule

requires the agencies to provide a

person written notice and an

opportunity to respond before

determining the person has not

complied with the rule, and allows the

person at least 90 days to correct a

willful and material violation. The

agencies request comment on whether

this written notice should be sent to all

the parties to the agreement.

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 most

consistent reading of the language and

purpose of the Act. The agencies note

that an alternative construction could

encourage persons 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

person, the appropriate agency may

assist the institution or affiliate in

identifying a successor person to

assume the responsibilities of the

person under a covered agreement that

has become unenforceable.

Section 711 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, the Act 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.

E. Other Definitions and Rule of

Construction

Section ll.8 of the proposed rule

defines other terms used in the rule.

Because section 711 amended the FDI

Act, the rule provides that the terms

‘‘insured depository institution,’’

‘‘control,’’ ‘‘Federal banking agency’’

and ‘‘appropriate Federal banking

agency’’ have the same meaning as in

the FDI Act.35

1. ‘‘Person’’ and ‘‘Nongovernmental

Entity or Person’’

Section 711 of the GLB Act 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 ‘‘person’’ instead of

the phrase ‘‘nongovernmental entity or

person.’’ (The OTS rule, however, refers

to a ‘‘nongovernmental entity or person’’

as a ‘‘NGEP.’’) As a general matter, the

rule defines a ‘‘person’’ to mean 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 ‘‘person’’ 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 be considered a

‘‘person’’ under the rule, unless the

entity independently qualified for an

exclusion.

The proposal also would not treat

insured depository institutions and their

affiliates as persons. Section 711

appears to draw a distinction between

insured depository institutions (and

their affiliates) and nongovernmental

entities and persons and imposes

separate obligations on insured

depository institutions (and their

affiliates) and nongovernmental entities

or persons.

The agencies request comment on the

proposed definition of

‘‘nongovernmental entity or person,’’

including whether specific types of

entities should be added or removed

from the list of entities and individuals

excluded from the definition of the

term.

2. Affiliate and Control

The term ‘‘affiliate’’ is defined in the

FDI Act by reference to the Bank

Holding Company Act. 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.

The proposed rule creates a 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 person may have a

CRA contact and enter into an

agreement with the acquiring insured

depository institution (or holding

company thereof) concerning the CRA

performance of the target institution.

The agencies believe these types of

contacts constitute a CRA contact under

section 711 and that any agreement

resulting from such contact is a covered

agreement if it otherwise meets the

requirements of section 711.

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

contact occurs.

Example: A bank holding company files an

application with the Board to acquire control

of an additional insured depository

institution. While the application is pending,

an organization contacts the bank holding

company to discuss perceived deficiencies in

the CRA performance record of the insured

depository institution to be acquired. The

bank holding company and the organization

enter into a written agreement that provides

for the target institution to increase its level

of community development grants by $1

million per year for the next three years. The

target institution would be considered an

‘‘affiliate’’ of the bank holding company

under the proposed rule. Accordingly, the

agreement would be a covered agreement

because the organization had a CRA contact

with the holding company concerning the

CRA record of performance of an affiliated

insured depository institution.

3. Term of agreement

Under the 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

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31979

36See 12 CFR Part 35 (OCC); 12 CFR Part 207

(Board); 12 CFR Part 346 (FDIC); and 12 CFR Part

533 (OTS).

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 onetime grant is made to a person 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 person to file an

annual report for the next year.

III. Placement of Proposed Rule

The agencies propose to implement

section 711 by adding a new part to

their regulations.36 These new parts

would be separate from the agencies’

CRA Regulations. The agencies believe

this placement is appropriate because

section 711 of the GLB Act amended the

FDI Act, and not the CRA, and is

independent of the CRA and the CRA

Regulations. The agencies note,

however, that because section 711

concerns CRA-related agreements, the

proposed rule includes several crossreferences to the CRA Regulations. The

agencies request comment on whether

users would find it more convenient if

the proposed rule was incorporated into

the agencies’ existing CRA Regulations

and, if so, how the agencies could make

clear that the rule does not in any way

affect the CRA.

IV. Regulatory Flexibility Act Analysis

OCC: In accordance with section 3(a)

of the Regulatory Flexibility Act (5

U.S.C. 603(a)), the OCC is publishing

the following initial regulatory

flexibility analysis with this proposed

rulemaking.

The proposed rule would implement

provisions of section 711 of the GLB

Act. A description of the reasons why

action by the OCC is being considered

and a statement of the objectives of, and

legal basis for, the proposed rule are

contained in the SUPPLEMENTARY

INFORMATION.

The proposed rule includes reporting

requirements that would apply to all

insured depository institutions,

including national banks, affiliates of

insured depository institutions,

including national bank subsidiaries,

and persons that enter into covered

agreements (as defined by the proposed

rule). The proposed rule requires

insured depository institutions,

affiliates, and persons 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 711 of the GLB Act

and apply regardless of the size of the

insured depository institution, affiliate,

or person. Section 711 does not

authorize the OCC to provide an

exemption for covered agreements based

on the size of any entity within the

scope of its provisions. The Act,

however, directs the OCC and the other

agencies to ensure that the proposed

rule does not impose an undue burden

on the parties to covered agreements.

The proposed rule includes several

provisions, described in detail in the

SUPPLEMENTARY INFORMATION that are

designed to limit the potential impact of

the proposed rule on insured depository

institutions, affiliates and persons or

entities of any size. For example, the

rule gives entities and persons

flexibility in determining how to make

a covered agreement available to the

public. In addition, the proposed rule

would allow persons to use reports that

have been prepared for other purposes,

such as tax returns and financial

statements, to fulfill the annual

reporting requirement. The rule also

allows an insured depository

institution, affiliate, or person that is a

party to 5 or more covered agreements

to prepare a single, consolidated annual

report relating to all of the agreements.

As noted above, the proposed rule

applies to insured depository

institutions, affiliates, and persons that

enter into covered agreements. These

agreements are entered into by private

parties, are not enforced by the OCC

and, to date, have not been required to

be disclosed to the OCC. In addition, the

OCC and the other agencies have

specifically requested comment on the

scope of the proposed rule and will

issue a final rule after review of public

comments. Accordingly, the OCC

cannot estimate at this time the total

number of national banks or their

subsidiaries that would be subject to the

requirements of the rule and the number

of such entities that would be

considered small entities. Similarly, the

OCC cannot estimate at this time the

total number of persons that may enter

into a covered agreement with these

entities, and therefore be subject to the

requirements of the rule.

The OCC specifically seeks comment

on the likely burden that the proposed

rule would impose on national banks

and other entities within the OCC’s

supervisory jurisdiction that are subject

to it and on persons who enter into

covered agreements with those entities.

Board: In accordance with section 3(a)

of the Regulatory Flexibility Act (5

U.S.C. 603(a)), the Board must publish

an initial regulatory flexibility analysis

with this proposed rulemaking. The

proposed rule would implement

provisions of section 711 of the GLB

Act. A description of the reasons why

action by the Board is being considered

and a statement of the objectives of, and

legal basis for, the proposed rule are

contained in the supplementary

material provided above.

The proposed rule includes reporting

requirements that would apply to all

insured depository institutions,

affiliates of insured depository

institutions, and persons that enter into

covered agreements (as defined by the

proposed rule). The proposed rule

requires insured depository institutions,

affiliates, and persons 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 711 of the GLB Act

and would apply regardless of the size

of the insured depository institution,

affiliate, or person. The Act does not

authorize the Board to provide an

exemption for covered agreements based

on the size of the insured depository

institution, affiliate or person that enters

into the agreement.

The Act, however, directs the Board

and the other agencies to ensure that the

proposed rule does not impose an

undue burden on the parties to covered

agreements and the proposed rule

includes several provisions that are

designed to limit the potential impact of

the proposed rule on insured depository

institutions, affiliates and persons,

including small institutions, affiliates

and persons. For example, the rule gives

entities and persons flexibility in

determining how to make a covered

agreement available to the public. In

addition, the proposed rule would allow

persons to use reports that have been

prepared for other purposes, such as tax

returns and financial statements, to

fulfill the annual reporting requirement.

The rule also allows insured depository

institutions, affiliates, and persons that

are a party to 5 or more covered

agreements to prepare a single,

consolidated annual report relating to

all of the agreements.

As noted above, the proposed rule

applies only to insured depository

institutions, affiliates, and persons that

31980 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

37OTS’s rule applies to the following affiliates:

savings and loan holding companies and companies

that are controlled by savings associations or

savings and loan holding companies.

enter into covered agreements. These

agreements are entered into by private

parties, are not enforced by the Board

and, to date, have not been required to

be disclosed to the Board. In addition,

the Board and the other agencies have

specifically requested comment on the

scope of the proposed rule and will

issue a final rule after review of public

comments. Accordingly, the Board

cannot estimate at this time the total

number of state member banks, bank

holding companies, and nonbank

subsidiaries of a bank holding company

that would be subject to the

requirements of the rule and the number

of such entities that would be

considered small entities. Similarly, the

Board cannot estimate at this time the

total number of persons that may enter

into a covered agreement with the types

of entities listed above and, thereby, be

subject to the requirements of the rule

or the number of such persons that

would be considered small entities.

The Board specifically seeks comment

on the likely burden that the proposed

rule would impose on insured

depository institutions and affiliates

within the Board’s supervisory

jurisdiction and on persons who enter

into covered agreements with such

entities.

FDIC: Consistent with the Regulatory

Flexibility Act (5 U.S.C. 601–612)

(RFA), the FDIC is required to publish

an initial regulatory flexibility analysis

relating to the proposed rule. The

proposed rule would implement

provisions of section 711 of the GLB Act

and would apply to all insured

depository institutions, affiliates of

insured depository institutions, and

persons that enter into the types of

covered agreements described in section

711 and in the proposed rule.

Material contained in the

Supplementary Information section of

this document contains statements

about the legal basis for and objectives

of the FDIC in proposing this rule. The

GLB Act incorporates disclosure and

reporting requirements applicable to all

insured depository institutions,

affiliates, and persons that enter into

covered agreements. Insured depository

institutions, affiliates, and persons must

make the covered agreements available

to the general public and to the

appropriate supervisory agency. They

must also file an annual report with the

appropriate supervisory agency

describing the disbursement, receipt,

and use of the funds under the

agreement. The GLB Act does not

provide exemptions for the reporting or

disclosure requirements based on the

size of the insured depository

institution, affiliate, or person; similarly

the GLB Act does not authorize the

FDIC to provide for exemptions.

Because the GLB Act requires the

agencies to ensure that the proposed

rule does not impose an undue burden

on the parties to a covered agreement,

the proposed rule contains provisions

that limit the potential impact on

insured depository institutions,

affiliates, and persons. For example, the

proposed rule provides flexibility to

entities and persons regarding the way

a covered agreement is made available

to the public. Insured depository

institutions are permitted to disclose

covered agreements to the public by

placing it in their CRA public files, and

parties may satisfy their obligation to

make covered agreements available to

the public, in part, by posting the

agreement on a publicly available

Internet website. Although the GLB Act

states that parties to a covered

agreement must make the agreement

available to an agency, the proposed

rule requires a person that is a party to

an agreement to disclose the covered

agreement to an agency upon the

agency’s request for a copy of the

agreement. In addition, the proposed

rule would allow persons to use reports

that have been prepared for other

purposes, such as tax returns and

financial statements, to fulfill the

annual reporting requirement.

