Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Rules and Regulations 13429 

regulations by changing the 

classification of the State of Wyoming 

from Class A to Class Free. That action 

relieved certain restrictions on the 

interstate movement of cattle from 

Wyoming. 

Comments on the interim rule were 

required to be received on or before 

November 14, 2006. We received one 

comment by that date, from an industry 

group. 

The commenter supported our 

determination that Wyoming has met 

the requirements to be classified as a 

Class Free State. The commenter also 

raised separate points related to this 

change in classification, which we will 

address in this document. 

The interim rule stated that the last 

brucellosis-infected herd of cattle in 

Wyoming was depopulated in December 

2004. The commenter stated that, 

because the requirements for Class Free 

classification state that all cattle herds 

in a Class Free State or area must remain 

free of field strain Brucella abortus for 

12 consecutive months, Wyoming 

should have been upgraded to the Class 

Free classification much earlier than 

September 2006. 

In addition to satisfying the 

requirement for freedom in paragraph 

(b)(1) of the criteria for a Class Free 

State or area in § 78.1, the Animal and 

Plant Health Inspection Service (APHIS) 

must determine that a State or area 

meets all the other requirements in 

those criteria prior to classifying a State 

or area as Class Free. This process can 

take some time, but it would not be 

appropriate to classify a State or area as 

Class Free until the process is 

completed. 

The commenter also referred to 

surveillance programs and risk 

mitigation measures that are in place to 

address the risk associated with 

reservoirs of brucellosis in wild animals 

in Sublette, Teton, Lincoln, Fremont, 

Hot Springs, and Park Counties in 

Wyoming. The commenter stated that 

APHIS required that this surveillance 

and risk mitigation be undertaken in 

order for Wyoming to be reclassified as 

a Class Free State. The commenter 

stated that the regulations and the 

Animal Health Protection Act (7 U.S.C. 

8301–8317) do not give APHIS the 

authority to impose such requirements 

in order to achieve Class Free status. 

The commenter inaccurately 

characterizes the origin of these 

surveillance programs and risk 

mitigation measures. APHIS’ review of 

the Wyoming brucellosis program 

recommended that surveillance 

programs and risk mitigation measures 

be established to address the risk of 

infection transmitted from wild animals. 

We also recommended that the State of 

Wyoming develop a memorandum of 

understanding with APHIS to 

implement these programs and 

measures. The State of Wyoming 

recognized the risk associated with the 

reservoirs of brucellosis that exist in 

wild animals in parts of that State and 

took action in cooperation with APHIS. 

We based our decision to reclassify 

Wyoming as a Class Free State for 

brucellosis on the State’s compliance 

with the requirements in the regulations 

regarding Class Free status. 

Therefore, for the reasons given in the 

interim rule and in this document, we 

are adopting the interim rule as a final 

rule without change. 

This action also affirms the 

information contained in the interim 

rule concerning Executive Order 12866 

and the Regulatory Flexibility Act, 

Executive Orders 12372 and 12988, and 

the Paperwork Reduction Act. 

Further, for this action, the Office of 

Management and Budget has waived its 

review under Executive Order 12866. 

List of Subjects in 9 CFR Part 78 

Animal diseases, Bison, Cattle, Hogs, 

Quarantine, Reporting and 

recordkeeping requirements, 

Transportation. 

PART 78—BRUCELLOSIS 

■ Accordingly, we are adopting as a 

final rule, without change, the interim 

rule that amended 9 CFR part 78 and 

that was published at 71 FR 54402–

54404 on September 15, 2006. 

Done in Washington, DC, this 16th day of 

March 2007. 

Kevin Shea, 

Acting Administrator, Animal and Plant 

Health Inspection Service. 

[FR Doc. E7–5230 Filed 3–21–07; 8:45 am] 

BILLING CODE 3410–34–P 

DEPARTMENT OF THE TREASURY 

Office of Thrift Supervision 

12 CFR Part 563e 

[No. 2007–03] 

RIN 1550–AC08 

Community Reinvestment Act—

Interagency Uniformity 

AGENCY: Office of Thrift Supervision, 

Treasury (OTS), Treasury. 

ACTION: Final rule. 

SUMMARY: In this final rule, OTS is 

changing its Community Reinvestment 

Act (CRA) regulations in four areas to 

reestablish uniformity between its 

regulations and those of the other 

federal banking agencies. OTS is making 

these revisions to its CRA rule to 

promote consistency and help facilitate 

objective evaluations of CRA 

performance across the banking and 

thrift industries. Consistent standards 

will allow the public to make more 

effective comparisons of bank and thrift 

CRA performance. Additionally, OTS is 

incorporating changes that reinforce 

CRA objectives consistent with the 

ongoing performance of savings 

associations in meeting the financial 

services needs of the communities they 

serve. 

To advance these objectives OTS is 

aligning its CRA rule with the rule 

adopted by the banking agencies by: (1) 

Eliminating the option of alternative 

weights for lending, investment, and 

service under the large, retail savings 

association test; (2) defining small 

savings associations with between $250 

million and $1 billion in assets as 

‘‘intermediate small savings 

associations’’ and establishing a new 

community development test for them; 

(3) indexing the asset threshold for 

small and intermediate small savings 

associations annually based on changes 

to the Consumer Price Index (CPI); and 

(4) clarifying the impact on a savings 

association’s CRA rating if OTS finds 

evidence of discrimination or other 

illegal credit practices. 

DATES: This rule is effective on July 1, 

2007. 

FOR FURTHER INFORMATION CONTACT: 

Celeste Anderson, Senior Project 

Manager, Compliance and Consumer 

Protection, (202) 906–7990; Richard 

Bennett, Counsel, Regulations and 

Legislation Division, (202) 906–7409, 

Office of Thrift Supervision, 1700 G 

Street, NW., Washington, DC 20552. 

SUPPLEMENTARY INFORMATION: 

A. Background 

The CRA requires the federal banking 

and thrift agencies to assess the record 

of each insured depository institution of 

meeting the credit needs of its entire 

community, including low- and 

moderate-income neighborhoods, 

consistent with the safe and sound 

operation of the institution, and to take 

that record into account when 

evaluating an application by the 

institution for a deposit facility. 

