1

BILLING CODE 4810-AK

DEPARTMENT OF THE TREASURY

31 CFR Part 35

Docket No. TREAS-DO-2021-0004

RIN 1505-AC76

Emergency Capital Investment Program – Restrictions on Executive Compensation, Share 

Buybacks, and Dividends

AGENCY: Department of the Treasury.

ACTION: Interim final rule and request for public comment.

SUMMARY: Section 104A of the Community Development Banking and Financial Institutions 

Act of 1994, which was added by the Consolidated Appropriations Act, 2021, establishes the 

Emergency Capital Investment Program to support capital investments in low- and moderateincome community financial institutions. The program is available to eligible minority 

depository institutions and community development financial institutions that are (1) insured 

depository institutions, (2) bank holding companies, (3) savings and loan holding companies, or 

(4) federally insured credit unions. Under Section 104A, the Secretary of the Treasury is 

required to issue rules setting restrictions on executive compensation, share buybacks, and 

dividend payments for recipients of capital investments under the program. This interim final 

rule establishes these restrictions. 

DATES: 

Effective date: This interim final rule is effective [INSERT DATE OF PUBLICATION 

IN THE FEDERAL REGISTER]. 
2

Comment Date: Comments must be received on or before [INSERT DATE 30 DAYS 

AFTER PUBLICATION IN THE FEDERAL REGISTER].

ADDRESSES: You may submit comments identified by number TREAS-DO-2021-0004

through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for 

submitting comments. 

Treasury will post all comments on www.regulations.gov. If you wish to submit 

confidential business information (CBI) as defined in the User Notice at www.regulations.gov, 

please send an email to ECIPInquiries@Treasury.gov. Highlight the information that you 

consider to be CBI and explain why you believe Treasury should hold this information as 

confidential. Treasury will review the information and make the final determination whether it 

will publish the information. 

FOR FURTHER INFORMATION CONTACT: For further information regarding this 

interim final rule contact Brian Donovan, Emergency Capital Investment Program, Treasury, at 

Brian.Donovan2@treasury.gov, or Eric Froman, Assistant General Counsel (Banking and 

Finance), Treasury, at Eric.Froman@treasury.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background Information

II. Comments and Immediate Effective Date

III. Interim Final Rule

A. Background on the ECIP

B. Overview of the Interim Final Rule

1. Restrictions on Compensation
3

2. Restrictions on Dividends, Share Buybacks, and other Capital Distributions

IV. Regulatory Analyses

A. Administrative Procedure Act

B. National Environmental Policy Act 

C. Paperwork Reduction Act

D. Regulatory Flexibility Act

E. Regulatory Planning and Review

F. Executive Order 13132

G. Congressional Review Act

I. Background Information

On December 27, 2020, the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), 

was signed into law. It added Section 104A of the Community Development Banking and 

Financial Institutions Act of 1994 (the Act) (12 U.S.C. 4701 et seq.), which was enacted as part 

of the Riegle Community Development and Regulatory Improvement Act of 1994 (Pub. L. 103–

325). Section 104A authorizes the Secretary of the Treasury to establish the Emergency Capital 

Investment Program (ECIP or Program) to make investments in low- and moderate-income 

community financial institutions. These investments are to support the efforts of low- and 

moderate-income community financial institutions to, among other things, provide loans, grants, 

and forbearance for small businesses, minority-owned businesses, and consumers, especially in 

low-income and underserved communities, including persistent poverty counties, which may be 

disproportionately impacted by the economic effects of the COVID-19 pandemic. 

Under Section 104A(h) of the Act, the Department of the Treasury (Treasury) must issue 

rules setting restrictions on executive compensation, share buybacks, and dividend payments for 
4

recipients of capital investments under ECIP. This rulemaking establishes those restrictions, 

which are described in section III below. 