Recognizing that many tax returns and

financial statements are based on fiscal

year reporting periods, the proposed

regulation permits either a fiscal or

calendar year reporting period so that

parties may coordinate their required

annual report with other reports or

filings. The rule also would permit

insured depository institutions,

affiliates, and persons that are parties to

5 or more covered agreements to file a

single, consolidated report relating to all

of the agreements and would allow

insured depository institutions and

affiliates that are parties to the same

covered agreement to file a single

consolidated report. Finally, the

proposed rule does not require annual

reports to be prepared on a special form

or in a particular format. All of these

provisions were developed to minimize

the impact and burden the proposed

rule would have on parties to a covered

agreement.

Before passage of the GLB Act, parties

to covered agreements were not required

to disclose the agreements to the FDIC;

therefore, at this time, the FDIC cannot

estimate the total number of insured

state non-member banks, affiliates of

state non-member banks, or persons that

would be subject to the requirements of

the proposed rule. Similarly, the FDIC

cannot predict which parties to covered

agreements may be classified as small

businesses or entities. Although the

FDIC and the other agencies have

requested comment on the scope of the

proposed rules, presently, the FDIC

cannot determine whether the proposed

rule would have a significant economic

impact on a substantial number of small

entities. The FDIC requests comment on

the likely significance of the economic

impact the proposed rule would impose

on FDIC-supervised banks and affiliates

and on persons who enter into a covered

agreement.

OTS: The Regulatory Flexibility Act

requires federal agencies to either

prepare an initial regulatory flexibility

analysis (IRFA) with a proposed rule or

certify that the proposed rule would not

have a significant economic impact on

a substantial number of small entities.

OTS cannot, at this time, determine

whether this proposed rule would have

a significant economic impact on a

substantial number of small entities.

Therefore, OTS includes the following

IRFA.

A description of the reasons why OTS

is considering this action and a

statement of the objectives of, and legal

basis for, this proposed rule, are

contained in the supplementary

materials provided above.

A. Small Entities to Which the Proposed

Rule Would Apply

The proposed rule would apply to the

following types of entities if they are a

party to a covered agreement: (1)

Savings associations; (2) certain

affiliates of savings associations; 37 and

(3) nongovernmental entities or persons

that enter into covered agreements with

savings associations or affiliates of

savings associations. The proposed rule

would apply regardless of the size of the

savings association, affiliate, or persons.

OTS is unable to estimate how many

covered agreements exist, how many

savings associations, affiliates of savings

associations, or persons are parties to

such covered agreements, or how many

parties to covered agreements are ‘‘small

businesses’’ or ‘‘small organizations’’

under the Regulatory Flexibility Act. To

date, parties to such agreements have

not had to disclose or report the

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 does not have information

about these agreements.

OTS has very limited information that

would assist in an estimate. According

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31981

to December 31, 1999 data, OTS

calculates that of the approximately

1,100 savings associations, a maximum

of 486 are small savings associations.

Small savings associations are generally

defined, for Regulatory Flexibility Act

purposes, as those with assets under

$100 million. 13 CFR 121.201, Division

H (1999). OTS also calculates that these

486 savings associations hold

approximately 100 subordinate

organizations that could possibly

qualify as small entities. OTS further

calculates that a maximum of 205

savings and loan holding companies

could possibly qualify as small entities.

OTS does not have data on how many

of these subordinate organizations or

holding companies may actually qualify

as small entities. Nor does OTS have

data on how many other affiliates of

savings associations exist (e.g.,

companies that are under common

control with a savings association), how

many of these affiliates are affiliates of

small savings associations, or how many

of these affiliates are themselves small

entities. OTS does not know how many

persons have entered into covered

agreements with savings associations or

affiliates of savings associations or how

many of these persons are small entities.

OTS specifically seeks comment on

the number and size of savings

associations, affiliates of savings

associations, and persons that are

parties to covered agreements. OTS also

seeks comment on how many covered

agreements may currently exist and

approximately how many will be

entered into each year in the future.

B. Requirements of the Proposed Rule

As described more fully in the

supplementary material provided above,

the proposed rule contains new

disclosure and reporting requirements.

Most of the requirements are mandated

by section 711 of the GLB Act. The GLB

Act, however, directs the Federal

banking agencies to ensure that the

regulations prescribed by the agency do

not impose an undue burden on the

parties.

The primary requirements under the

proposed rule involve disclosure and

reporting of covered agreements. The

proposal would require 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

would also require each savings

association or affiliate that is a party to

the covered agreement to provide a copy

to each relevant supervisory agency (as

defined in the proposal) and would

require each person that is a party to

provide a copy to each relevant

supervisory agency upon request.

To minimize the disclosure burden,

the proposal would:

• Terminate the public disclosure

requirement and the requirement for a

person to provide a copy to the relevant

supervisory agencies upon request 12

months after the end of the term of the

covered agreement;

• Not mandate any particular method

for disclosing the agreement to the

public;

• Allow each party to charge

reasonable copying and mailing fees

when it discloses an agreement to the

public;

• Allow a savings association to

publicly disclose by placing a copy of

the covered agreement in its CRA public

file and making it available under the

public file procedures;

• Require a person to provide a copy

to the relevant supervisory agencies

only if the agency requests a copy; and

• Allow two or more insured

depository institutions or affiliates that

are parties to a covered agreement to

jointly file with each relevant

supervisory agency.

The proposal would require each

party to a covered agreement to file an

annual report with each relevant

supervisory agency concerning the

disbursement, receipt, and uses of funds

or other resources under the covered

agreement. To minimize the reporting

burden, the proposal would:

• Not mandate any particular form for

the annual report;

• Allow each party to report on its

own fiscal year basis;

• Exempt a person from filing a report

for a fiscal year if the person does not

receive any funds or resources during

that year;

• Provide simplified reporting

procedures for persons that allocate and

use funds or other resources under a

covered agreement for a specific

purpose;

• Allow a person’s report to consist

of, or incorporate, reports prepared for

other purposes, such as tax forms and

financial statements;

• Permit a savings association,

affiliate, or person that is a party to five

or more covered agreements to file a

single consolidated annual report

covering all of the covered agreements,

aggregating certain information;

• Allow a savings association and its

affiliates that are parties to the same

covered agreement to file a single

consolidated report; and

• Allow a person 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).

It is possible that savings associations,

affiliates, and persons have already

established recordkeeping and other

policies and practices that would

already enable them to partly or fully

meet the requirements of this proposed

rule. To the extent that existing

practices and available resources are

insufficient, parties to covered

agreements would need professional

skills to comply with this proposed rule.

To disclose covered agreements, parties

may need clerical and computer

personnel. To prepare required reports,

parties may need personnel with these

skills, as well as personnel skilled in

financial and legal matters. Some degree

of personnel training may be necessary,

such as to enable employees to

determine when they enter into covered

agreements, and how to retain, record,

and compile information about

agreements to disclose and report them.

OTS does not have a practicable or

reliable basis for quantifying the costs of

this proposed rule, or of any alternatives

to the rule. The requirements are too

new for those subject to the law to have

learned what the law requires and

decide how to proceed. OTS cannot

predict how savings associations,

affiliates, and persons would comply

with the proposed rule. For example,

OTS cannot assess the extent to which

savings associations, affiliates, and

persons would avoid entering into

covered agreements as a result of a final

rule.

Rather than merely guess at the

regulatory burden of this proposed rule,

OTS solicits comment on these burdens

and on ways to minimize the burdens,

consistent with the GLB Act.

C. Significant Alternatives

The requirements in the proposed

rule parallel those in the GLB Act. The

proposed rule would clarify the

statutory requirements in some areas

and restate the requirements in a more

understandable manner in other areas. It

would not impose any substantially

different requirements.

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

persons from these requirements. OTS

does not interpret the statute to permit

such an exemption.

The supplementary material provided

above describes and solicits comment

on a number of alternatives that would

reduce the regulatory burden. These

include:

31982 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

• Limiting the types of agreements

that are covered by the rule (e.g.,

defining ‘‘CRA contacts,’’ ‘‘fulfillment of

CRA,’’ and the calculation of value more

narrowly, or defining the statutory

exemptions for certain types of loans,

extensions of credit and commitments

more broadly);

• Simplifying the procedures for

parties to delete proprietary and

confidential information;

• Limiting which parties to an

agreement must comply with the

disclosure and reporting requirements

in multi-party agreements (e.g., not

applying the requirements to parties

that have not made CRA contacts, have

not been the subject of CRA contacts, or

do not know that CRA contacts have

occurred); and

• Providing more flexible reporting

requirements (e.g., allowing parties to

two or more agreements to use

consolidated reporting procedures,

permitting affiliated persons that are

parties to the same covered agreement to

file a consolidated report, allowing

persons to elect to report on specific

purpose funds or resources under the

itemized reporting procedures, and

exempting savings associations and

affiliates from filing a report for a fiscal

year if the savings association or affiliate

has not had transactions to report).

OTS requests comment on whether

these or other alternatives would reduce

the burdens and whether any exceptions

for small institutions would be

appropriate.

D. Other Matters

These proposed requirements do 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 proposed rule allows a

person’s report to consist of, or

incorporate, these existing reports.

OTS lacks sufficient information

about the contents of covered

agreements, however, to conclude

whether the proposed requirements

conflict with other Federal rules. One

area of potential conflict is the rule’s

requirement to make a ‘‘complete copy’’

of a covered agreement available to the

public and to the relevant supervisory

agencies. OTS solicits 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 seeks comment on

any Federal rules that may duplicate,

overlap, or conflict with the proposal.

V. Executive Order 12866

Determination

OCC: The Comptroller of the Currency

has determined that this proposed rule

does not constitute a significant

regulatory action for the purpose of

Executive Order 12866. Reporting and

disclosure are mandated by section 711

of the GLB Act. The proposed rule

closely follows the requirements of that

statute. As described in the

SUPPLEMENTARY INFORMATION, however,

the proposal also contains regulatory

options designed to minimize costs and

burdens, where feasible and consistent

with the statute. The OCC invites

national banks and the public to provide

specific cost estimates and related data

that would contribute to the accuracy of

the OCC’s evaluations of the costs of the

requirements in the rule.

OTS: OTS has determined that this

proposed rule does not constitute a

significant regulatory action for the

purpose of Executive Order 12866.

Reporting and disclosure are mandated

by section 711 of the GLB Act. Many of

the proposed provisions closely follow

the requirements of this section. OTS

has exercised its discretion, to the

extent possible, to propose regulatory

options to minimize costs and burdens.

Nevertheless, OTS acknowledges that

the rule would impose costs on insured

depository institutions, affiliates, and

nongovernmental entities or persons by

requiring these entities to disclose and

report on agreements. Therefore, OTS

invites the thrift industry and the public

to provide any cost estimates and

related data that they think would be

useful to the agency in evaluating the

overall costs of the rule.