12 U.S.C. 2903. In 1995, when OTS, the 

Office of the Comptroller of the 

Currency (OCC), the Board of Governors 

of the Federal Reserve System (Board), 

and the Federal Deposit Insurance 

Corporation (FDIC) (collectively, the 

four agencies) adopted major 


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amendments to regulations 

implementing the CRA, they committed 

to reviewing the amended regulations in 

2002 for their effectiveness in placing 

performance over process, promoting 

consistency in evaluations, and 

eliminating unnecessary burden. 60 FR 

22156, 22177 (May 4, 1995). The four 

agencies indicated that they would 

determine whether and, if so, how the 

regulations should be amended to better 

evaluate financial institutions’

performance under the CRA, consistent 

with the Act’s authority, mandate, and 

intent. 

The four agencies initiated their 

public review in July 2001 with 

publication in the Federal Register of an 

advance notice of proposed rulemaking 

(ANPR). 66 FR 37602 (July 19, 2001). In 

the ANPR, the agencies requested 

comment on whether the regulations 

were effective in meeting the stated 

goals of the 1995 rulemaking and 

whether any changes should be made to 

the rules. The agencies also solicited 

comment on a wide variety of issues 

including the large retail institution test, 

the small institution test, the 

community development test for limited 

purpose and wholesale institutions, 

strategic plans, performance context, 

assessment areas, affiliate activities, and 

data collection and maintenance of 

public files. 

After nearly three years of 

discussions, in February 2004, the four 

agencies published a notice of proposed 

rulemaking. 69 FR 5729 (Feb. 6, 2004). 

Through it, the Agencies proposed to 

raise the small institution asset 

threshold to $500 million without 

regard to holding company affiliation; to 

amend the regulations to provide that 

certain discriminatory, illegal, or 

abusive credit practices would 

adversely affect the evaluation of the 

institution’s CRA performance; and to 

enhance the data disclosed in CRA 

public evaluations and CRA disclosure 

statements. 

On July 16, 2004, the OCC and the 

Board announced that they would not 

proceed with their respective February 

2004 proposals. The OCC did not 

formally withdraw the proposal, but did 

not adopt it. The Board formally 

withdrew its proposal. 

On August 18, 2004, OTS published 

a final rule that raised the small savings 

association asset threshold to $1 billion 

without regard to holding company 

affiliation effective October 1, 2004. 

69 FR 51155 (Aug. 18, 2004). 

On August 20, 2004, the FDIC issued 

another proposed rule. 69 FR 51611 

(Aug. 20, 2004). The FDIC proposed to 

raise the small institution asset 

threshold to $1 billion, while adding a 

community development activity 

criterion to the small institution test for 

banks with assets greater than $250 

million up to $1 billion. It also proposed 

to expand the definition of ‘‘community 

development’’ to encompass a broader 

range of activities in rural areas. 

On November 24, 2004, OTS 

proposed further CRA regulatory 

reforms. 69 FR 68257 (Nov. 24, 2004). 

Like the FDIC, it proposed to expand the 

definition of ‘‘community development’’

to encompass certain community 

development activities in underserved 

nonmetropolitan areas. OTS also 

solicited comment on expanding the 

definition of ‘‘community development’’

to encompass certain community 

development activities in areas affected 

by natural or other disasters or other 

major community disruptions without 

regard to whether those areas or the 

individuals served were low- or 

moderate-income. Further, OTS 

solicited comment on providing 

additional flexibility in the CRA 

examinations of large retail institutions. 

On March 2, 2005, OTS adopted a 

final rule effective April 1, 2005, that 

provided additional flexibility under the 

large retail savings association test 

allowing savings associations to choose 

to be evaluated under weights that 

differed from the standard previously 

adopted by the agencies whereby 

approximately 50 percent weight was 

placed on lending, 25 percent weight on 

services, and 25 percent weight on 

investments. 70 FR 10023 (Mar. 2, 

2005). 

After OTS adopted final rules on CRA 

regulatory reform, the other agencies 

also amended their CRA rules. On 

August 2, 2005, following their 

publication of a notice of proposed 

rulemaking (70 FR 12148, 12149 (Mar. 

11, 2005)), the OCC, the Board, and the 

FDIC (collectively, the three agencies) 

issued a joint final rule amending their 

CRA regulations. 70 FR 44256 (Aug. 2, 

2005). The three agencies’ August 2005 

final rule extended eligibility for 

streamlined lending evaluations and the 

exemption from data reporting to banks 

under $1 billion, without regard to 

holding company assets. The three 

agencies’ final rule expanded the 

definition of ‘‘community development’’

to include certain activities in 

underserved rural areas and disaster 

areas. 

The three agencies’ final rule 

contained some differences from 

provisions OTS had proposed or 

finalized. It provided that the three 

agencies would separately evaluate and 

rate the community development 

records of institutions between $250 

million and $1 billion (termed 

‘‘intermediate small banks’’ by the three 

agencies), but under a new, more 

streamlined basis than under the large 

retail institution test. Under this new 

test, the three agencies no longer require 

an intermediate small bank to collect 

and report data on small business or 

small farm loans or on the location of 

certain nonmetropolitan mortgage loans. 

However, the new test contains two 

components, a lending test and a 

community development test. 

The three agencies’ final rule also 

refined one aspect of the February 2004 

joint proposal to provide that evidence 

of discrimination or evidence of credit 

practices that violate an applicable law, 

rule, or regulation could adversely affect 

an agency’s evaluation of a bank’s CRA 

performance. The final rule included an 

illustrative list of such practices. 

Further, it provided that the asset 

thresholds would be adjusted annually 

for inflation, based on changes to the 

Consumer Price Index. 

On April 12, 2006, OTS adopted a 

further final rule revising the definition 

of ‘‘community development’’ to reduce 

burden and provide greater flexibility to 

meet community needs. The revised 

definition is the same as the definition 

that the Board, OCC, and FDIC adopted 

in their August 2, 2005 final rule. 

B. OTS’s November 2006 Proposal 

On November 24, 2006, OTS issued a 

new proposed rule. In the 

SUPPLEMENTARY INFORMATION to that 

rule, OTS stated its belief that its rule 

changes over the past three years had 

achieved regulatory burden reduction. 

All four agencies have reduced the 

regulatory burden associated with the 

CRA regulations through steps such as 

amending the definition of small bank. 

However, OTS also stated its belief that 

consistent standards applied equally 

across the banking and thrift industries 

could facilitate objective evaluations of 

CRA performance and ensure accurate 

assessments of institutions that operate 

in the same market. As a result, OTS 

proposed to align its CRA regulation 

with those of the other federal banking 

agencies to best serve the interests of 

insured depository institutions and their 

communities by providing for 

consistency in regulation and 

compliance. 