II. Comments and Immediate Effective Date 

ECIP is intended to be used to make investments in low- and moderate-income 

community financial institutions expeditiously.1 Section 104A(h) of the Act requires Treasury to 

issue rules no later than 30 days after the statute’s effective date that set restrictions on executive 

compensation, share buybacks, and dividend payments for recipients of capital investments 

under ECIP. This legislative mandate, along with the dramatic and ongoing effects of the 

COVID-19 pandemic—the public health crisis, continuing closures of small businesses and 

minority-owned businesses, and heightened consumer unemployment, especially in low-income 

and underserved communities—provides good cause for Treasury to issue this interim final rule 

without advance notice and public comment and to dispense with the 30-day delayed effective 

date provided in the Administrative Procedure Act (5 U.S.C. 553). The immediate effective date 

of this interim final rule will benefit low- and moderate-income community financial institutions, 

as well as the communities served by such institutions, by allowing low- and moderate-income 

community financial institutions to expeditiously apply for capital investments with a full 

understanding of the executive compensation, share buyback, and dividend payment restrictions 

that will apply to participants in the Program. Otherwise, potential recipients of capital 

investments under ECIP could decide not to participate in the Program or to delay their 

1 For example, section 104A(d)(1) of the Act requires Treasury to begin accepting applications 

for capital investments under ECIP within 30 days after enactment of the statute, and section 

104A(h)(1) requires Treasury to issue rules setting restrictions on executive compensation, share 

buybacks, and dividend payments for ECIP recipients within 30 days after enactment of the 

statute. 
5

applications for a material period of time pending the establishment of these requirements, which 

would reduce or delay the provision of much-needed assistance to communities that have 

suffered economic impairment due to the COVID-19 pandemic. Although this interim final rule 

is effective immediately, comments are solicited from the public on all aspects of the interim 

final rule. Comments must be submitted on or before [INSERT DATE 30 DAYS AFTER 

PUBLICATION IN FEDERAL REGISTER], 2021. Treasury will consider these comments and 

the need for making any revisions as a result of these comments. 

III. Interim Final Rule

A. Background on the ECIP 

The purpose of ECIP is to support the efforts of low- and moderate-income community 

financial institutions to, among other things, provide loans, grants, and forbearance for small 

businesses, minority-owned businesses, and consumers, especially in low-income and 

underserved communities, including persistent poverty counties, which may be 

disproportionately impacted by the economic effects of the COVID-19 pandemic.2

 To support 

these objectives, the Act makes up to $9 billion available to Treasury to make capital 

investments in minority depository institutions and community development financial 

institutions that are (1) insured depository institutions that are not controlled by eligible bank 

holding companies or eligible savings and loan holding companies, (2) bank holding companies, 

(3) savings and loan holding companies, or (4) federally insured credit unions. Certain 

additional eligibility criteria apply, including a requirement for applicants to provide Treasury 

2 Section 104A(b)(2) of the Act.
6

with an investment and lending plan that provides certain specified information concerning the 

applicant’s lending history and plans.3 

A community development financial institution or minority depository institution that 

submits an application and is selected to participate in the Program (ECIP recipient) will receive 

a capital investment from Treasury.4, 5 Consistent with statutory requirements, the investment by 

Treasury will take the form of preferred stock, except in cases where Treasury determines that an 

institution cannot feasibly issue preferred stock, Treasury may purchase subordinated debt 

instruments.6

 The statute sets forth certain economic terms of the capital investments under 

ECIP7 and limitations on the amount of capital investments Treasury may purchase from 

individual institutions.8 In addition, the statute prohibits institutions with certain types of 

conflicts of interest from participating in ECIP.9

 Treasury’s authority to make new capital 

investments in ECIP will end six months after the date on which the national emergency 

concerning the COVID–19 outbreak declared by the President on March 13, 2020 under the 

National Emergencies Act (50 U.S.C. 1601 et seq.) terminates.

3 Sections 104A(d)(3)-(4), 104A(i) of the Act.

4 An ECIP capital investment may be treated as equity or subordinated debt for accounting 

purposes depending on the type of instrument issued and the corporate form and regulatory 

classification of the ECIP participant. 

5 Currently, the only federally insured credit unions that may accept these types of investments as 

secondary capital under the secondary capital rules of the National Credit Union Administration 

(NCUA) are those with a designation of low-income status. See 12 CFR 701.34(b). Credit unions 

that do not meet the low-income credit union designation may participate through the issuance of 

subordinated debt, but the subordinated debt would not be secondary capital.

6 Section 104(d)(5)(B) of the Act.

7 Sections 104A(d)(5)-(8) of the Act.

8 Sections 104A(e), (f) of the Act.

9 Section 104A(h) of the Act.
7

B. Overview of the Interim Final Rule

This interim final rule establishes restrictions on executive compensation, share 

buybacks, and dividend payments, as required by the Act. In developing these restrictions, 

Treasury has considered two primary objectives. First, these restrictions should seek to promote 

the integrity of ECIP by ensuring that the funds provided under the Program are used to provide 

loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, 

especially in low-income and underserved communities. Second, the restrictions generally 

should seek to encourage a large number of minority depository institutions and community 

development financial institutions to participate in ECIP, because the Program will have the most 

beneficial impact on the intended communities if a broad range of institutions participate in the 

Program. 