VI. Paperwork Reduction Act

The information collection and

reporting requirements of the proposed

rule are described in II. above. In

summary, the proposed rule requires

persons, insured depository institutions,

and affiliates of insured depository

institutions that are parties to covered

agreements (as defined by the proposed

rule) to make the agreements available

to the public and the relevant

supervisory agencies and to file annual

reports relating to the agreements with

the relevant supervisory agencies. These

reporting and disclosure requirements

are required under Title VII of the GLB

Act (Pub. L. 106–102, 113 Stat. 1465

(1999)), which adds new section 48 to

the Federal Deposit Insurance Act (12

U.S.C. 1831y).

The proposed rule requires each

person, insured depository institution,

and affiliate of an insured depository

institution that is a party to a covered

agreement to make a complete copy of

the agreement available to the public on

request at any time during the term of

the agreement and 12 months after the

term of the agreement (proposed

ll.4(b)). Accordingly, each party must

retain a copy of the agreement for that

period. Any party to a covered

agreement may request that the relevant

supervisory agency determine whether

certain portions of the agreement may

be exempt from disclosure under the

Freedom of Information Act (5 U.S.C.

552 et seq.) prior to making the

agreement available to the public

(proposed ll.4(b)(1)(ii)).

An insured depository institution or

affiliate of an insured depository

institution that enters into a covered

agreement must file a copy of the

agreement with the supervisory agency

within 30 days of entering into the

agreement (proposed ll.4(c)(2)(i)). A

person must make the agreement

available to the relevant supervisory

agency upon request (proposed

ll.4(c)(1)).

The proposed rule also requires each

person, insured depository institution,

or affiliate of an insured depository

institution that is a party to a covered

agreement to file an annual report that

relates to the agreement for each fiscal

year during the term of the agreement

with the relevant supervisory agency of

the insured depository institution or

affiliate that is a party to the agreement

(proposed ll.5(b)). The annual report

of a person must include (1) the name

and address of the person filing the

report, (2) the names of the parties to the

agreement, and (3) the amount of funds

or resources received during the fiscal

year (proposed ll.5(d)). The annual

report of an insured depository

institution or affiliate must include (1)

the name and principal place of

business of the institution or affiliate,

(2) sufficient information to identify the

covered agreement for which the annual

report is being filed, and (3) information

on payments and other resources

provided or received under the

agreement (proposed ll.5(e)). The

proposed rule allows a person to send

its annual report either to the relevant

supervisory agency of each insured

depository institution or affiliate that is

a party to the agreement or to an insured

depository institution or affiliate that is

a party to the agreement. The insured

depository institution or affiliate must

send the annual report of a person to the

relevant supervisory agency within 30

days of receiving the report (proposed

ll.5(f)(2)(ii)).

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31983

Finally, an insured depository

institution or affiliate that is a party to

a covered agreement that concerns the

performance of any activity of a CRA

affiliate (as defined in ——.8(c)) is

required to notify each person that is a

party to the agreement that the

agreement concerns a CRA affiliate

(proposed ll.2(d)).

The agencies request public comment

on all aspects of the collections of

information contained in this proposed

rule, including how burdensome it

would be for persons, insured

depository institutions, and affiliates to

comply with each of the reporting and

disclosure requirements of the proposed

rule.

The estimated total annual reporting

and disclosure burden of the proposed

rule will depend on the number of

covered agreements. The agreements

that trigger the disclosure and reporting

requirements of the proposed rule,

however, 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. As a result, the agencies

cannot accurately estimate at this time

the total number of insured depository

institutions, affiliates or persons 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. The

agencies also are unable to identify a

reasonable proxy for estimating the

number of covered agreements. 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 50

percent of the insured depository

institutions it regulates are parties to

one covered agreement. In addition, the

agencies have assumed that one person

is a party to each of these agreements.

The agencies specifically request

comment on these assumptions, the

total number of persons, 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 also invite comment on:

(1) Whether the collections of

information contained in the notice of

proposed rulemaking are necessary for

the proper performance of each agency’s

functions, including whether the

information has practical utility;

(2) The accuracy of each agency’s

estimate of the burden of the proposed

information collections;

(3) Ways to enhance the quality,

utility, and clarity of the information to

be collected;

(4) Ways to minimize the burden of

the information collections on

respondents, including the use of

automated collection techniques or

other forms of information technology;

and

(5) Estimates of capital or start-up

costs and costs of operation,

maintenance, and purchases of services

to provide information.

The agencies will revisit these

estimates when they have more

information on the scope of the rule and

the number of potential respondents

and covered agreements. The revised

estimates will also reflect all comments

received concerning the burden

estimates. Respondents/recordkeepers

are not required to respond to these

collections of information unless the

agencies display a currently valid Office

of Management and Budget (OMB)

control number. The agencies are

currently requesting their respective

control numbers for these information

collections from OMB.

OCC: The collection of information

requirements contained in the

Regulation will be submitted to the

OMB in accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3507).

Comments on the collections of

information should be sent to the

Communications Division, Office of the

Comptroller of the Currency, 250 E

Street, SW, Third Floor, Attention:

1557–to be assigned, Washington, DC

20219, with a copy to the Office of

Management and Budget, Paperwork

Reduction Project (1557–to be assigned),

Washington, DC 20503.

The potential respondents include

national banks, subsidiaries of national

banks, and nongovernmental entities or

persons.

Estimated number of financial

institution respondents: 1,200.

Estimated number of nongovernmental

entity or person respondents: 1,200.

Estimated average annual burden

hours for all disclosure and reporting

requirements of the proposed rule per

financial institution respondent per

agreement: 6 hours.

Estimated burden hours for all

disclosure and reporting requirements

of the proposed rule per

nongovernmental entity or person per

agreement: 4 hours.

Estimated total annual reporting and

disclosure burden: 12,000 hours.

Board: In accordance with section

3506 of the Paperwork Reduction Act of

1995 (44 U.S.C. Ch. 35; 5 CFR 1320,

appendix A.1), the Board reviewed the

Regulation under the authority

delegated to the Board by the OMB.

Comments on the collections of

information should be sent to Mary M.

West, Federal Reserve Board Clearance

Officer, Division of Research and

Statistics, Mail Stop 97, Board of

Governors of the Federal Reserve

System, Washington, DC 20551, with a

copy to the Office of Management and

Budget, Paperwork Reduction Project

(7100–to be assigned), Washington, DC

20503.

The potential respondents are 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

nongovernmental entities or persons.

Estimated number of financial

institution respondents: 507.

Estimated number of

nongovernmental entity or person

respondents: 507.

Estimated average annual burden

hours for all disclosure and reporting

requirements of the proposed rule per

financial institution respondent per

agreement: 6 hours.

Estimated burden hours for all

disclosure and reporting requirements

of the proposed rule per

nongovernmental entity or person per

agreement: 4 hours.

Estimated total annual reporting and

disclosure burden: 5,070 hours.

FDIC: The collections of information

contained in the Regulation will be

submitted to the OMB in accordance

with the Paperwork Reduction Act of

1995 (44 U.S.C. 3507). The FDIC will

use any comments received to develop

its new burden estimates. Comments on

the collections of information should be

sent to Steven F. Hanft, Assistant

Executive Secretary (Regulatory

Analysis), Federal Deposit Insurance

Corporation, F–4080, 550 17th Street,

NW, Washington, DC 20429, with a

copy to the Office of Management and

Budget, Paperwork Reduction Project

(3064–to be assigned), Washington, DC

20503.

The potential respondents are insured

nonmember banks, subsidiaries of

insured nonmember banks, and

nongovernmental entities or persons.

Estimated number of financial

institution respondents: 2,850.

Estimated number of

nongovernmental entity or person

respondents: 2,850.

Estimated average annual burden

hours for all disclosure and reporting

requirements of the proposed rule per

financial institution respondent per

agreement: 6 hours.

31984 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

Estimated burden hours for all

disclosure and reporting requirements

of the proposed rule per

nongovernmental entity or person per

agreement: 4 hours.

Estimated total annual reporting and

disclosure burden: 28,500 hours.

OTS: The collection of information

requirements contained in the

Regulation will be submitted to the

OMB in accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3507).

The OTS will use any comments

received to develop its new burden

estimates. Comments on the collection

of information should be sent to the

Dissemination Branch (1550-to be

assigned), Office of Thrift Supervision,

1700 G Street, NW, Washington, DC

20552, with a copy to the Office of

Management and Budget, Paperwork

Reduction Project (1550-to be assigned),

Washington, DC 20503.

The potential respondents are savings

and loan holding companies, savings

associations, companies controlled by

savings and loan holding companies

and savings associations, and

nongovernmental entities or persons.

Estimated number of financial

institution respondents: 552.

Estimated number of

nongovernmental entity or person

respondents: 552.

Estimated average annual burden

hours for all disclosure and reporting

requirements of the proposed rule per

financial institution respondent per

agreement: 6 hours.

Estimated burden hours for all

disclosure and reporting requirements

of the proposed rule per

nongovernmental entity or person per

agreement: 4 hours.

Estimated total annual reporting and

disclosure burden: 5,520 hours.

VII. Solicitation of Comments

Regarding the Use of ‘‘Plain Language’’

Section 722 of the GLB Act requires

the agencies to use ‘‘plain language’’ in

all proposed and final rules published

after January 1, 2000. The agencies

invite comments about how to make the

proposed rule easier to understand,

including answers to the following

questions:

(1) Have the agencies organized the

material in an effective manner? If not,

how could the material be better

organized?

(2) Are the terms of the rule clearly

stated? If not, how could the terms be

more clearly stated?

(3) Does the rule contain technical

language or jargon that is unclear? If so,

which language requires clarification?

(4) Would a different format (with

respect to the grouping and order of

sections and use of headings) make the

rule easier to understand? If so, what

changes to the format would make the

rule easier to understand?

(5) Would increasing the number of

sections (and making each section

shorter) clarify the rule? If so, which

portions of the rule should be changed

in this respect?

(6) What additional changes would

make the rule easier to understand?

The agencies also solicit comment

about whether it would be appropriate

and useful to include in the rule the

examples discussed in this preamble.

The agencies note that creating safe

harbors in the rule may generate certain

problems over time due to changes in

technology or business practices. Are

there alternatives that the agencies

should consider to illustrate the terms

in the rule?

VIII. FDIC’s Electronic Public Comment

Site

The FDIC has included a page on its

web site to facilitate the submission of

electronic comments in response to this

general solicitation (the EPC site). The

EPC site provides an alternative to the

written letter and may be a more

convenient way for you to submit your

comments. Commenting through the

EPC site will assist the FDIC to more

accurately and efficiently analyze

comments submitted electronically. If

you submit your comments through the

EPC site your comments will receive the

same consideration that they would

receive if submitted in hard copy to the

FDIC’s street address. Information

provided through the EPC site will be

used by the FDIC only to assist in its

analysis of the proposed regulation. The

FDIC will not use an individual’s name

or any other personal identifier of an

individual to retrieve records or

information submitted through the EPC

site. Like comments submitted in hard

copy to the FDIC’s street address, EPC

site comments will be made available in

their entirety (including the

commenter’s name and address if the

commenter chooses to provide them) for

public inspection.