In issuing the proposal, OTS noted 

that savings associations have an 

excellent record in the provision of 

credit, investments, and services in their 

markets, particularly in low- to 

moderate-income communities. OTS 

observed that in its experience, as a 

percentage of their total assets, savings 

associations far outdistance banks and 

other lenders in originating multi-family 


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1OTS calculated that as of June 30, 2006, savings 

association had 4.41% of their assets in multifamily 

loans whereas commercial banks had only 1.03% of 

their assets in multifamily loans. 

housing loans, a vehicle frequently 

utilized to provide affordable housing.1

OTS stated its belief that savings 

associations would continue to serve 

their markets, including low- and 

moderate-income communities, 

regardless of the applicable CRA rules. 

OTS proposed changes to its CRA 

regulations in four areas. While the 

preamble addressed each area in turn, 

the SUPPLEMENTARY INFORMATION

highlighted that the overriding question 

OTS posed to commenters with respect 

to each area was whether the benefits of 

greater regulatory uniformity and any 

other benefits outweigh any potential 

disadvantages. OTS also invited 

comment on all aspects of the proposal, 

including whether OTS should make 

any variations to the approach adopted 

by the other federal banking agencies in 

any of these areas. 

1. Alternative Weights 

OTS’s March 2005 final rule provided 

additional flexibility for the weights 

given to lending, services, and 

investments for each examination under 

the large retail savings association test. 

OTS issued guidance on April 7, 2005, 

explaining the methodology it would 

apply through Thrift Bulletin 85 (April 

7, 2005). The other three agencies have 

not adopted this approach. 

In its November 24, 2006 proposal, 

OTS proposed to eliminate alternative 

weights to facilitate uniformity in the 

assessment of CRA performance 

between banks and thrifts. Most large 

institutions elected to continue to 

allocate weights under the three 

performance categories of lending, 

investments, and services. 

OTS noted that if the agency 

eliminated the alternative weight option 

for large savings associations, large 

savings associations would retain 

flexibility to focus their CRA efforts 

with emphasis on lending, just as they 

have in the past. For example, a savings 

association with outstanding 

performance in lending and services 

would still receive an ‘‘outstanding’’

CRA rating overall, even if it makes few 

or no qualified investments. 

Additionally, a savings association with 

a poor record on the service test and few 

or no qualified investments would still 

receive a ‘‘satisfactory’’ CRA rating 

overall if its lending is at least highly 

satisfactory. 

The SUPPLEMENTARY INFORMATION

recounted how a savings association 

with a strong lending record has always 

been able to receive at least a ‘‘low 

satisfactory’’ rating on the investment 

test while making few or no qualified 

investments due to limits on savings 

associations’ investment authority. This 

policy originated in the preamble to 

1995 CRA rule. Because of differences 

between savings associations and other 

financial institutions (e.g., the qualified 

thrift lender test and lending and 

investment limits on commercial loans 

and community development 

investments) a savings association could 

receive at least a ‘‘low satisfactory’’

rating on the investment test without 

making qualified investments 

depending upon its lending 

performance. 60 FR at 22163. Similarly, 

the 2001 Interagency Q&A Regarding 

Community Reinvestment indicates that 

a savings association that has made few 

or no qualified investments due to its 

limited investment authority may still 

receive a satisfactory rating under the 

investment test if it has a strong lending 

record. Q&A 21(b)(4), 66 FR 36620, 

36631 (July 12, 2001). The 

SUPPLEMENTARY INFORMATION explained 

that if OTS were to eliminate the 

alternative weight option, these 

principles would continue to apply. 

The SUPPLEMENTARY INFORMATION also 

pointed out that a savings association 

that would like OTS to evaluate its 

performance based on even more 

flexible criteria could opt for a strategic 

plan. While a strategic plan for a large 

retail savings association should 

generally address all three performance 

categories (lending, service, and 

investment), a different emphasis, 

including a focus on one or more 

performance categories, may be 

appropriate. The CRA rule specifically 

provides—and would continue to 

provide—that such a focus may be 

appropriate if responsive to the 

characteristics and credit needs of its 

assessment area, considering public 

comment and the savings association’s 

capacity and constraints, product 

offerings, and business strategy. 12 CFR 

563e.27(f)(ii). 

2. Community Development Test 

OTS’s August 2004 final rule raised 

the small savings association asset 

threshold from $250 million to $1 

billion and eliminated consideration of 

holding company affiliation. This 

change enabled OTS to evaluate the 

CRA performance of savings 

associations with $250 million or more, 

but less than $1 billion, in assets under 

the small savings association test. In 

contrast to OTS, the other three agencies 

imposed a different community 

development test for institutions with 

$250 million or more, but less than $1 

billion, in assets, called ‘‘intermediate 

small banks.’’ Under their test, the three 

agencies evaluate an intermediate small 

bank’s lending performance under the 

small bank lending criteria, but they 

also evaluate the bank’s community 

development performance under the 

following criteria: 

• The number and amount of 

community development loans; 

• The number and amount of 

qualified investments; 

• The extent to which the bank 

provides community development 

services; and 

• The bank’s responsiveness through 

such activities to community 

development lending, investment, and 

services needs. 

OTS proposed to adopt the 

intermediate small institution test. In 

the supplementary information to the 

November 24, 2006 proposal, OTS 

stated its belief that intermediate small 

savings associations are responsive to 

the community development needs 

within the communities they serve. The 

adoption of the intermediate small 

institution test would provide a more 

comprehensive framework for assessing 

the community development 

performance of intermediate small 

savings associations than the small 

savings association performance criteria. 

In addition, adopting the intermediate 

small institution test would assist the 

public in making a reasonable 

comparison of community development 

performance between banks and savings 

associations operating in the same 

market. 

OTS explained that it anticipated that 

if it adopted this test, it would allow 

flexibility. This proposal did not 

prescribe a required threshold for 

community development loans, 

qualified investments, and community 

development services. Instead, OTS 

explained that based on the savings 

association’s assessment of community 

development needs in its assessment 

area(s), it would be able to engage in 

those categories of community 

development activities that are 

responsive to observed needs and 

consistent with the savings association’s 

capacity. Savings associations that have 

been providing community 

development loans and services, would 

find that OTS would continue to give 

those activities credit when OTS 

evaluates compliance under the new 

test. 