The restrictions under this interim final rule generally apply to an ECIP recipient during 

the “ECIP period,” defined as the period from the date the ECIP makes its investment until the 

earliest of (i) the date on which the ECIP recipient has fully redeemed or repaid the capital 

investment received under ECIP; (ii) the date on which the capital investment the ECIP recipient 

received under ECIP is no longer held, in full or in part, by Treasury or a Treasury affiliate, or a 

custodian, trustee, or agent acting on behalf of Treasury or a Treasury affiliate, and (iii) the date 

that is ten years after the ECIP investment date. The restrictions apply to the ECIP recipient on a 

consolidated basis. Treasury anticipates that the ECIP period will provide sufficient time to 

ensure that ECIP investments are deployed in a manner that supports the statutory objectives. 

Accordingly, the requirements of the interim final rule will cease to apply when the ECIP 

investment is no longer held by Treasury or an entity established by Treasury (Treasury 

affiliate).
8

1. Restrictions on Compensation 

The restrictions on executive compensation under the interim final rule include (i) a 

requirement to ensure that the total compensation paid to senior executive officers is appropriate 

and not excessive; (ii) a restriction on severance pay for an ECIP recipient’s senior executive 

officers if the ECIP recipient is in troubled condition; and (iii) a requirement to adopt policies 

and procedures prohibiting excessive or luxury expenditures (as defined below). Each of these 

compensation-related restrictions is intended to help ensure that the proceeds of ECIP 

investments have the effect intended by Section 104A of the Act and are not to fund excessive 

compensation for ECIP recipients’ executives.

The restrictions on excess compensation apply to total compensation, which is defined as 

all compensation, other than any severance payment, provided by an ECIP recipient to an officer 

or employee, including salary, wages, bonuses, awards of stock, deferred compensation, and 

other financial benefits.

A “senior executive officer” means an ECIP recipient’s president, any vice president in 

charge of a principal business unit division or function (such as sales, administration, or finance), 

any other officer who performs a policy making function, or any other person who performs 

similar policy making functions.

i. Policies and procedures prohibiting excessive compensation

Under the interim final rule, an ECIP recipient is required to ensure that the total 

compensation paid to its senior executive officers is appropriate and not excessive. Unless 

informed otherwise by Treasury, an ECIP recipient is considered to have satisfied the 

requirements regarding excessive executive compensation under the interim final rule if it 
9

maintains compliance with the guidelines or standards established by its primary federal 

regulator that address excessive compensation, corporate practices, and operations. Specifically, 

ECIP recipients that are insured depository institutions are subject to the Interagency Guidelines

Establishing Standards for Safety and Soundness as issued by the appropriate federal banking 

agency for the particular ECIP recipient.10 Bank holding companies and savings and loan 

holding companies are required to maintain compliance with corporate practice11 and operations 

requirements12 issued by the Board of Governors of the Federal Reserve System (Federal 

Reserve Board), and, under the interim final rule, to ensure their subsidiary insured depository 

institutions adopt and maintain policies and procedures that are consistent with the applicable 

guidelines or standards established by their primary federal regulators that address excessive 

compensation. In addition, federally insured credit unions must maintain compliance with the 

requirements on compensation and benefits for federally insured credit unions as issued by the 

National Credit Union Administration (NCUA).13 Treasury reserves the authority to take action 

as necessary to address potential anti-evasion concerns relating to the interim final rule’s 

requirements for ECIP participants. 

ii. Limit on severance pay

Under the interim final rule, an ECIP recipient is prohibited from making excessive 

severance payments to a senior executive officer. Severance pay is defined to include all types 

of cash payments, benefits, and other amounts paid or provided in connection with an 

10 For national banks and federal savings associations, 12 CFR part 30, Appendix A; state 

member banks, 12 CFR part 208, Appendix D-1; and insured state nonmember banks and state 

savings associations, 12 CFR part 364, Appendix A.

11 12 CFR 225.4.

12 12 CFR 238.8.

13 12 CFR 701.19(a); 12 CFR 701.21(c)(8); 12 CFR 702.203(b)(10); 12 CFR 702.204(b)(10).
10

individual’s termination of employment, except for payment for services performed or benefits 

that were accrued prior to termination of employment or otherwise accrued with respect to 

services performed.