The EPC site will be available on the

FDIC’s home page at http://

www.fdic.gov. You will be able to

provide comments directly on any of the

sections of the proposed regulation as

well as the specific questions that have

been asked in the preceding

Supplementary Information section.

You will also be able to view the

regulation and Supplementary

Information sections that related to your

comments directly on the site. Because

the GLB Act requires promulgation of

this regulation, the FDIC encourages you

to provide written comments in the

spaces provided. Written comments

enable the FDIC to thoughtfully

consider possible changes to the

proposed regulation.

The FDIC is also interested in your

feedback on the EPC site. We have

provided a space for you to comment on

the site itself. Answers to this question

will help the FDIC evaluate the EPC site

for use in future rulemaking.

At the conclusion of the EPC site you

will have an opportunity to provide us

with your name, indicate whether you

are an individual, insured depository

institution, financial holding company,

community-based organization, trade

association, government agency, or

other, and provide the name of the

organization you represent, if

applicable. Whether you choose to

respond to these questions is entirely up

to you. Any responses received may

help the FDIC to better understand the

public comments it receives.

IX. Unfunded Mandates Act of 1995

OCC: 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 proposed rule would not apply to

state, local or tribal governments.

Although the proposed rule would

apply to insured depository institutions,

affiliates, and nongovernmental entities

and persons, OCC 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. Many of the

proposed provisions closely follow the

requirements of Section 711 of the

GLBA. Moreover, the proposal contains

regulatory options designed to minimize

costs and burdens. Therefore, the OCC

has determined that this proposed 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, the OCC has not prepared

a budgetary impact statement or

specifically addressed the regulatory

alternatives considered.

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31985

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 proposed rule would not apply to

state, local or tribal governments.

Although the proposed rule would

apply to insured depository institutions,

affiliates, and nongovernmental entities

and persons, 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. Many of the

proposed provisions closely follow the

requirements of section 711 of the GLB

Act. Moreover, OTS has exercised its

discretion, to the extent possible, to

propose regulatory options to minimize

costs and burdens. Therefore, the OTS

has determined that this proposed 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, the OTS has not prepared

a budgetary impact statement or

specifically addressed the regulatory

alternatives considered.

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

association.

Office of the Comptroller of the

Currency

12 CFR Chapter I

Authority and Issuance

For the reasons set out in the joint

preamble, the OCC proposes to amend

title 12, chapter I, of the Code of Federal

Regulations by adding a new part 35 to

read as follows:

PART 35—DISCLOSURE AND

REPORTING OF CRA RELATED

AGREEMENTS

Sec.

35.1 Purpose and scope.

35.2 Definition of covered agreement.

35.3 Related agreements considered a single

agreement.

35.4 Disclosure of covered agreements.

35.5 Annual reports.

35.6 Release of information under FOIA.

35.7 Compliance provisions.

35.8 Other definitions and rules of

construction.

Authority: 12 U.S.C. 1831y.

§ 35.1 Purpose and scope.

(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,

and 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) The provisions of this part are

enforced by the OCC with respect to

national banks and their subsidiaries.

§ 35.2 Definition of covered agreement.

(a) General definition. A covered

agreement is any contract, arrangement,

or understanding (whether or not legally

binding) that meets all of the following

criteria:

(1) The agreement is in writing.

(2) The parties to the agreement

include:

(i) An insured depository institution

or an affiliate of an insured depository

institution; and

(ii) A nongovernmental entity or

person (referred to hereafter as a

person).

(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 paragraph (c) of this section.

(b) Agreements that are not covered

agreements— (1) Certain loans. A

covered agreement does not include:

(i) Any individual mortgage loan; or

(ii) Any specific contract or

commitment for a loan or extension of

credit to individuals, businesses, farms,

or other entities if:

(A) The funds are loaned at rates not

substantially below market rates; and

(B) The purpose of the loan or

extension of credit does not include any

re-lending of the borrowed funds to

third parties.

(2) Agreements where there has not

been a CRA contact—(i)General. A

covered agreement does not include any

agreement entered into by an insured

depository institution or affiliate of an

insured depository institution with a

person who has not commented on,

testified about, or discussed with the

institution, or otherwise contacted the

institution, concerning the CRA.

(ii) Examples of CRA contact. The

following are examples of CRA contacts.

These examples are not exclusive and

other actions by a person may also make

the exemption in paragraph (b)(2)(i) of

this section unavailable. If a person

engages in any of the following actions

and subsequently enters into an

agreement with the insured depository

institution or any affiliate of the

institution, the agreement is not exempt

under paragraph (b)(2)(i) of this section.

(A) CRA contact with a Federal

banking agency. (1) The person submits

a written comment to a Federal banking

agency that discusses the record of

performance or future performance

under the CRA of an insured depository

institution or any CRA affiliate of the

institution.

(2) The person provides oral

testimony or comments to a Federal

banking agency concerning the record of

performance or future performance

under the CRA of an insured depository

institution or any CRA affiliate of the

institution.

(B) CRA contact with insured

depository institution or affiliate. (1)

The person has a discussion with, or

otherwise contacts, an insured

31986 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

depository institution or any affiliate of

the institution about providing (or

refraining from providing) written or

oral comments or testimony to any

Federal banking agency concerning the

record of performance or future

performance under the CRA of the

institution or any CRA affiliate of the

institution.

(2) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution about providing (or

refraining from providing) written

comments to the institution that must be

included in the institution’s CRA public

file.

(3) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning the CRA

rating of the institution, or the CRA

record of performance of the institution

or any CRA affiliate of the institution.

(4) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning actions that

should be taken to improve the CRA

performance of the institution or any

CRA affiliate of the institution.

(5) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning any

obligation or responsibility that the

institution or any CRA affiliate of the

institution may have to meet the

banking needs of its community and the

discussion or contact occurs while the

institution or any affiliate has an

application for a deposit facility

pending at a Federal banking agency or

is undergoing a publicly announced

CRA performance examination.

(iii) Examples of actions that are not

CRA contacts. The following are

examples of actions that are not CRA

contacts. The actions described in these

examples would not, by themselves,

cause the exemption in paragraph

(b)(2)(i) of this section to be unavailable.

These examples are not exclusive.

(A) A person provides comments or

testimony concerning an insured

depository institution or affiliate to a

Federal banking agency in response to a

direct request by the agency for

comments or testimony from that

person. 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 by, an

insured depository institution or an

application by a company to acquire an

insured depository institution.

(B) A person 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 or affiliates or transactions

involving an application for a deposit

facility is not considered a widely

attended conference or seminar.

(C) A person sends a similar

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.

(D) A person sends a general offering

circular to financial institutions offering

to sell a portfolio of loans. An insured

depository institution that receives the

offering circular discusses with the

person whether the loans are in the

institution’s local community. No

reference to the CRA or the institution’s

CRA performance is made in the

offering circular or in the discussions of

the parties.

(c) Fulfillment of the CRA—(1)

General. Fulfillment of the CRA means

the list of factors that the Federal

banking agencies have determined have

a material impact on an agency’s

decision:

(i) To approve or disapprove an

application for a deposit facility (as

defined in section 803 of the CRA (12

U.S.C. 2902)); or

(ii) To assign a rating to an insured

depository institution under section 807

of the CRA (12 U.S.C. 2906).

(2) List of factors. The list of factors

referred to in paragraph (c)(1) of this

section means the performance of any of

the following activities by an insured

depository institution or CRA affiliate

that is a party to the agreement or that

is an affiliate of a party to the agreement

or by any person that is a party to the

agreement:

(i) Providing or refraining from

providing written or oral comments or

testimony to any Federal banking

agency concerning the record of

performance or future 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;

(ii) Home-purchase, homeimprovement, small business, small

farm, community development, and

consumer lending, as described in

§ 25.22, including loan purchases, loan

commitments, and letters of credit;

(iii) Making investments, deposits, or

grants, or acquiring membership shares,

that have as their primary purpose

community development, as described

in § 25.23;

(iv) Delivering retail banking services,

as described in § 25.24(d);

(v) Providing community

development services, as described in

§ 25.24(e);

(vi) 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 § 25.25(c);

(vii) In the case of a small insured

depository institution, any lending or

other activity described in § 25.26(a); or

(viii) 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 § 25.27(f).

(d) Agreements relating to activities of

CRA affiliates. An insured depository

institution or affiliate that is a party to

a covered agreement that concerns the

performance of any activity of a CRA

affiliate described in paragraph (c) of

this section must notify each person that

is a party to the agreement that the

agreement concerns a CRA affiliate. The

insured depository institution or

affiliate must provide this notice prior

to the time the agreement is entered into

if the affiliate is a CRA affiliate at that

time, or within a reasonable time after

the affiliate becomes a CRA affiliate if

the affiliate is not a CRA affiliate at the

time the agreement is entered into.

(e) Disclosure and reporting of certain

existing agreements that become

covered agreements. An agreement that

concerns the performance of any

activity described in paragraph (c) of

this section by an affiliate may become

a covered agreement after it is entered

into if the affiliate subsequently

becomes a CRA affiliate. In that event,

the disclosure and reporting obligations

under §§ 35.4 and 35.5 begin on the date

that the agreement becomes a covered

agreement and do not apply to the

period prior to that date.

§ 35.3 Related agreements considered a

single agreement.

The following rules must be applied

in determining whether a written

contract, arrangement, or understanding

is a covered agreement under § 35.2.

(a) Contracts, arrangements, or

understandings entered into by same

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31987

parties. All written contracts,

arrangements, or understandings 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 contracts,

arrangements, or understandings:

(1) Are entered into with the same

person;

(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 person is a

party to each contract.

§ 35.4 Disclosure of covered agreements.

(a) Effective 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.

(i) Each person and each insured

depository institution or affiliate that

enters into a covered agreement must

make a complete copy of the covered

agreement available to any individual or

entity upon request.

(ii) In disclosing a covered agreement

to the public under paragraph (b)(1)(i) of

this section, a person, insured

depository institution, or affiliate may

withhold from disclosure only those

portions of an agreement that the

relevant supervisory agency determines

are exempt from disclosure under the

Freedom of Information Act (5 U.S.C.

552 et seq.).

(2) Duration of obligation. The

obligation to disclose a covered

agreement terminates 12 months after

the end of the term of the agreement.

(3) Reasonable copy and mailing fees.

Each person 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.

(4) Use of CRA public file by insured

depository institution. 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 and making the

agreement available in accordance with

the procedures set forth in § 35.43.

(c) Disclosure of covered agreements

to the relevant supervisory agency—(1)

Disclosure by person. Each person that

is a party to a covered agreement must

provide a complete copy of the

agreement to the relevant supervisory

agency within 30 days of receiving a

request from the agency for the

agreement. This obligation terminates

12 months after the end of the term of

the covered agreement.

(2) Disclosure by insured depository

institution or affiliate—(i) Filing with

the relevant supervisory agency. Each

insured depository institution or

affiliate that is a party to a covered

agreement must provide a copy of the

agreement to each relevant supervisory

agency within 30 days after the date the

insured depository institution or

affiliate enters into the agreement.