Further, as under the large retail 

institution test, examiners would take 

into account statutory and supervisory 

limitations on a savings association’s 

ability to engage in any lending, 

investment, and service activities. For 


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example, OTS could still deem a savings 

association that has made few or no 

qualified investments due to limits on 

investment authority to have satisfied 

the criterion in the community 

development component of the test 

regarding ‘‘the number and amount of 

qualified investments’’ if the institution 

has a strong lending record. 

3. Indexing Asset Thresholds 

The SUPPLEMENTARY INFORMATION to 

the November 24, 2006 proposal 

pointed out that OTS had not previously 

proposed to index the relevant asset 

thresholds for purposes of determining 

whether an institution is small or large. 

In contrast, the three agencies’ final rule 

provides that they annually adjust the 

asset thresholds for small and 

intermediate small banks based on 

changes to the Consumer Price Index 

(CPI). Therefore, to ensure consistency 

in the standards for evaluating small 

and intermediate savings associations, 

OTS proposed to index the asset 

threshold consistent with the approach 

adopted by the other federal banking 

agencies. 

As the three agencies explained in the 

preamble to their March 11, 2005 

proposed rule (70 FR at 12151), there is 

precedent for indexing asset thresholds 

to the CPI. Under the Home Mortgage 

Disclosure Act, 12 U.S.C. 2801 et seq., 

institutions under a certain asset 

threshold are exempt from HMDA 

requirements. The threshold is adjusted 

annually to the CPI and rounded to the 

nearest multiple of $1 million. 12 U.S.C. 

2808. 

4. Discriminatory or Other Illegal Credit 

Practices 

The SUPPLEMENTARY INFORMATION to 

the November 24, 2006 proposal 

referred to the preamble to OTS’s 

August 2004 final rule, which explained 

why OTS had withdrawn one part of its 

portion of the February 2004 joint 

proposed rule. The withdrawn language 

would have added regulatory text 

providing that evidence that an 

institution or affiliate engages in 

discriminatory, illegal, or abusive credit 

practices would adversely affect the 

evaluation of the institution’s CRA 

performance. Opposition came from 

financial institutions and consumer 

groups. OTS indicated in August 2004 

that it would continue to rely on the 

more general provision in its rule that 

evidence of discriminatory or other 

illegal credit practices adversely affects 

the performance evaluation as 

interpreted in interagency Q&A 28(c)–1, 

66 FR at 36640. 

The language adopted by the other 

three agencies in their August 2005 final 

rule stated that with respect to 

discrimination in affiliate lending, the 

three agencies would reduce a rating 

based on discrimination in an affiliate’s 

loans made inside the institution’s 

assessment area where the loans have 

been considered as part of the 

institution’s lending performance. The 

three agencies explained in the 

preamble to their August 2, 2005 final 

rule (70 FR at 44263) that a bank may 

not elect to include as part of its CRA 

evaluation affiliate loans outside the 

bank’s assessment area. OTS proposed 

to amend its CRA rule to reflect this 

approach. 

C. The Comments 

1. Overview of the Comments 

OTS received 66 comments in total on 

the proposed rule from: One member of 

Congress in support; three trade 

associations, one in support (or at least 

not opposed) and two opposed; three 

savings associations opposed; 58 from 

individuals and organizations dedicated 

to consumer, affordable housing, and 

community development causes in 

support; and one national bank in 

support. 

Fifty-four commenters supported all 

aspects of the proposal. Another six 

supported everything except indexing of 

asset thresholds. One trade association 

did not oppose the proposal and 

supported indexing of asset thresholds. 

Two other trade associations supported 

indexing of asset thresholds; one of 

these also supported the provision on 

discriminatory or other illegal credit 

practices. 

In contrast, two trade associations and 

two large savings associations opposed 

eliminating alternative weights. Those 

trade associations and one intermediate 

small savings association (as defined by 

the final rule) opposed imposing the 

new community development test on 

intermediate small institutions. 

Most who commented recommend 

that the changes take effect right away. 

In contrast, one trade association 

supported a two-year transition period 

for large and intermediate small savings 

associations. Another trade association 

requested a transition period of at least 

one examination cycle for intermediate 

small institutions if OTS changes its 

rule. One organization that advocates for 

community reinvestment said it did not 

object to OTS waiting six months to a 

year before conducting more exams for 

large or intermediate small savings 

associations. 

2. Comments in Support of Proposal 

Many of the commenters who 

supported the proposal raised similar 

points. The member of Congress who 

supported all aspects of the proposal, 

explained that it would restore 

uniformity and eliminate temptation to 

flip charters based on different CRA 

standards. That letter urged OTS to 

adopt the proposed changes as soon as 

possible. 

The industry trade association that 

supported (or at least did not oppose) 

the proposal explained that while it 

prefers OTS’s approach on alternative 

weights and would have preferred that 

the other federal banking agencies had 

adopted OTS’s rule, it realizes that the 

other federal banking agencies have not 

done so. It credited OTS with breaking 

the interagency logjam and allowing 

much needed progress on CRA. But it 

explained that given the position of the 

other agencies, it understood OTS’s 

desire to make its rule uniform with the 

others. It added that uniformity would 

eliminate confusion for bankers and 

examiners and that consistency among 

the agencies would outweigh the 

benefits of only OTS offering alternative 

weights. This commenter supported 

indexing asset thresholds and did not 

oppose the provision on discriminatory 

or other illegal credit practices for 

uniformity. This commenter urged OTS, 

however, to provide a two-year 

transition period for large thrifts that 

relied on alternate weights and 

intermediate small thrifts that relied on 

the streamlined lending test to give 

them time to adjust their policies and 

procedures. 