Unless informed otherwise by Treasury, an ECIP recipient that is an insured depository 

institution, bank holding company, or savings and loan holding company is considered to have 

satisfied the requirements regarding severance payments if it maintains compliance with the 

limits and prohibitions on the ability of insured depository institutions and their affiliated holding 

companies to enter into contracts to pay and to make golden parachute and indemnification 

payments to institution-affiliated parties, as issued by the FDIC.14 The FDIC rules place 

restrictions on payments to institution-affiliated parties whenever an insured depository 

institution or depository institution holding company is in “troubled condition,” as determined by 

the appropriate federal banking agency. An ECIP recipient that is not designated in troubled 

condition by the appropriate federal banking agency during the ECIP period generally would not 

be subject to restrictions on severance payments under the interim final rule. Similarly, a 

federally insured credit union is considered to have satisfied the requirements regarding 

severance payments if it maintains compliance with the limits and prohibitions on the ability of 

federally insured credit unions to enter into contracts to pay and to make golden parachute and 

indemnification payments to institution-affiliated parties as issued by the NCUA.15

 This 

restriction is designed to align the requirements of the ECIP with existing standards applicable to 

ECIP recipients under regulations issued by federal regulators. 

14 12 CFR part 359.

15 12 CFR part 750.
11

iii. Limit on excessive or luxury expenditures

Under the interim final rule, ECIP recipients are required to establish and maintain 

policies designed to eliminate excessive or luxury expenditures. The term “excessive or luxury 

expenditures” is defined as excessive expenditures on any of the following to the extent such 

expenditures are not reasonable expenditures for staff development, reasonable performance 

incentives, or other similar reasonable measures conducted in the normal course of the ECIP 

recipient’s business operations: (1) entertainment or events; (2) office and facility renovations; 

(3) aviation or other transportation services; (4) tax gross-ups (i.e., reimbursement of taxes owed 

with respect to any compensation); and (5) other similar items, activities, or events for which the 

ECIP recipient may reasonably anticipate incurring expenses, or reimbursing an employee for 

incurring expenses. Capital investments, including investments in technology, equipment, and 

similar items that expand the long-term capability of an ECIP recipient to provide products and 

services to its customers and community are not excessive or luxury expenditures. 

The interim final rule requires an ECIP recipient to adopt and maintain an “excessive or 

luxury expenditures policy” that sets forth written standards applicable to the ECIP recipient and 

its employees that address the five categories of expenses set forth in the definition of “excessive 

or luxury expenditures” and that are reasonably designed to eliminate excessive or luxury 

expenditures. The standards must (1) identify the types or categories of expenditures which are 

prohibited; (2) identify the types or categories of expenditures for which prior approval is 

required (which may include a threshold expenditure amount per item, activity, or event or a 

threshold expenditure amount per employee receiving the item or participating in the activity or 

event); (3) provide reasonable approval procedures for expenditures requiring prior approval; (4) 

require the ECIP recipient to deliver a certification, executed by two senior executive officers 
12

(one of which must be either the ECIP recipient’s chief executive officer (or individual 

performing a similar function) (defined as the “principal executive officer”) or its chief financial 

officer (or individual performing a similar function) (defined as the “principal financial officer”) 

that the approval of any expenditure requiring the prior approval of any senior executive officer, 

any executive officer of a substantially similar level of responsibility, or the ECIP recipient’s 

board of directors (or a committee of such board of directors) was properly obtained with respect 

to each such expenditure; (5) require the prompt internal reporting of violations to an appropriate 

person or persons identified in this policy; and (6) mandate accountability for adherence to the 

policy. The requirement to establish a policy regarding excessive or luxury expenditures is 

intended to promote the integrity of ECIP by ensuring that the funds provided under the Program 

are used to provide loans, grants, and forbearance, without restricting ECIP participants’

discretion to establish policies and procedures that are tailored to meet the needs and business 

objectives of their respective organizations. 