(ii) Joint filings. In the event that two

or more insured depository institutions

or affiliates are parties to a covered

agreement, the insured depository

institution(s) and affiliate(s) may jointly

file a copy of the covered agreement

with each relevant supervisory agency.

Any joint filing must identify the

insured depository institution(s) and

affiliate(s) for whom the covered

agreement is being filed.

(d) Relevant supervisory agency. For

purposes of this section and § 35.5, 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.

§ 35.5 Annual reports.

(a) Effective date. This section applies

only to covered agreements entered into

on or after May 12, 2000.

(b) Annual report required. Each

person 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) General. An annual

report under this section must be filed

with each relevant supervisory agency

for:

(i) The fiscal year in which the parties

enter into the covered agreement; and

(ii) Each fiscal year during the term of

the covered agreement.

(2) Exception for person that has not

received any funds or resources. A

person is not required to file an annual

report for a covered agreement for any

fiscal year during the term of the

agreement in which the person did not

receive any funds or other resources

under the agreement.

(d) Annual reports filed by person—

(1) General. The annual report filed by

a person under this section must

include the following:

(i) The name and mailing address of

the person 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) The information required by

paragraphs (d)(2) and (d)(3) of this

section concerning the use of funds

received under the covered agreement.

(2) Reporting for funds or resources

allocated and used for a specific

purpose. For funds or other resources

that the person received during the

fiscal year under the covered agreement

and allocated and used for a specific

purpose during the fiscal year, the

annual report must:

(i) Describe each specific purpose for

which the funds or resources were used

during the fiscal year; and (ii) State the

amount of funds or resources used

during the fiscal year for each specific

purpose.

(3) Funds or resources used for other

purposes. For all funds or resources that

the person received during the fiscal

year under the covered agreement and

did not use for a specific purpose, the

annual report must:

(i) State the amount received during

the fiscal year; and

(ii) Provide a detailed, itemized list of

how the funds or resources 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 or uses.

(4) Use of other reports. The annual

report filed by a person may consist of,

or incorporate, a report prepared for any

other purpose, such as an Internal

Revenue Service form, a state tax form,

31988 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

a report to members or shareholders,

financial statements, or other report, so

long as the annual report contains all of

the information required by this

paragraph (d).

(5) Consolidated reports permitted. A

person that is a party to five 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 required to be

reported under paragraph (d)(1)(iii),

(d)(2), and (d)(3) of this section may be

reported on an aggregate basis for all

covered agreements.

(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

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 a person

under paragraph (d) of this section.

(2) Consolidated reports permitted—

(i) Party to large number of agreements.

An insured depository institution or

affiliate that is a party to five or more

covered agreements may file a single

consolidated annual report with each

relevant supervisory agency covering 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 paragraph

(e)(1)(iii), (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

person. (i) A person 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 five months following the

end of the person’s fiscal year:

(A) A copy of the person’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

person.

(ii) An insured depository institution

or affiliate that receives an annual report

from a person pursuant to paragraph

(f)(2)(i) of this section must file the

report with the relevant supervisory

agency or agencies on behalf of the

person within 30 days.

§ 35.6 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 (12 CFR part 4). 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.

§ 35.7 Compliance provisions.

(a) Willful failure to comply with

disclosure and reporting obligations. (1)

If the OCC determines that a person has

willfully failed to comply in a material

way with §§ 35.4 or 35.5, the OCC will

notify the person in writing of that

determination and provide the person a

period of 90 days (or such longer period

as the OCC finds to be reasonable under

the circumstances) to comply.

(2) If the person does not comply

within the time period established by

the OCC, the agreement shall thereafter

be unenforceable by that person 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 person by operation

of section 48 of the Federal Deposit

Insurance Act (12 U.S.C. 1831y) in

identifying a successor to assume the

person’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 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 §§ 35.4 or 35.5 will

not subject the reporting party to any

penalty.

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31989

(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.

§ 35.8 Other definitions and rules of

construction.

(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 § 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 person that is a party to the

agreement makes a CRA contact, as

described in § 35.2(b)(2).

(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.

(d) CRA public file. For purposes of

this part, ‘‘CRA public file’’ means the

public file maintained by an insured

depository institution and described in

§ 25.43.

(e) 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).

(f) Fiscal year. (1) The fiscal year for

a person that does not have a fiscal year

shall be the calendar year;

(2) Any person, 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.

(g) 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).

(h) 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.

(i) Party. The term ‘‘party’’ with

respect to a covered agreement means

each person and each insured

depository institution or affiliate that

entered into the agreement.

(j) Person. For purposes of this part,

a ‘‘person’’ is any nongovernmental

entity or person.

(k) Term of agreement. An agreement

that does not by its terms establish a

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 appropriate Federal banking agency

otherwise notifies each party in writing.

Dated: May 10, 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 proposed

to be 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 Related agreements considered a

single agreement.

207.4 Disclosure of covered agreements.

207.5 Annual reports.

207.6 Release of information under FOIA.

207.7 Compliance provisions.

207.8 Other definitions and rules of

construction used in this part.

Authority: 12 U.S.C. 1831y.

§ 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,

and 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) The provisions of this part are

enforced by the Board with respect to

state member banks, bank holding

companies, and affiliates of bank

holding companies, other than banks,

savings associations and subsidiaries of

banks and savings associations.

§ 207.2 Definition of covered agreement.

(a) General definition. A covered

agreement is any contract, arrangement,

or understanding (whether or not legally

binding) that meets all of the following

criteria—

(1) The agreement is in writing.

(2) The parties to the agreement

include—

(i) An insured depository institution

or an affiliate of an insured depository

institution; and

(ii) A nongovernmental entity or

person (referred to hereafter as a

person).

(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 paragraph (c) of this section.

31990 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

(b) Agreements that are not covered

agreements—(1) Certain loans. A

covered agreement does not include—

(i) Any individual mortgage loan; or

(ii) Any specific contract or

commitment for a loan or extension of

credit to individuals, businesses, farms,

or other entities if—

(A) The funds are loaned at rates not

substantially below market rates; and

(B) The purpose of the loan or

extension of credit does not include any

re-lending of the borrowed funds to

third parties.

(2) Agreements where there has not

been a CRA contact. (i) General. A

covered agreement does not include any

agreement entered into by an insured

depository institution or affiliate of an

insured depository institution with a

person who has not commented on,

testified about, or discussed with the

institution, or otherwise contacted the

institution, concerning the CRA.

(ii) Examples of CRA contact. The

following are examples of CRA contacts.

These examples are not exclusive and

other actions by a person may also make

the exemption in paragraph (b)(2)(i) of

this section unavailable. If a person

engages in any of the following actions

and subsequently enters into an

agreement with the insured depository

institution or any affiliate of the

institution, the agreement is not exempt

under paragraph (b)(2)(i) of this section.

(A) CRA contact with a Federal

banking agency. (1) The person submits

a written comment to a Federal banking

agency that discusses the record of

performance or future performance

under the CRA of an insured depository

institution or any CRA affiliate of the

institution.

(2) The person provides oral

testimony or comments to a Federal

banking agency concerning the record of

performance or future performance

under the CRA of an insured depository

institution or any CRA affiliate of the

institution.

(B) CRA contact with insured

depository institution or affiliate. (1)

The person has a discussion with, or

otherwise contacts, an insured

depository institution or any affiliate of

the institution about providing (or

refraining from providing) written or

oral comments or testimony to any

Federal banking agency concerning the

record of performance or future

performance under the CRA of the

institution or any CRA affiliate of the

institution.

(2) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution about providing (or

refraining from providing) written

comments to the institution that must be

included in the institution’s CRA public

file.

(3) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning the CRA

rating of the institution, or the CRA

record of performance of the institution

or any CRA affiliate of the institution.

(4) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning actions that

should be taken to improve the CRA

performance of the institution or any

CRA affiliate of the institution.

(5) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning any

obligation or responsibility that the

institution or any CRA affiliate of the

institution may have to meet the

banking needs of its community and the

discussion or contact occurs while the

institution or any affiliate has an

application for a deposit facility

pending at a Federal banking agency or

is undergoing a publicly announced

CRA performance examination.

(iii) Examples of actions that are not

CRA contacts. The following are

examples of actions that are not CRA

contacts. The actions described in these

examples would not, by themselves,

cause the exemption in paragraph

(b)(2)(i) of this section to be unavailable.

These examples are not exclusive.

(A) A person provides comments or

testimony concerning an insured

depository institution or affiliate to a

Federal banking agency in response to a

direct request by the agency for

comments or testimony from that

person. 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 by, an

insured depository institution or an

application by a company to acquire an

insured depository institution.

(B) A person 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 or affiliates or transactions

involving an application for a deposit

facility is not considered a widely

attended conference or seminar.

(C) A person sends a similar

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.

(D) A person sends a general offering

circular to financial institutions offering

to sell a portfolio of loans. An insured

depository institution that receives the

offering circular discusses with the

person whether the loans are in the

institution’s local community. No

reference to the CRA or the institution’s

CRA performance is made in the

offering circular or in the discussions of

the parties.

(c) Fulfillment of the CRA—(1)

General. Fulfillment of the CRA means

the list of factors that the Federal

banking agencies have determined have

a material impact on an agency’s

decision—

(i) To approve or disapprove an

application for a deposit facility (as

defined in section 803 of the CRA (12

U.S.C. 2902)); or

(ii) To assign a rating to an insured

depository institution under section 807

of the CRA (12 U.S.C. 2906).

(2) List of factors. The list of factors

referred to in paragraph (c)(1) of this

section means the performance of any of

the following activities by an insured

depository institution or CRA affiliate

that is a party to the agreement or that

is an affiliate of a party to the agreement

or by any person that is a party to the

agreement—

(i) Providing or refraining from

providing written or oral comments or

testimony to any Federal banking

agency concerning the record of

performance or future 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;

(ii) Home-purchase, homeimprovement, small business, small

farm, community development, and

consumer lending, as described in

§ 228.22 of Regulation BB (12 CFR

228.22), including loan purchases, loan

commitments, and letters of credit;

(iii) Making investments, deposits, or

grants, or acquiring membership shares,

that have as their primary purpose

community development, as described

in § 228.23 of Regulation BB (12 CFR

228.23);

(iv) Delivering retail banking services,

as described in § 228.24(d) of Regulation

BB (12 CFR 228.24(d));

(v) Providing community

development services, as described in

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31991

§ 228.24(e) of Regulation BB (12 CFR

228.24(e));

(vi) 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 § 228.25(c) of

Regulation BB (12 CFR 228.25(c));

(vii) In the case of a small insured

depository institution, any lending or

other activity described in § 228.26(a) of

Regulation BB (12 CFR 228.26(a)); or

(viii) 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 § 228.27(f) of Regulation

BB (12 CFR 228.27(f)).

(d) Agreements relating to activities of

CRA affiliates. An insured depository

institution or affiliate that is a party to

a covered agreement that concerns the

performance of any activity of a CRA

affiliate described in paragraph (c) of

this section must notify each person that

is a party to the agreement that the

agreement concerns a CRA affiliate. The

insured depository institution or

affiliate must provide this notice prior

to the time the agreement is entered into

if the affiliate is a CRA affiliate at that

time, or within a reasonable time after

the affiliate becomes a CRA affiliate if

the affiliate is not a CRA affiliate at the

time the agreement is entered into.