One national organization that 

advocates for community reinvestment 

submitted a detailed letter and its 

comments were echoed by dozens of 

others dedicated to consumer 

protection, affordable housing, and 

community development causes. This 

organization supported all aspects of the 

proposal for several reasons including: 

(1) It would increase lending, investing, 

and services in low- and moderateincome communities; (2) establishing 

the same CRA standards are necessary 

for the public to be able to effectively 

compare performance; (3) weaker 

standards for thrifts make it difficult to 

hold thrifts accountable for responding 

to community needs; (4) different 

standards increase the possibility of 

some shirking their CRA obligations; (5) 

the large bank test has worked well; (6) 

the anti-predatory lending provision is 

necessary to penalize thrifts through 

lower CRA ratings if they engage in 

illegal, discriminatory, and abusive 

lending practices; (7) research 

demonstrates that OTS’s different rule 

resulted in declines by thrifts in 

community development lending, 

investments, and the number of 


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branches in low- and moderate-income 

communities; and (8) there is more CRA 

exam rating grade inflation for thrifts 

under OTS’s rule. (A few other 

comment letters referred to this research 

as well.) While most of this 

organization’s supporters urged OTS to 

make the changes effective immediately, 

the organization said that it did not 

object to OTS waiting six months to a 

year before conducting any more exams 

for mid-size and large thrifts to let them 

adjust to the new exams and find and 

execute community development 

financing and service activities. It also 

suggested that OTS could use 

performance context to take into 

account that a thrift’s community 

development activities might be on the 

low side for the period in which the 

thrift was covered by the different rules 

because of the rules that existed during 

that period. 

One national organization that 

advocates for affordable housing lending 

supported all aspects of the proposal. It 

stated that consistency among regulators 

helps communities and institutions 

maximize the opportunities to make 

loans and sell services and that 

consistency among regulators avoids a 

regulatory ‘‘race to the bottom.’’ Many 

other commenters echoed these 

sentiments. 

OTS also received several letters from 

housing authorities supporting the 

proposal except for indexing asset 

thresholds. These commenters argued 

that over time, indexing would exempt 

more large thrifts from the large retail 

exam and more intermediate small 

thrifts from the new community 

development test. 

3. Comments Opposed to Proposal 

The industry trade associations that 

opposed eliminating alternative weights 

and imposing the new community 

development test for intermediate small 

thrifts made several arguments: (1) 

Uniformity is not necessary to ensure 

that savings associations meet the credit 

needs of their communities; (2) OTS’s 

current rule significantly reduces 

burden, which outweighs potential 

benefits, if any, of uniformity; and (3) 

the extensive narratives in OTS’s 

examination reports make savings 

associations’ performance readily 

comparable to banks’ even if the tests 

applied are different. These commenters 

advocated that the other federal banking 

agencies should adopt OTS’s rule to 

create uniformity. 

With specific regard to alternative 

weights, they commented that it is 

necessary and appropriate for large 

savings association to have a flexible 

test given differences between the thrift 

charter and bank charters. This 

flexibility simply recognizes that thrifts 

have always been evaluated somewhat 

differently from banks under the OTS 

policy of granting savings associations 

with strong lending records at least a 

low satisfactory rating on the 

investment test even if they make few or 

no qualified investments. 

One trade association specifically 

criticized the new CD test for creating 

an additional layer of regulatory 

complexity. Another urged OTS to 

provide a transition period of at least 

one examination cycle for those 

intermediate small institutions that had 

reallocated their CRA activities relying 

on the ability to comply with the 

streamlined lending test. 

One trade association concluded, 

based on its analysis, that applying the 

small institution test to savings 

associations up to $1 billion in assets 

had not resulted in a reduction of their 

commitments to their communities. 

Another indicated, however, that if OTS 

changed its rule to realign with the 

other federal banking agencies, the 

change would not have a negative effect 

on the way savings associations are 

already meeting the credit needs of their 

communities. These commenters both 

supported indexing asset thresholds; 

one also supported the provision on 

discriminatory or other illegal credit 

practices. 

The thrifts that commented made 

similar arguments. One also expressed a 

specific concern about relying on the 

OTS policy of granting savings 

associations with strong lending records 

at least a low satisfactory rating on the 

investment test even if they make few or 

no qualified investments due to limits 

on savings associations’ investment 

authority. This thrift suggested that 

unless the alternative weight option is 

retained in the rule, OTS might, at any 

time, discontinue the policy or begin 

requiring a savings association to make 

an individualized showing of how 

restrictions on investment authority 

have limited that particular thrift’s 

investments. 

D. Today’s Final Rule 

The comments largely supported the 

proposal. Having carefully considered 

the comments, OTS is revising its rule 

for the same reasons it issued the 

proposal as discussed in part B of this 

SUPPLEMENTARY INFORMATION. OTS 

believes the revisions will promote 

consistency and help facilitate objective 

evaluations of CRA performance across 

the banking and thrift industries. 

Consistent standards will allow the 

public to make more effective 

comparisons of bank and thrift CRA 

performance. Additionally, the revisions 

reinforce principal objectives of the 

CRA. 

OTS would like to address some of 

the specific comments. While some 

commenters submitted information to 

support claims that alternative weights 

and the extension of the streamlined 

small institution test to institutions with 

assets of less than $1 billion had a 

negative impact on community 

development, others submitted 

information to support claims that 

changes did not have a negative impact. 

OTS believes the experience with these 

innovations was too brief to be 

conclusive either way. However, the 

revisions reinforce CRA objectives 

consistent with long standing 

performance of savings associations in 

providing access to credit, making 

investments, and providing services that 

support the communities they serve. 

Regarding the elimination of 

alternative weights, OTS wishes to 

reassure the commenter who expressed 

concern about relying on the OTS policy 

of granting savings associations with 

strong lending records at least a low 

satisfactory rating on the investment test 

even if they make few or no qualified 

investments due to limits on savings 

associations’ investment authority. OTS 

notes—as discussed in detail in part B.1. 

of this SUPPLEMENTARY INFORMATION—

that this policy is long-standing. 

Further, it is a direct outgrowth of 

section 563e.21(b) of the CRA rule, 

which addresses the performance 

context. As discussed in part B.2. of this 

SUPPLEMENTARY INFORMATION, OTS will 

apply a similar approach under the new 

community development test for 

intermediate small savings associations. 

OTS highlights that in one small 

respect, today’s final rule departs 

slightly from the proposal. That 

departure concerns indexing asset 

thresholds. As proposed, the regulation 

provides that OTS will publish annual 

adjustments to these dollar figures based 

on the year-to-year change in the 

average of the Consumer Price Index for 

Urban Wage Earners and Clerical 

Workers (CPIW), not seasonally 

adjusted, for each twelve-month period 

ending in November, with rounding to 

the nearest million. 12 CFR 

563e.12(u)(2). 

Since OTS’s proposal, however, the 

OCC, Board, and FDIC updated their 

regulations to make this annual 

adjustment. 71 FR 78335 (December 29, 

2006). The preamble to their joint rule 

noted that during the one-year period 

ending November 2006, the CPIW 

increased by 3.32 percent. As a result, 

they revised their rule to provide that 

beginning January 1, 2007, banks that, 


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13434 Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Rules and Regulations 

2Until July 1, 2007, the small savings association 

asset threshold OTS applies remains at $1 billion. 

as of December 31 of either of the prior 

two calendar years, had assets of less 

than $1.033 billion are ‘‘small banks.’’