To facilitate compliance with this requirement, Treasury is making available to ECIP 

recipients a form of excessive or luxury expenditures policy in Appendix A to the interim final 

rule. An ECIP recipient may use this form to satisfy the requirement in the interim final rule to 

adopt and maintain an excessive or luxury expenditures policy. Alternatively, an ECIP recipient 

may use other forms or existing policies relating to excessive or luxury expenditures, but such 

other forms or policies must satisfy all the requirements of the interim final rule.

iv. Material Changes to Policies or Procedures

An ECIP recipient must obtain prior approval from Treasury before making any material 

change to the policies or procedures that it maintains for purposes of compliance with the 

compensation, severance pay and excessive or luxury expenditures requirements described in the 
13

preceding discussion.16

 A change to such policies or procedures will be considered material if 

the change is likely to have a negative effect on the financial condition of the ECIP recipient, 

limit the ability of the ECIP recipient to make payments under the terms of an ECIP instrument, 

or otherwise impair the ECIP recipient’s ability to meet its obligations to Treasury under the 

Program. An ECIP recipient would bear the initial responsibility for determining whether a 

change in policy or procedures is material; however, Treasury would retain the authority to take 

enforcement as appropriate (i.e., an ECIP recipient should not revise its compensation policy to

permit or pay excessive compensation if its cash is insufficient to pay dividends on ECIP 

instruments). A request by an ECIP recipient to make a material change to its compensation, 

severance pay, or excessive or luxury expenditures policies or procedures must be submitted to 

Treasury in writing at least 30 days prior to the effective date of the policy change. The notice 

will be deemed approved 30 days after the ECIP submits the notice to Treasury unless prior to 

the expiration of the 30-day period Treasury (i) objects to the proposed change or (ii) notifies the 

ECIP recipient that additional time is required in order to better evaluate the impact of the 

proposed change to policy or procedures.

Treasury specifically solicits comments from members of the public concerning the 

following issues:

Question #1: Are the restrictions on compensation sufficiently tailored to facilitate the 

ECIP Program objectives without discouraging participation in the program? 

16 Disclosures by ECIP recipients of any proposed material changes to any such policies or 

procedures will be subject to their federal regulators’ applicable restrictions in respect of the 

disclosure of confidential supervisory information. 
14

Question #2: Are there other reasonable alternatives to the Program’s excessive or 

luxury expenditures policy requirement that would be as effective in ensuring that funds provided 

under the Program are used to provide loans, grants, and forbearance, without restricting ECIP 

participant discretion to establish policies and procedures that are tailored to meet the needs 

and business objectives of their respective organizations?

Question #3: What additional guidance or clarification regarding the compensation and 

expenditure restrictions would help facilitate compliance with these restrictions and ensure that 

the restrictions are working as intended? 

2. Restrictions on Dividends, Share Buybacks, and other Capital Distributions 

The restrictions on dividends, share buybacks, and other capital distributions under the 

interim final rule include two components. The first is a prohibition on discretionary dividends, 

share buybacks and other capital distributions on non-senior securities if an ECIP recipient has 

not (i) for preferred stock issued to Treasury, paid in full the dividends for the last completed 

dividend period, or (ii) for instruments issued to Treasury other than in the form of preferred 

stock, such as subordinated debt, paid all amounts due and payable and all amounts previously 

deferred under the terms of the instruments. The second is a limit on dividends, share buybacks, 

and other capital distributions based on separate earnings-based tests for (i) insured depository

institutions, bank holding companies and savings and loan holding companies, on the one hand, 

and (ii) federally insured credit unions, on the other.

However, the interim final rule provides an exception from these restrictions for ECIP 

recipients that are S corporations or other pass-through entities for purposes of the Internal 

Revenue Code of 1986. The interim final rule will permit S corporations and other pass-through 
15

entities to make capital distributions to the extent reasonably required to cover its owners’ tax 

obligations in respect of the entity’s earnings. Such distributions shall be subject to an annual 

reconciliation, with any surplus or deficiency to be deducted or added to distributions, as 

applicable, in the following year.

The exemption for tax-related distributions in the interim final rule does not supersede 

otherwise applicable limitations or determinations with respect to distributions established by an 

ECIP recipient’s federal regulators. Accordingly, tax-related distributions permitted under the 

interim final rule must also comply with any applicable limitations or determinations established 

by an ECIP recipient’s federal regulators. 