(e) Disclosure and reporting of certain

existing agreements that become

covered agreements. An agreement that

concerns the performance of any

activity described in paragraph (c) of

this section by an affiliate may become

a covered agreement after it is entered

into if the affiliate subsequently

becomes a CRA affiliate. In that event,

the disclosure and reporting obligations

under §§ 207.4 and 207.5 begin on the

date that the agreement becomes a

covered agreement and do not apply to

the period prior to that date.

§ 207.3 Related agreements considered a

single agreement.

The following rules must be applied

in determining whether a written

contract, arrangement, or understanding

is a covered agreement under § 207.2.

(a) Contracts, arrangements, or

understandings entered into by same

parties. All written contracts,

arrangements, or understandings 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 contracts,

arrangements, or understandings—

(1) Are entered into with the same

person;

(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 person is a

party to each contract.

§ 207.4 Disclosure of covered agreements.

(a) Effective 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.

(i) Each person and each insured

depository institution or affiliate that

enters into a covered agreement must

make a complete copy of the covered

agreement available to any individual or

entity upon request.

(ii) In disclosing a covered agreement

to the public under paragraph (b)(1)(i) of

this section, a person, insured

depository institution, or affiliate may

withhold from disclosure only those

portions of an agreement that the

relevant supervisory agency determines

are exempt from disclosure under the

Freedom of Information Act (5 U.S.C.

552 et seq.).

(2) Duration of obligation. The

obligation to disclose a covered

agreement terminates 12 months after

the end of the term of the agreement.

(3) Reasonable copy and mailing fees.

Each person 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.

(4) Use of CRA public file by insured

depository institution. 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 and making the

agreement available in accordance with

the procedures set forth in section

§ 228.43 of Regulation BB (12 CFR

228.43).

(c) Disclosure of covered agreements

to the relevant supervisory agency—(1)

Disclosure by person. Each person that

is a party to a covered agreement must

provide a complete copy of the

agreement to the relevant supervisory

agency within 30 days of receiving a

request from the agency for the

agreement. This obligation terminates

12 months after the end of the term of

the covered agreement.

(2) Disclosure by insured depository

institution or affiliate. (i) Filing with the

relevant supervisory agency. Each

insured depository institution or

affiliate that is a party to a covered

agreement must provide a copy of the

agreement to each relevant supervisory

agency within 30 days after the date the

insured depository institution or

affiliate enters into the agreement.

(ii) Joint filings. In the event that two

or more insured depository institutions

or affiliates are parties to a covered

agreement, the insured depository

institution(s) and affiliate(s) may jointly

file a copy of the covered agreement

with each relevant supervisory agency.

Any joint filing must identify the

insured depository institution(s) and

affiliate(s) for whom the covered

agreement is being filed.

(d) Relevant supervisory agency. For

purposes of this section and § 207.5, 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.

§ 207.5 Annual reports.

(a) Effective date. This section applies

only to covered agreements entered into

on or after May 12, 2000.

(b) Annual report required. Each

person 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) General. An annual

report under this section must be filed

with each relevant supervisory agency

for—

(i) The fiscal year in which the parties

enter into the covered agreement; and

(ii) Each fiscal year during the term of

the covered agreement.

(2) Exception for person that has not

received any funds or resources. A

person is not required to file an annual

report for a covered agreement for any

31992 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

fiscal year during the term of the

agreement in which the person did not

receive any funds or other resources

under the agreement.

(d) Annual reports filed by person—

(1) General. The annual report filed by

a person under this section must

include the following—

(i) The name and mailing address of

the person 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) The information required by

paragraphs (d)(2) and (d)(3) of this

section concerning the use of funds

received under the covered agreement.

(2) Reporting for funds or resources

allocated and used for a specific

purpose. For funds or other resources

that the person received during the

fiscal year under the covered agreement

and allocated and used for a specific

purpose during the fiscal year, the

annual report must—

(i) Describe each specific purpose for

which the funds or resources were used

during the fiscal year; and

(ii) State the amount of funds or

resources used during the fiscal year for

each specific purpose.

(3) Funds or resources used for other

purposes. For all funds or resources that

the person received during the fiscal

year under the covered agreement and

did not use for a specific purpose, the

annual report must—

(i) State the amount received during

the fiscal year; and

(ii) Provide a detailed, itemized list of

how the funds or resources 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 or uses.

(4) Use of other reports. The annual

report filed by a person may consist of,

or incorporate, a report prepared for any

other purpose, such as an Internal

Revenue Service form, a state tax form,

a report to members or shareholders,

financial statements, or other report, so

long as the annual report contains all of

the information required by this

paragraph (d).

(5) Consolidated reports permitted. A

person that is a party to five 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 required to be

reported under paragraph (d)(1)(iii),

(d)(2), and (d)(3) of this section may be

reported on an aggregate basis for all

covered agreements.

(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

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 a person

under paragraph (d) of this section.

(2) Consolidated reports permitted. (i)

Party to large number of agreements. An

insured depository institution or

affiliate that is a party to five or more

covered agreements may file a single

consolidated annual report with each

relevant supervisory agency covering 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)(iii), (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

person. (i) A person 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 five months following the

end of the person’s fiscal year—

(A) A copy of the person’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

person.

(ii) An insured depository institution

or affiliate that receives an annual report

from a person pursuant to paragraph

(f)(2)(i) of this section must file the

report with the relevant supervisory

agency or agencies on behalf of the

person within 30 days.

§ 207.6 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

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31993

confidential treatment of proprietary

and confidential information in a

covered agreement or an annual report

under those procedures.

§ 207.7 Compliance provisions.

(a) Willful failure to comply with

disclosure and reporting obligations. (1)

If the Board determines that a person

has willfully failed to comply in a

material way with §§ 207.4 or 207.5, the

Board will notify the person in writing

of that determination and provide the

person a period of 90 days (or such

longer period as the Board finds to be

reasonable under the circumstances) to

comply.

(2) If the person does not comply

within the time period established by

the Board, the agreement shall thereafter

be unenforceable by that person 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 person by operation

of section 48 of the Federal Deposit

Insurance Act (12 U.S.C. 1831y) in

identifying a successor to assume the

person’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 §§ 207.4 or 207.5

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.

§ 207.8 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 § 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 person that is a party to the

agreement makes a CRA contact, as

described in § 207.2(b)(2).

(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.

(d) CRA public file. For purposes of

this part, ‘‘CRA public file’’ means the

public file maintained by an insured

depository institution and described in

§ 228.43 of Regulation BB (12 CFR

228.43).

(e) 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).

(f) Fiscal year. (1) The fiscal year for

a person that does not have a fiscal year

shall be the calendar year;

(2) Any person, 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.

(g) 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).

(h) 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.

(i) Party. The term ‘‘party’’ with

respect to a covered agreement means

each person and each insured

depository institution or affiliate that

entered into the agreement.

(j) Person. For purposes of this part,

a ‘‘person’’ is any nongovernmental

entity or person.

(k) Term of agreement. An agreement

that does not by its terms establish a

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 appropriate Federal banking agency

otherwise notifies each party in writing.

By order of the Board of Governors of the

Federal Reserve System, May 10, 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 proposed

to be 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 Related agreements considered a

single agreement.

346.4 Disclosure of covered agreements.

346.5 Annual reports.

346.6 Release of information under FOIA.

346.7 Compliance provisions.

31994 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

346.8 Other definitions and rules of

construction used in this part.

Authority: 12 U.S.C. 1831y.

§ 346.1 Purpose and scope of this part.

(a) General. This part implements

section 711 of the Gramm-Leach-Bliley

Act, Pub. L. 106–102, section 711, 113

Stat. 1465 (1999) (12 U.S.C. 1831y). That

section requires any nongovernmental

entity or person, insured depository

institution, and 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) The provisions of this part are

enforced by the FDIC with respect to a

state nonmember insured bank or a

foreign bank having an insured branch.

§ 346.2 Definition of covered agreement.

(a) General definition. A covered

agreement is any contract, arrangement,

or understanding (whether or not legally

binding) that meets all of the following

criteria:

(1) The agreement is in writing.

(2) The parties to the agreement

include:

(i) An insured depository institution

or an affiliate of an insured depository

institution; and

(ii) A nongovernmental entity or

person (referred to hereafter as a

person).

(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 paragraph (c) of this section.

(b) Agreements that are not covered

agreements—(1) Certain loans. A

covered agreement does not include:

(i) Any individual mortgage loan; or

(ii) Any specific contract or

commitment for a loan or extension of

credit to individuals, businesses, farms,

or other entities if:

(A) The funds are loaned at rates not

substantially below market rates; and

(B) The purpose of the loan or

extension of credit does not include any

re-lending of the borrowed funds to

third parties.

(2) Agreements where there has not

been a CRA contact. (i) General. A

covered agreement does not include any

agreement entered into by an insured

depository institution or affiliate of an

insured depository institution with a

person who has not commented on,

testified about, or discussed with the

institution, or otherwise contacted the

institution, concerning the CRA.

(ii) Examples of CRA contact. The

following are examples of CRA contacts.

These examples are not exclusive and

other actions by a person may also make

the exemption in paragraph (b)(2)(i) of

this section unavailable. If a person

engages in any of the following actions

and subsequently enters into an

agreement with the insured depository

institution or any affiliate of the

institution, the agreement is not exempt

under paragraph (b)(2)(i) of this section.

(A) CRA contact with a federal

banking agency. (1) The person submits

a written comment to a federal banking

agency that discusses the record of

performance or future performance

under the CRA of an insured depository

institution or any CRA affiliate of the

institution.

(2) The person provides oral

testimony or comments to a federal

banking agency concerning the record of

performance or future performance

under the CRA of an insured depository

institution or any CRA affiliate of the

institution.

(B) CRA contact with insured

depository institution or affiliate. (1)

The person has a discussion with, or

otherwise contacts, an insured

depository institution or any affiliate of

the institution about providing (or

refraining from providing) written or

oral comments or testimony to any

federal banking agency concerning the

record of performance or future

performance under the CRA of the

institution or any CRA affiliate of the

institution.

(2) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution about providing (or

refraining from providing) written

comments to the institution that must be

included in the institution’s CRA public

file.

(3) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning the CRA

rating of the institution, or the CRA

record of performance of the institution

or any CRA affiliate of the institution.

(4) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning actions that

should be taken to improve the CRA

performance of the institution or any

CRA affiliate of the institution.

(5) The person has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning any

obligation or responsibility that the

institution or any CRA affiliate of the

institution may have to meet the

banking needs of its community and the

discussion or contact occurs while the

institution or any affiliate has an

application for a deposit facility

pending at a federal banking agency or

is undergoing a publicly announced

CRA performance examination.

(iii) Examples of actions that are not

CRA contacts. The following are

examples of actions that are not CRA

contacts. The actions described in these

examples would not, by themselves,

cause the exemption in paragraph

(b)(2)(i) of this section to be unavailable.