Small banks with assets of at least $258 

million as of December 31 of both of the 

prior two calendar years and less than 

$1.033 billion as of December 31 of 

either of the prior two calendar years are 

‘‘intermediate small banks.’’

To enable OTS to adjust the asset 

thresholds applicable for savings 

associations consistently with the other 

federal banking agencies, the rule text 

provides that savings associations that, 

as of December 31 of either of the prior 

two calendar years, had assets of less 

than $1.033 billion are ‘‘small savings 

associations.’’ Small savings 

associations with assets of at least $258 

million as of December 31 of both of the 

prior two calendar years and less than 

$1.033 billion as of December 31 of 

either of the prior two calendar years are 

‘‘intermediate small savings 

associations.’’ These inflation-adjusted 

asset thresholds will take effect once 

today’s final rule takes effect on July 1, 

2007.2

E. Effective Date 

Today’s final rule takes effect July 1, 

2007. The rule changes will apply to 

examinations that begin in the third 

quarter of 2007. 

However, OTS recognizes that some 

savings associations may have adjusted 

their CRA-related programs in reliance 

on the availability of the alternative 

weight option under the large retail 

savings association test and on the 

availability of the streamlined small 

institution test for institutions with up 

to $1 billion in assets (inflation 

adjusted). Rather than providing a long 

delay in effective date as a few 

commenters requested, OTS will 

provide relief in another way. OTS 

examiners will take the elimination of 

the alternative weight option under the 

large retail savings association test and 

the elimination of the streamlined small 

institution test for institutions with 

$250 million to $1 billion in assets 

(inflation adjusted) into consideration as 

part of the performance context when 

conducting examinations of savings 

associations affected, since these 

regulatory changes could have impacted 

their operations. Section 563e.21(b) of 

the CRA rule provides that OTS applies 

the CRA tests in the context of various 

factors including ‘‘(7) Any other 

information deemed relevant by the 

OTS.’’ OTS deems these two changes to 

its CRA relevant for performance 

context purposes. 

The period during which OTS’s rules 

allow for alternative weights under the 

large retail savings association test 

started April 1, 2005 and ends July 1, 

2007. Accordingly, for CRA 

examinations under the large retail 

savings associations test that encompass 

all or part of this period, OTS examiners 

will take into account in performance 

context that a reduction in investment 

or service performance during this 

period could be attributable in part to 

reliance on the alternative weight 

option. 

The period during which OTS’s rules 

applied the small savings association 

test to savings associations between 

$250 million and $1 billion in assets 

started October 1, 2004 and ends July 1, 

2007. For CRA examinations of 

intermediate small savings associations 

under the new community development 

test that encompass all or part of this 

period, OTS examiners will take into 

account in performance context that a 

reduction in investment or service 

performance during this period could be 

attributable in part to reliance on the 

availability of the small savings 

association test. 

OTS further notes that under section 

563e.21(a)(3), savings associations that 

prefer to be evaluated under the large 

retail savings association test have that 

option, but only if they collect and 

report data required under section 

563e.42. The large retail savings 

association test applied to savings 

associations with between $250 million 

and $1 billion in assets before October 

1, 2004. Thus, evaluation under the 

large retail savings association test 

would be an option available to 

intermediate small savings associations 

if they collected and reported data for 

each year covered by the performance 

evaluation. 

Regulatory Analysis 

Paperwork Reduction Act 

In accordance with the requirements 

of the Paperwork Reduction Act of 1995, 

OTS may not conduct or sponsor, and 

a respondent is not required to respond 

to, an information collection unless it 

displays a currently valid Office of 

Management and Budget (OMB) control 

number. This collection of information 

is currently approved under OMB 

Control Number 1550–0012. This final 

rule would not change the collection of 

information. 

Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act, OTS certifies 

that the final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

None of the provisions impose any 

additional paperwork or regulatory 

reporting requirements. Eliminating the 

option of alternative weights only 

affects savings associations with assets 

of $1 billion or more. Imposing a 

community development test for 

intermediate small savings associations 

only affects savings associations with 

assets of $250 million up to $1 billion. 

Likewise, indexing the asset thresholds 

only affect savings associations with 

around $250 million in assets or more. 

In contrast, the Small Business 

Administration (SBA) has defined 

‘‘small entities’’ for banking purposes as 

those with assets of $165 million or less. 

13 CFR 121.201. 

Incorporating language into the rule 

regarding discriminatory or illegal credit 

practices has no impact whatsoever. It 

does not change the laws or regulations 

applicable to savings associations that 

prohibit discriminatory or illegal 

conduct. It simply affects the way OTS 

considers noncompliance with these 

laws and regulations as part of the CRA 

performance evaluation. 

Executive Order 12866 Determination 

OTS has determined that this 

proposal is not a significant regulatory 

action under Executive Order 12866. 

Unfunded Mandates Reform Act of 1995 

Determination 

Section 202 of the Unfunded 

Mandates Reform Act of 1995, Pub. L. 

104–4 (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 

expenditure 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. 

OTS has determined that this rule will 

not result in expenditures by State, 

local, and tribal governments, or by the 

private sector, of $100 million or more. 

Accordingly, OTS has not prepared a 

budgetary impact statement nor 

specifically addressed the regulatory 

alternatives considered. 

List of Subjects in 12 CFR Part 563e 

Community development, Credit, 

Investments, Reporting and 

recordkeeping requirements, Savings 

associations. 


rmajette on PROD1PC67 with RULES
Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Rules and Regulations 13435 

Office of Thrift Supervision 

12 CFR Chapter V 

■ For the reasons outlined in the 

preamble, the Office of Thrift 

Supervision amends part 563e of 

chapter V of title 12 of the Code of 

Federal Regulations as set forth below: 

PART 563e—COMMUNITY 

REINVESTMENT 

■ 1. The authority citation for part 563e 

continues to read as follows: 

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

1467a, 1814, 1816, 1828(c), and 2901 through 

2907. 

■ 2. In § 563e.12 revise paragraph (u), to 

read as follows: 

§ 563e.12 Definitions. 