Similar to the restrictions on executive compensation described above, these limitations 

on capital distributions are intended to ensure that the funds provided under ECIP have the effect 

intended by Section 104A of the Act, and are not to provide undue compensation to an ECIP 

recipient’s shareholders or owners. In addition, these restrictions serve to protect the taxpayer’s 

financial interest in connection with the instruments issued by an ECIP recipient to Treasury in 

connection with the Program. 

i. Restriction on dividends, share buybacks and other capital distributions

The interim final rule defines “non-senior securities” as any equity interests in or other 

instruments issued by an ECIP recipient that are pari passu with or junior to Treasury’s 

investment, or equity interests in or other instruments issued by a depository institution holding 

company of which the ECIP recipient is a subsidiary. Under the interim final rule, an ECIP 

recipient will be prohibited from making capital distributions, such as declaring or paying any 

dividend on, or purchasing or redeeming, any non-senior securities unless (i) if Treasury holds 
16

shares of preferred stock, the company has paid in full dividends on the preferred stock with 

respect to the last completed dividend period (prior to the current dividend period); or (ii) if 

Treasury holds an instrument other than preferred stock (e.g., subordinated debt), all amounts 

due and payable on the instrument have been paid in full, and no deferred amounts are unpaid. 

These restrictions reflect customary contractual protections to prevent an ECIP recipient from 

making discretionary distributions on non-senior securities if payments are not being made to 

Treasury on its investment. These restrictions would not prevent an ECIP recipient from making 

required, non-discretionary payments on non-senior securities, such as payments required at 

stated maturity in accordance with an instrument’s terms, or payments of interest that may not be 

deferred.

17

For these purposes, a “capital distributions” are defined as (i) dividends, including 

discretionary dividends, on non-senior securities and any other payments on a share of stock or 

other equity or equivalent interest, (ii) payments, including interest payments, on non-senior 

securities that the issuer has full discretion to permanently or temporarily suspend without 

triggering a default, (iii) redemptions or repurchases of non-senior securities or (iv) any similar 

transaction that Treasury determines to be in substance a capital distribution. Excluded from this 

definition, however, are (a) redemptions or repurchases of shares that are part of an employee 

stock ownership plan for an ECIP recipient that is not publicly traded, provided that the 

repurchase is required solely by virtue of the Employee Retirement Income Security Act of 1974, 

as amended; (b) in the case of federally insured credit unions, payments of dividends and interest 

(as defined by 12 CFR 707.2(h) and (o)) on accounts held by their members and redemptions of 

17 Such payments may be subject to limitations established by an ECIP recipient’s primary 

federal regulator. 
17

membership share interests upon voluntary or involuntary terminations of membership by a 

credit union or its members, as applicable; and (c) solely in the case of the earnings test 

described below, redemptions or repurchases of non-senior securities if the issuer of the nonsenior securities being repurchased or redeemed funds the redemption or repurchase by issuing at 

least a corresponding amount of new non-senior securities that rank equally in liquidation with, 

receive the same capital treatment as and, if applicable, have a stated maturity date no earlier 

than the non-senior securities being redeemed or repurchased. An extraordinary or special 

dividend (which excludes an ordinary dividend on a special share account) by a federally insured 

credit union is a capital distribution and is not subject to the exclusion for payments of dividends 

and interest by credit unions on accounts held by their members.

ii. Limit on the amount of capital distributions

Under the interim final rule, an ECIP recipient will be required to obtain prior approval 

from Treasury in order to make capital distributions in excess of the following earnings-based 

tests. 

Treasury determined that the limits on capital distributions are appropriate based on a 

review of publicly available data regarding average dividend rates among banking organizations 

with $10 billion or less in total assets, in the period before the Covid-19 pandemic. Thus, the 

limitation on capital distributions strikes an appropriate balance between allowing ECIP 

recipients to make capital distributions and helping to ensure that the proceeds of the ECIP 

investment are used to expand lending to low- and moderate-income and other targeted 

populations.
18

A. Earnings Test for Insured Depository Institutions, Bank Holding Companies, and 

Savings and Loan Holding Companies

The interim final rule provides that, without prior approval from Treasury, an ECIP 

recipient that is an insured depository institution, bank holding company, or savings and loan 

holding company may not make a capital distribution if the total capital distributions made 

during the calendar year, including the proposed capital distribution, exceeds its “eligible 

distributable income,” which is calculated as the ECIP recipient’s (a) year-to-date net income as 

of the end of the most recent calendar quarter, plus net income for the two preceding calendar 

years, less (b) any dividends or capital distributions for the year to date as of the end of the most 

recent calendar quarter, and for the two preceding calendar years, where (a) and (b) are

calculated in accordance with the instructions to the Call Report or applicable reporting form. 

While approval may be awarded by Treasury to make capital distributions, the interim final rule

confirms that such approval does not supersede any applicable regulatory requirements of the 

ECIP recipient’s appropriate federal banking agency, or other actions taken by such agency.