These examples are not exclusive.

(A) A person provides comments or

testimony concerning an insured

depository institution or affiliate to a

federal banking agency in response to a

direct request by the agency for

comments or testimony from that

person. 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 by, an

insured depository institution or an

application by a company to acquire an

insured depository institution.

(B) A person 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 or affiliates or transactions

involving an application for a deposit

facility is not considered a widely

attended conference or seminar.

(C) A person sends a similar

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.

(D) A person sends a general offering

circular to financial institutions offering

to sell a portfolio of loans. An insured

depository institution that receives the

offering circular discusses with the

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31995

person whether the loans are in the

institution’s local community. No

reference to the CRA or the institution’s

CRA performance is made in the

offering circular or in the discussions of

the parties.

(c) Fulfillment of the CRA—(1)

General. Fulfillment of the CRA means

the list of factors that the federal

banking agencies have determined have

a material impact on an agency’s

decision:

(i) To approve or disapprove an

application for a deposit facility (as

defined in section 803 of the CRA (12

U.S.C. 2902)); or

(ii) To assign a rating to an insured

depository institution under section 807

of the CRA (12 U.S.C. 2906).

(2) List of factors. The list of factors

referred to in paragraph (c)(1) of this

section means the performance of any of

the following activities by an insured

depository institution or CRA affiliate

that is a party to the agreement or that

is an affiliate of a party to the agreement

or by any person that is a party to the

agreement:

(i) Providing or refraining from

providing written or oral comments or

testimony to any federal banking agency

concerning the record of performance or

future 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;

(ii) Home-purchase, homeimprovement, 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;

(iii) Making investments, deposits, or

grants, or acquiring membership shares,

that have as their primary purpose

community development, as described

in 12 CFR 345.23;

(iv) Delivering retail banking services,

as described in 12 CFR 345.24(d);

(v) Providing community

development services, as described in

12 CFR 345.24(e);

(vi) 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);

(vii) In the case of a small insured

depository institution, any lending or

other activity described in 12 CFR

345.26(a); or

(viii) 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).

(d) Agreements relating to activities of

CRA affiliates. An insured depository

institution or affiliate that is a party to

a covered agreement that concerns the

performance of any activity of a CRA

affiliate described in paragraph (c) of

this section must notify each person that

is a party to the agreement that the

agreement concerns a CRA affiliate. The

insured depository institution or

affiliate must provide this notice prior

to the time the agreement is entered into

if the affiliate is a CRA affiliate at that

time, or within a reasonable time after

the affiliate becomes a CRA affiliate if

the affiliate is not a CRA affiliate at the

time the agreement is entered into.

(e) Disclosure and reporting of certain

existing agreements that become

covered agreements. An agreement that

concerns the performance of any

activity described in paragraph (c) of

this section by an affiliate may become

a covered agreement after it is entered

into if the affiliate subsequently

becomes a CRA affiliate. In that event,

the disclosure and reporting obligations

under §§ 346.4 and 346.5 begin on the

date that the agreement becomes a

covered agreement and do not apply to

the period prior to that date.

§ 346.3 Related agreements considered a

single agreement.

The following rules must be applied

in determining whether a written

contract, arrangement, or understanding

is a covered agreement under § 346.2.

(a) Contracts, arrangements, or

understandings entered into by same

parties. All written contracts,

arrangements, or understandings 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 contracts,

arrangements, or understandings:

(1) Are entered into with the same

person;

(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 person is a

party to each contract.

§ 346.4 Disclosure of covered agreements.

(a) Effective 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.

(i) Each person and each insured

depository institution or affiliate that

enters into a covered agreement must

make a complete copy of the covered

agreement available to any individual or

entity upon request.

(ii) In disclosing a covered agreement

to the public under paragraph (b)(1)(i) of

this section, a person, insured

depository institution, or affiliate may

withhold from disclosure only those

portions of an agreement that the

relevant supervisory agency determines

are exempt from disclosure under the

Freedom of Information Act (5 U.S.C.

552 et seq.).

(2) Duration of obligation. The

obligation to disclose a covered

agreement terminates 12 months after

the end of the term of the agreement.

(3) Reasonable copy and mailing fees.

Each person 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.

(4) Use of CRA public file by insured

depository institution. 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 and making the

agreement available in accordance with

the procedures set forth in 12 CFR

345.43.

(c) Disclosure of covered agreements

to the relevant supervisory agency—(1)

Disclosure by person. Each person that

is a party to a covered agreement must

provide a complete copy of the

agreement to the relevant supervisory

agency within 30 days of receiving a

request from the agency for the

agreement. This obligation terminates

12 months after the end of the term of

the covered agreement.

(2) Disclosure by insured depository

institution or affiliate. (i) Filing with the

relevant supervisory agency. Each

insured depository institution or

affiliate that is a party to a covered

agreement must provide a copy of the

agreement to each relevant supervisory

agency within 30 days after the date the

insured depository institution or

affiliate enters into the agreement.

(ii) Joint filings. In the event that two

or more insured depository institutions

or affiliates are parties to a covered

agreement, the insured depository

institution(s) and affiliate(s) may jointly

31996 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

file a copy of the covered agreement

with each relevant supervisory agency.

Any joint filing must identify the

insured depository institution(s) and

affiliate(s) for whom the covered

agreement is being filed.

(d) Relevant supervisory agency. For

purposes of this section and § 346.5, 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.

§ 346.5 Annual reports.

(a) Effective date. This section applies

only to covered agreements entered into

on or after May 12, 2000.

(b) Annual report required. Each

person 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) General. An annual

report under this section must be filed

with each relevant supervisory agency

for:

(i) The fiscal year in which the parties

enter into the covered agreement; and

(ii) Each fiscal year during the term of

the covered agreement.

(2) Exception for person that has not

received any funds or resources. A

person is not required to file an annual

report for a covered agreement for any

fiscal year during the term of the

agreement in which the person did not

receive any funds or other resources

under the agreement.

(d) Annual reports filed by person—

(1) General. The annual report filed by

a person under this section must

include the following:

(i) The name and mailing address of

the person 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) The information required by

paragraphs (d)(2) and (d)(3) of this

section concerning the use of funds

received under the covered agreement.

(2) Reporting for funds or resources

allocated and used for a specific

purpose. For funds or other resources

that the person received during the

fiscal year under the covered agreement

and allocated and used for a specific

purpose during the fiscal year, the

annual report must:

(i) Describe each specific purpose for

which the funds or resources were used

during the fiscal year; and

(ii) State the amount of funds or

resources used during the fiscal year for

each specific purpose.

(3) Funds or resources used for other

purposes. For all funds or resources that

the person received during the fiscal

year under the covered agreement and

did not use for a specific purpose, the

annual report must:

(i) State the amount received during

the fiscal year; and

(ii) Provide a detailed, itemized list of

how the funds or resources 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 or uses.

(4) Use of other reports. The annual

report filed by a person may consist of,

or incorporate, a report prepared for any

other purpose, such as an Internal

Revenue Service form, a state tax form,

a report to members or shareholders,

financial statements, or other report, so

long as the annual report contains all of

the information required by this

paragraph (d).

(5) Consolidated reports permitted. A

person that is a party to five 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 required to be

reported under paragraphs (d)(1)(iii),

(d)(2), and (d)(3) of this section may be

reported on an aggregate basis for all

covered agreements.

(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

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 a person

under paragraph (d) of this section.

(2) Consolidated reports permitted. (i)

Party to large number of agreements. An

insured depository institution or

affiliate that is a party to five or more

covered agreements may file a single

consolidated annual report with each

relevant supervisory agency covering 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.

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31997

(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)(iii), (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

person. (i) A person 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 five months following the

end of the person’s fiscal year:

(A) A copy of the person’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

person.

(ii) An insured depository institution

or affiliate that receives an annual report

from a person pursuant to paragraph

(f)(2)(i) of this section must file the

report with the relevant supervisory

agency or agencies on behalf of the

person within 30 days.

§ 346.6 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.

§ 346.7 Compliance provisions.

(a) Willful failure to comply with

disclosure and reporting obligations. (1)

If the FDIC determines that a person has

willfully failed to comply in a material

way with §§ 346.4 or 346.5, the FDIC

will notify the person in writing of that

determination and provide the person a

period of 90 days (or such longer period

as the FDIC finds to be reasonable under

the circumstances) to comply.

(2) If the person does not comply

within the time period established by

the FDIC, the agreement shall thereafter

be unenforceable by that person 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 person by operation

of section 48 of the Federal Deposit

Insurance Act (12 U.S.C. 1831y) in

identifying a successor to assume the

person’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 §§ 346.4 or 346.5

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.

§ 346.8 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 § 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 person that is a party to the

agreement makes a CRA contact, as

described in § 346.2(b)(2).

(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.

(d) CRA public file. For purposes of

this part, ‘‘CRA public file’’ means the

public file maintained by an insured

depository institution and described in

12 CFR 345.43.

(e) 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).

(f) Fiscal year. (1) The fiscal year for

a person that does not have a fiscal year

shall be the calendar year;

(2) Any person, 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.

(g) 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).

(h) 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,

31998 Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules

employee, or representative) of an entity

listed in paragraphs (h)(2)(i) through

(iii) of this section.

(i) Party. The term ‘‘party’’ with

respect to a covered agreement means

each person and each insured

depository institution or affiliate that

entered into the agreement.

(j) Person. For purposes of this part,

a ‘‘person’’ is any nongovernmental

entity or person.

(k) Term of agreement. An agreement

that does not by its terms establish a

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 appropriate federal banking agency

otherwise notifies each party in writing.

By order of the Board of Directors.

Federal Deposit Insurance Corporation.

Dated at Washington, DC, this 10th day of

May, 2000.

Robert E. Feldman,

Executive Secretary.

Department of the Treasury

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

For the reasons set out in the joint

preamble, OTS proposes to amend Title

12, Chapter V, of the Code of Federal

Regulations 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 Related agreements considered a

single agreement.

533.4 Disclosure of covered agreements.

533.5 Annual reports.

533.6 Release of information under FOIA.

533.7 Compliance provisions.

533.8 Other definitions and rules of

construction used in this part.

Authority: 12 U.S.C. 1462a, 1463, 1464,

1467a, and 1831y.

§ 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, insured depository institution,

and 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) The provisions of this part are

enforced by OTS with respect to savings

associations, savings and loan holding

companies, and companies that are

controlled by savings associations or

savings and loan holding companies.

§ 533.2 Definition of covered agreement.

(a) General definition. A covered

agreement is any contract, arrangement,

or understanding (whether or not legally

binding) that meets all of the following

criteria—

(1) The agreement is in writing.

(2) The parties to the agreement

include—

(i) An insured depository institution

or an affiliate of an insured depository

institution; and

(ii) A nongovernmental entity or

person (referred to as a NGEP).

(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 paragraph (c) of this section.

(b) Agreements that are not covered

agreements. (1) Certain loans. A covered

agreement does not include—

(i) Any individual mortgage loan; or

(ii) Any specific contract or

commitment for a loan or extension of

credit to individuals, businesses, farms,

or other entities if—

(A) The funds are loaned at rates not

substantially below market rates; and

(B) The purpose of the loan or

extension of credit does not include any

re-lending of the borrowed funds to

third parties.