* * * * * 

(u) Small savings associations—(1) 

Definition. Small savings association 

means a savings association that, as of 

December 31 of either of the prior two 

calendar years, had assets of less than 

$1.033 billion. Intermediate small 

savings association means a small 

savings association with assets of at 

least $258 million as of December 31 of 

both of the prior two calendar years and 

less than $1.033 billion as of December 

31 of either of the prior two calendar 

years. 

(2) Adjustment. The dollar figures in 

paragraph (u)(1) of this section shall be 

adjusted annually and published by the 

OTS, based on the year-to-year change 

in the average of the Consumer Price 

Index for Urban Wage Earners and 

Clerical Workers, not seasonally 

adjusted, for each twelve-month period 

ending in November, with rounding to 

the nearest million. 

* * * * * 

§ 563e.21 [Amended] 

■ 3. Amend § 563e.21(a)(1) by removing 

‘‘, and to the extent consistent with 

§ 563e.28(d)’’. 

■ 4. Revise § 563e.26 to read as follows: 

§ 563e.26 Small savings association 

performance standards. 

(a) Performance criteria—(1) Small 

savings associations with assets of less 

than $250 million. The OTS evaluates 

the record of a small savings association 

that is not, or that was not during the 

prior calendar year, an intermediate 

small savings association, of helping to 

meet the credit needs of its assessment 

area(s) pursuant to the criteria set forth 

in paragraph (b) of this section. 

(2) Intermediate small savings 

associations. The OTS evaluates the 

record of a small savings association 

that is, or that was during the prior 

calendar year, an intermediate small 

savings association, of helping to meet 

the credit needs of its assessment area(s) 

pursuant to the criteria set forth in 

paragraphs (b) and (c) of this section. 

(b) Lending test. A small savings 

association’s lending performance is 

evaluated pursuant to the following 

criteria: 

(1) The savings association’s loan-todeposit ratio, adjusted for seasonal 

variation, and, as appropriate, other 

lending-related activities, such as loan 

originations for sale to the secondary 

markets, community development 

loans, or qualified investments; 

(2) The percentage of loans and, as 

appropriate, other lending-related 

activities located in the savings 

association’s assessment area(s); 

(3) The savings association’s record of 

lending to and, as appropriate, engaging 

in other lending-related activities for 

borrowers of different income levels and 

businesses and farms of different sizes; 

(4) The geographic distribution of the 

savings association’s loans; and 

(5) The savings association’s record of 

taking action, if warranted, in response 

to written complaints about its 

performance in helping to meet credit 

needs in its assessment area(s). 

(c) Community development test. An 

intermediate small savings association’s 

community development performance 

also is evaluated pursuant to the 

following criteria: 

(1) The number and amount of 

community development loans; 

(2) The number and amount of 

qualified investments; 

(3) The extent to which the savings 

association provides community 

development services; and 

(4) The savings association’s 

responsiveness through such activities 

to community development lending, 

investment, and services needs. 

(d) Small savings association 

performance rating. The OTS rates the 

performance of a savings association 

evaluated under this section as provided 

in Appendix A of this part. 

■ 5. Amend § 563e.28 by: 

■ a. Removing ‘‘paragraphs (b), (c), and 

(d) of this section’’ in paragraph (a) and 

by adding in lieu thereof ‘‘paragraphs 

(b) and (c) of this section’’; 

■ b. Removing paragraph (d); 

■ c. Revising paragraph (c) to read as 

follows: 

§ 563e.28 Assigned ratings. 

* * * * * 

(c) Effect of evidence of 

discriminatory or other illegal credit 

practices. (1) The OTS’s evaluation of a 

savings association’s CRA performance 

is adversely affected by evidence of 

discriminatory or other illegal credit 

practices in any geography by the 

savings association or any affiliate 

whose loans have been considered as 

part of the savings association’s lending 

performance. In connection with any 

type of lending activity described in 

§ 563e.22(a), evidence of discriminatory 

or other credit practices that violate an 

applicable law, rule, or regulation 

includes, but is not limited to: 

(i) Discrimination against applicants 

on a prohibited basis in violation, for 

example, of the Equal Credit 

Opportunity Act or the Fair Housing 

Act; 

(ii) Violations of the Home Ownership 

and Equity Protection Act; 

(iii) Violations of section 5 of the 

Federal Trade Commission Act; 

(iv) Violations of section 8 of the Real 

Estate Settlement Procedures Act; and 

(v) Violations of the Truth in Lending 

Act provisions regarding a consumer’s 

right of rescission. 

(2) In determining the effect of 

evidence of practices described in 

paragraph (c)(1) of this section on the 

savings association’s assigned rating, the 

OTS considers the nature, extent, and 

strength of the evidence of the practices; 

the policies and procedures that the 

savings association (or affiliate, as 

applicable) has in place to prevent the 

practices; any corrective action that the 

savings association (or affiliate, as 

applicable) has taken or has committed 

to take, including voluntary corrective 

action resulting from self-assessment; 

and any other relevant information. 

■ 6. In Appendix A to part 563e, revise 

paragraph (d) to read as follows: 

Appendix A to Part 563e—Ratings 

* * * * * 

(d) Savings associations evaluated under 

the small savings association performance 

standards.—(1) Lending test ratings. (i) 

Eligibility for a satisfactory lending test 

rating. The OTS rates a small savings 

association’s lending performance 

‘‘satisfactory’’ if, in general, the savings 

association demonstrates: 

(A) A reasonable loan-to-deposit ratio 

(considering seasonal variations) given the 

savings association’s size, financial 

condition, the credit needs of its assessment 

area(s), and taking into account, as 

appropriate, other lending-related activities 

such as loan originations for sale to the 

secondary markets and community 

development loans and qualified 

investments; 

(B) A majority of its loans and, as 

appropriate, other lending-related activities, 

are in its assessment area; 

(C) A distribution of loans to and, as 

appropriate, other lending-related activities 

for individuals of different income levels 

(including low- and moderate-income 


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13436 Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Rules and Regulations 

individuals) and businesses and farms of 

different sizes that is reasonable given the 

demographics of the savings association’s 

assessment area(s); 

(D) A record of taking appropriate action, 

when warranted, in response to written 

complaints, if any, about the savings 

association’s performance in helping to meet 

the credit needs of its assessment area(s); and 

(E) A reasonable geographic distribution of 

loans given the savings association’s 

assessment area(s). 