The “eligible distributable income” limit is similar to other existing earnings limitations 

on payments of dividends that apply to certain insured depository institutions.

18 In light of this 

similarity, an ECIP recipient could calculate eligible distributable income with respect to capital 

distributions, by applying the methodology set forth in 12 CFR 5.64 or 12 CFR 208.5, as 

applicable, with respect to dividends, by substituting “capital distributions” for “dividends.” In 

addition, in the case of 12 CFR 208.5, an ECIP recipient that is not an insured depository 

institution would use net income, as reported in the ECIP recipient’s FR Y-9C or FR Y-9SP, 

18 See, e.g., 12 U.S.C. 60 (national banks), 12 CFR 5.64 (national banks), and 12 CFR 208.5 

(state member banks).
19

instead of net income as reported in the Reports of Condition and Income. Treasury anticipates 

that the operational impact the capital distribution approval requirement will be nominal and that 

the approval requirement will provide meaningful support for the objectives of the Program. 

B. Earnings Test for Federally Insured Credit Unions

Consistent with existing distribution limitations applicable to federally insured credit 

unions,19 the interim final rule provides that, without prior approval by Treasury, an ECIP 

recipient that is a federally insured credit union may not make a capital distribution on any nonsenior securities if the distribution would (i) in the case of a dividend, be payable from retained 

earnings (as defined in 12 CFR 702.2(f)) other than undivided earnings; or (ii) cause the credit 

union’s net worth classification to fall below “adequately capitalized” (as defined in 12 CFR 

702.102(a)(2)).

3. Exemptive Relief 

Under the interim final rule, Treasury retains authority to grant waivers or exemptions 

from the restrictions under the interim final rule on dividends, share buybacks, and other capital 

distributions. Such relief may be granted broadly to all ECIP recipients or to particular entities. 

In considering whether to grant exemptive relief, Treasury will consider whether the relief is 

necessary or appropriate to achieve the goals of the ECIP or to protect the public interest. Such 

relief may be granted based on terms and conditions as determined by Treasury, and in making 

determinations regarding requests for exemptive relief, Treasury may consult with the primary 

federal regulator when deemed appropriate. 

19 See 12 CFR 702.403.
20

4. Annual Certification and Enforcement

Each ECIP recipient will be required to submit to Treasury on an annual basis a 

certification executed by two senior executive officers (one of which must be either the ECIP 

recipient’s principal executive officer or principal financial officer) that the ECIP recipient is in 

compliance with each of the excessive compensation, severance payments, excessive or luxury 

expenditures requirements and restrictions on capital distributions set forth in the interim final 

rule. If an ECIP recipient certifies that it satisfies the severance payments requirements, 

Treasury expects that the certification will address only compliance with the requirements and 

will neither address whether the ECIP recipient is in troubled condition for purposes of 12 CFR 

parts 359 and 750, as applicable, nor contain any confidential supervisory information subject to 

applicable disclosure restrictions promulgated by the ECIP recipients’ federal regulators.

The interim final rule is promulgated under Section 104A of the Act, and agreements 

between ECIP recipients and Treasury in connection with the Program will be entered into under 

the Act. Treasury may take action or directly address noncompliance with the requirements of 

this interim final rule or Program agreements. In addition, Treasury may, in its discretion,

inform the appropriate federal banking agencies of any apparent violations by ECIP recipients of 

the interim final rule or Program agreements between ECIP recipients and Treasury.20

 

Treasury specifically solicits comments from members of the public concerning the 

following issues:

20 See, e.g., 12 U.S.C. 4717(b). 
21

Question #4: Are the restrictions on dividends, share buybacks, and other capital 

distributions sufficiently tailored to facilitate the ECIP Program objectives without discouraging 

participation in the program? 

Question #5: What would be the advantages and disadvantages of aligning limitations on 

capital distributions under the interim final rule with limitations applicable to each entity 

pursuant to the requirements of its appropriate federal banking regulator? What are the 

advantages and disadvantages of calculating eligible distributable income based on (i) income 

as of the end of the most recent calendar quarter and (ii) year to date reported net income?

What are the advantages and disadvantages of calculating the capital distribution limitation 

using (i) year-to-date dividends or capital distributions; (ii) reported dividends or capital 

distributions; and (iii) year-to-date dividends or capital distributions as of the end of the most 

recent calendar quarter?