(2) Agreements where there has not

been a CRA contact. (i) General. A

covered agreement does not include any

agreement entered into by an insured

depository institution or affiliate of an

insured depository institution with a

NGEP who has not commented on,

testified about, or discussed with the

institution, or otherwise contacted the

institution, concerning the CRA.

(ii) Examples of CRA contact. The

following are examples of CRA contacts.

These examples are not exclusive and

other actions by a NGEP may also make

the exemption in paragraph (b)(2)(i) of

this section unavailable. If a NGEP

engages in any of the following actions

and subsequently enters into an

agreement with the insured depository

institution or any affiliate of the

institution, the agreement is not exempt

under paragraph (b)(2)(i) of this section.

(A) CRA contact with a Federal

banking agency. (1) The NGEP submits

a written comment to a Federal banking

agency that discusses the record of

performance or future performance

under the CRA of an insured depository

institution or any CRA affiliate of the

institution.

(2) The NGEP provides oral testimony

or comments to a Federal banking

agency concerning the record of

performance or future performance

under the CRA of an insured depository

institution or any CRA affiliate of the

institution.

(B) CRA contact with insured

depository institution or affiliate. (1)

The NGEP has a discussion with, or

otherwise contacts, an insured

depository institution or any affiliate of

the institution about providing (or

refraining from providing) written or

oral comments or testimony to any

Federal banking agency concerning the

record of performance or future

performance under the CRA of the

institution or any CRA affiliate of the

institution.

(2) The NGEP has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution about providing (or

refraining from providing) written

comments to the institution that must be

included in the institution’s CRA public

file.

(3) The NGEP has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning the CRA

rating of the institution, or the CRA

record of performance of the institution

or any CRA affiliate of the institution.

(4) The NGEP has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning actions that

should be taken to improve the CRA

performance of the institution or any

CRA affiliate of the institution.

(5) The NGEP has a discussion with,

or otherwise contacts, an insured

depository institution or any affiliate of

the institution concerning any

obligation or responsibility that the

institution or any CRA affiliate of the

institution may have to meet the

banking needs of its community and the

discussion or contact occurs while the

Federal Register / Vol. 65, No. 98 / Friday, May 19, 2000 / Proposed Rules 31999

institution or any affiliate has an

application for a deposit facility

pending at a Federal banking agency or

is undergoing a publicly announced

CRA performance examination.

(iii) Examples of actions that are not

CRA contacts. The following are

examples of actions that are not CRA

contacts. The actions described in these

examples would not, by themselves,

cause the exemption in paragraph

(b)(2)(i) of this section to be unavailable.

These examples are not exclusive.

(A) A NGEP provides comments or

testimony concerning an insured

depository institution or affiliate to a

Federal banking agency 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 by, an

insured depository institution or an

application by a company to acquire an

insured depository institution.

(B) 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 or affiliates or transactions

involving an application for a deposit

facility is not considered a widely

attended conference or seminar.

(C) A NGEP sends a similar

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.

(D) A NGEP sends a general offering

circular to financial institutions offering

to sell a portfolio of loans. An insured

depository institution that receives the

offering circular discusses with the

NGEP whether the loans are in the

institution’s local community. No

reference to the CRA or the institution’s

CRA performance is made in the

offering circular or in the discussions of

the parties.

(c) Fulfillment of the CRA. (1)

General. Fulfillment of the CRA means

the list of factors that the Federal

banking agencies have determined have

a material impact on an agency’s

decision—

(i) To approve or disapprove an

application for a deposit facility (as

defined in section 803 of the CRA (12

U.S.C. 2902)); or (ii) To assign a rating

to an insured depository institution

under section 807 of the CRA (12 U.S.C.

2906).

(2) List of factors. The list of factors

referred to in paragraph (c)(1) of this

section means the performance of any of

the following activities by an insured

depository institution or CRA affiliate

that is a party to the agreement or that

is an affiliate of a party to the agreement

or by any NGEP that is a party to the

agreement—

(i) Providing or refraining from

providing written or oral comments or

testimony to any Federal banking

agency concerning the record of

performance or future 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;

(ii) Home-purchase, homeimprovement, small business, small

farm, community development, and

consumer lending, as described in

§ 563e.22 of this chapter, including loan

purchases, loan commitments, and

letters of credit;

(iii) Making investments, deposits, or

grants, or acquiring membership shares,

that have as their primary purpose

community development, as described

in § 563e.23 of this chapter;

(iv) Delivering retail banking services,

as described in § 563e.24(d) of this

chapter;

(v) Providing community

development services, as described in

§ 563e.24(e) of this chapter;

(vi) 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 § 563e.25(c) of

this chapter;

(vii) In the case of a small insured

depository institution, any lending or

other activity described in § 563e.26(a)

of this chapter; or

(viii) 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 § 563e.27(f) of this chapter.

(d) Agreements relating to activities of

CRA affiliates. An insured depository

institution or affiliate that is a party to

a covered agreement that concerns the

performance of any activity of a CRA

affiliate described in paragraph (c) of

this section must notify each NGEP that

is a party to the agreement that the

agreement concerns a CRA affiliate. The

insured depository institution or

affiliate must provide this notice prior

to the time the agreement is entered into

if the affiliate is a CRA affiliate at that

time, or within a reasonable time after

the affiliate becomes a CRA affiliate if

the affiliate is not a CRA affiliate at the

time the agreement is entered into.

(e) Disclosure and reporting of certain

existing agreements that become

covered agreements. An agreement that

concerns the performance of any

activity described in paragraph (c) of

this section by an affiliate may become

a covered agreement after it is entered

into if the affiliate subsequently

becomes a CRA affiliate. In that event,

the disclosure and reporting obligations

under §§ 533.4 and 533.5 begin on the

date that the agreement becomes a

covered agreement and do not apply to

the period prior to that date.

§ 533.3 Related agreements considered a

single agreement.

The following rules must be applied

in determining whether a written

contract, arrangement, or understanding

is a covered agreement under § 533.2.

(a) Contracts, arrangements, or

understandings entered into by same

parties. All written contracts,

arrangements, or understandings 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 contracts,

arrangements, or understandings—

(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.

§ 533.4 Disclosure of covered agreements.

(a) Effective 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. (i)

Each NGEP and each insured depository

institution or affiliate that enters into a

covered agreement must make a

complete copy of the covered agreement

available to any individual or entity

upon request.

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(ii) In disclosing a covered agreement

to the public under paragraph (b)(1)(i) of

this section, a NGEP, insured depository

institution, or affiliate may withhold

from disclosure only those portions of

an agreement that the relevant

supervisory agency determines are

exempt from disclosure under the

Freedom of Information Act (5 U.S.C.

552 et seq.).

(2) Duration of obligation. The

obligation to disclose a covered

agreement terminates 12 months after

the end of the term of the agreement.

(3) 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.

(4) Use of CRA public file by insured

depository institution. 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 and making the

agreement available in accordance with

the procedures set forth in § 563e.43 of

this chapter.

(c) Disclosure of covered agreements

to the relevant supervisory agency. (1)

Disclosure by NGEP. Each NGEP that is

a party to a covered agreement must

provide a complete copy of the

agreement to the relevant supervisory

agency within 30 days of receiving a

request from the agency for the

agreement. This obligation terminates

12 months after the end of the term of

the covered agreement.

(2) Disclosure by insured depository

institution or affiliate. (i) Filing with the

relevant supervisory agency. Each

insured depository institution or

affiliate that is a party to a covered

agreement must provide a copy of the

agreement to each relevant supervisory

agency within 30 days after the date the

insured depository institution or

affiliate enters into the agreement.

(ii) Joint filings. In the event that two

or more insured depository institutions

or affiliates are parties to a covered

agreement, the insured depository

institution(s) and affiliate(s) may jointly

file a copy of the covered agreement

with each relevant supervisory agency.

Any joint filing must identify the

insured depository institution(s) and

affiliate(s) for whom the covered

agreement is being filed.

(d) Relevant supervisory agency. For

purposes of this section and § 533.5, 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.

§ 533.5 Annual reports.

(a) Effective 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) General. An annual report under this

section must be filed with each relevant

supervisory agency for—

(i) The fiscal year in which the parties

enter into the covered agreement; and

(ii) Each fiscal year during the term of

the covered agreement.

(2) Exception for NGEP that has not

received any funds or resources. A

NGEP is not required to file an annual

report for a covered agreement for any

fiscal year during the term of the

agreement in which the NGEP did not

receive any funds or other resources

under the agreement.

(d) Annual reports filed by NGEP. (1)

General. 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) The information required by

paragraphs (d)(2) and (d)(3) of this

section concerning the use of funds

received under the covered agreement.

(2) Reporting for funds or resources

allocated and used for a specific

purpose. For funds or other resources

that the NGEP received during the fiscal

year under the covered agreement and

allocated and used for a specific

purpose during the fiscal year, the

annual report must—

(i) Describe each specific purpose for

which the funds or resources were used

during the fiscal year; and

(ii) State the amount of funds or

resources used during the fiscal year for

each specific purpose.

(3) Reporting for funds or resources

used for other purposes. For all funds or

resources that the NGEP received during

the fiscal year under the covered

agreement and did not use for a specific

purpose, the annual report must—

(i) State the amount received during

the fiscal year; and

(ii) Provide a detailed, itemized list of

how the funds or resources 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 or uses.

(4) 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 an Internal

Revenue Service form, a state tax form,

a report to members or shareholders,

financial statements, or other report, so

long as the annual report contains all of

the information required by this

paragraph (d).

(5) Consolidated reports permitted. A

NGEP that is a party to five 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 required to be

reported under paragraphs (d)(1)(iii),

(d)(2), and (d)(3) of this section may be

reported on an aggregate basis for all

covered agreements.

(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

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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

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 a NGEP

under paragraph (d) of this section.

(2) Consolidated reports permitted. (i)

Party to large number of agreements. An

insured depository institution or

affiliate that is a party to five or more

covered agreements may file a single

consolidated annual report with each

relevant supervisory agency covering 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)(iii), (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

no later than five 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.

§ 533.6 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.

§ 533.7 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 §§ 533.4 or 533.5, 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 §§ 533.4 or 533.5 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.

§ 533.8 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 § 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 contact, as

described in § 533.2(b)(2).

(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.

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(d) CRA public file. For purposes of

this part, CRA public file means the

public file maintained by an insured

depository institution and described in

§ 563e.43 of this chapter.

(e) 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).

(f) 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.

(g) 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).

(h) Nongovernmental entity or person.

(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 (h)(2)(i), (h)(2)(ii),

or (h)(2)(iii) of this section.

(i) 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.

(j) Term of agreement. An agreement

that does not by its terms establish a

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 appropriate Federal banking agency

otherwise notifies each party in writing.

Dated: May 10, 2000.

By the Office of Thrift Supervision.

Ellen Seidman,

Director.

[FR Doc. 00–12337 Filed 5–18–00; 8:45 am]

BILLING CODE 4810–33–U; 6210–01–U; 6714–01–U;

6720–01–U