(ii) Eligibility for an ‘‘outstanding’’ lending 

test rating. A small savings association that 

meets each of the standards for a 

‘‘satisfactory’’ rating under this paragraph 

and exceeds some or all of those standards 

may warrant consideration for a lending test 

rating of ‘‘outstanding.’’

(iii) Needs to improve or substantial 

noncompliance ratings. A small savings 

association may also receive a lending test 

rating of ‘‘needs to improve’’ or ‘‘substantial 

noncompliance’’ depending on the degree to 

which its performance has failed to meet the 

standard for a ‘‘satisfactory’’ rating. 

(2) Community development test ratings for 

intermediate small savings associations.—(i) 

Eligibility for a satisfactory community 

development test rating. The OTS rates an 

intermediate small savings association’s 

community development performance 

‘‘satisfactory’’ if the savings association 

demonstrates adequate responsiveness to the 

community development needs of its 

assessment area(s) through community 

development loans, qualified investments, 

and community development services. The 

adequacy of the savings association’s 

response will depend on its capacity for such 

community development activities, its 

assessment area’s need for such community 

development activities, and the availability 

of such opportunities for community 

development in the savings association’s 

assessment area(s). 

(ii) Eligibility for an outstanding 

community development test rating. The OTS 

rates an intermediate small savings 

association’s community development 

performance ‘‘outstanding’’ if the savings 

association demonstrates excellent 

responsiveness to community development 

needs in its assessment area(s) through 

community development loans, qualified 

investments, and community development 

services, as appropriate, considering the 

savings association’s capacity and the need 

and availability of such opportunities for 

community development in the savings 

association’s assessment area(s). 

(iii) Needs to improve or substantial 

noncompliance ratings. An intermediate 

small savings association may also receive a 

community development test rating of 

‘‘needs to improve’’ or ‘‘substantial 

noncompliance’’ depending on the degree to 

which its performance has failed to meet the 

standards for a ‘‘satisfactory’’ rating. 

(3) Overall rating.—(i) Eligibility for a 

satisfactory overall rating. No intermediate 

small savings association may receive an 

assigned overall rating of ‘‘satisfactory’’

unless it receives a rating of at least 

‘‘satisfactory’’ on both the lending test and 

the community development test. 

(ii) Eligibility for an outstanding overall 

rating. (A) An intermediate small savings 

association that receives an ‘‘outstanding’’

rating on one test and at least ‘‘satisfactory’’

on the other test may receive an assigned 

overall rating of ‘‘outstanding.’’

(B) A small savings association that is not 

an intermediate small savings association 

that meets each of the standards for a 

‘‘satisfactory’’ rating under the lending test 

and exceeds some or all of those standards 

may warrant consideration for an overall 

rating of ‘‘outstanding.’’ In assessing whether 

a bank’s performance is ‘‘outstanding,’’ the 

OTS considers the extent to which the 

savings association exceeds each of the 

performance standards for a ‘‘satisfactory’’

rating and its performance in making 

qualified investments and its performance in 

providing branches and other services and 

delivery systems that enhance credit 

availability in its assessment area(s). 

(iii) Needs to improve or substantial 

noncompliance overall ratings. A small 

savings association may also receive a rating 

of ‘‘needs to improve’’ or ‘‘substantial 

noncompliance’’ depending on the degree to 

which its performance has failed to meet the 

standards for a ‘‘satisfactory’’ rating. 

* * * * * 

Dated: March 16, 2007. 

By the Office of Thrift Supervision. 

John M. Reich, 

Director. 

[FR Doc. E7–5188 Filed 3–21–07; 8:45 am] 

BILLING CODE 6720–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 23 

[Docket No. CE263; Special Conditions No. 

23–203–SC] 

Special Conditions: Aviation 

Technology Group, Incorporated, 

Javelin Model No. 100; Firewalls for 

Fuselage Mounted Engines and Fire 

Extinguishing for Aft Fuselage 

Mounted Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final special conditions. 

SUMMARY: These special conditions are 

issued for the Aviation Technology 

Group, Incorporated, Javelin Model No. 

100 airplane. This airplane will have 

novel or unusual design features 

associated with aft mounted engine fire 

protection. The applicable airworthiness 

regulations do not contain adequate or 

appropriate safety standards for this 

design feature. These special conditions 

contain the additional safety standards 

that the Administrator considers 

necessary to establish a level of safety 

equivalent to that established by the 

existing airworthiness standards. 

DATES: Effective Date: March 12, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Leslie B. Taylor, Regulations & Policy 

Branch, ACE–111, Small Airplane 

Directorate, Aircraft Certification 

Service, 901 Locust, Kansas City, 

Missouri 64106; telephone (816) 329–

4134; facsimile (816) 329–4090, e-mail 

at leslie.b.taylor@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

On February 25, 2005, Aviation 

Technology Group, Incorporated 

applied for a type certificate for their 

new Javelin Model No. 100. The Javelin 

Model No. 100 is a two-place acrobatic 

airplane with two fuselage mounted 

turbofan engines. 

Part 23 historically addressed fire 

protection on multiengine airplanes 

based on the assumption that the 

engines are sufficiently separated to 

essentially eliminate the possibility of 

an engine fire spreading to another 

engine. On traditional multiengine 

airplanes, this has been achieved by 

locating engines on the wings separated 

by the fuselage. This configuration 

ensures that an engine fire on one side 

does not migrate to the opposite engine. 

This configuration also protects the 

opposite engine from heat radiating 

from the engine fire. Prevention, 

identification, and containment are 

traditional means of fire protection. 

Prevention has been provided through 

minimizing the potential for ignition of 

flammable fluids and vapors. 

Identification has been provided by 

locating engines within the pilots’

primary field of view and/or with the 

incorporation of fire detection systems. 

This has provided both rapid detection 

of a fire and confirmation when it was 

extinguished. Containment has been 

provided through the isolation of 

designated fire zones through flammable 

fluid shutoff valves and firewalls. This 

philosophy also ensures that 

components of the engine control 

system will function effectively to 

permit a safe shutdown of an engine. 

However, containment has only been 

demonstrated for 15 minutes. If a fire 

occurs in traditional part 23 airplanes, 

the appropriate corrective action is to 

land as soon as possible. For a small, 

simple airplane originally envisioned by 

part 23, it is possible to descend and 

land within 15 minutes. Thus, the 

occupants can safely exit the airplane 

before the firewall is breached. These 

simple airplanes normally have the 

engine located away from critical flight 

control systems and primary structure. 


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