IV. Regulatory Analyses

A. Administrative Procedure Act

Pursuant to authority at 5 U.S.C. 553(b)(B), the interim final rule is exempt from the 

rulemaking requirements of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq.), 

including the requirement to provide prior notice and an opportunity for public comment for the 

good cause shown in Sections I and II of this Supplementary Information.

B. National Environmental Policy Act

The interim final rule has been reviewed in accordance with 12 CFR part 1815, the CDFI 

Fund’s environmental quality regulations published pursuant to the National Environmental 

Protection Act of 1969 (NEPA). It is the determination of Treasury that the interim final rule 
22

does not constitute a major Federal action significantly affecting the quality of the human 

environment and, in accordance with NEPA and the CDFI Fund's environmental quality 

regulations at 12 CFR part 1815, neither an Environmental Assessment nor an Environmental 

Impact Statement is required. 

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA) states that no 

agency may conduct or sponsor, nor is the respondent required to respond to, an information 

collection unless it displays a currently valid OMB control number. 

The interim final rule will add current information collections for excessive or luxury 

expenditure policy and exemptive relief requests to the ECIP application process. The 

“excessive or luxury policy” collection requirements include the adoption and maintenance of 

the policy (detailed in section 1(iii)); written notices of change (detailed in section 1(iv)); and 

annual certifications (detailed in section 4). The exemptive relief requests are detailed in section 

3. The addition of these collections will increase total annual burden by 44,014 hours: The 

policy requirements are expected to take 1,100 respondents 40 hours to complete for an annual 

burden of 44,000 hours, and it is estimated that 55 (or 5%) of respondents will submit an 

exemptive relief request that will take 15 minutes to complete, for an annual burden of 14 hours. 

The OMB Control Number for the Emergency Capital Investment Program information 

collection is 1505-0267.

Comments concerning suggestions for reducing the burden of collections of information 

should be directed to the Deputy Director for Policy and Programs, Community Development 

Financial Institutions Fund, 601 13th Street, NW, Suite 200 South, Washington, DC 20005.
23

D. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) requires an agency to 

consider whether the rules it proposes will have a significant economic impact on a substantial 

number of small entities. The RFA applies only to rules for which an agency publishes a 

general notice of proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed above, 

consistent with 5 U.S.C. 553(b)(B), Treasury has determined for good cause that general notice 

and opportunity for public comment is unnecessary, and therefore is not issuing a notice of 

proposed rulemaking. Because no notice of proposed rulemaking is required for this interim 

final rule, the provisions of the RFA do not apply. Nevertheless, Treasury seeks comment on 

whether, and the extent to which, the interim final rule would affect a significant number of 

small entities.

E. Regulatory Planning and Review 

This interim final rule is economically significant for the purposes of Executive Orders 

12866 and 13563. Treasury, however, is proceeding under the emergency provision at Executive 

Order 12866 section 6(a)(3)(D) based on the need to move expeditiously to mitigate the current 

economic conditions arising from the COVID–19 emergency, as discussed in Section II of this 

Supplementary Information. 

F. Executive Order 13132

This interim final rule does not have federalism implications as defined in Executive 

Order 13132. It will not have substantial direct effects on the States, on the relationship between 

the National Government and the States, or on the distribution of power and responsibilities 
24

among the various levels of government, as specified in the executive order. As such it does not 

warrant the preparation of a federalism assessment.

G. Congressional Review Act

The Administrator of the Office of Management and Budget’s Office of Information and 

Regulatory Affairs (OIRA) has determined that this is a major rule for purposes the 

Congressional Review Act (CRA) (5 U.S.C. 804(2) et seq.). Under the CRA, a major rule takes 

effect 60 days after the rule is published in the Federal Register. 5 U.S.C. 801(a)(3).

Notwithstanding this requirement, the CRA allows agencies to dispense with the 

requirements of section 801 when the agency for good cause finds that such procedure would be 

impracticable, unnecessary, or contrary to the public interest and the rule shall take effect at such 

time as the agency promulgating the rule determines. 5 U.S.C. 808(2). Pursuant to § 808(2), 

Treasury, for the good cause shown in sections I and II of this Supplementary Information, finds 

that a 60-day delay to provide public notice is impracticable and contrary to the public interest. 

List of Subjects in 31 CFR Part 35

Executive compensation

For the reasons set forth in the preamble, 31 CFR Subtitle A is amended by adding part 

35 to read as follows:
25

31 CFR Part 35 

PART 35—EMERGENCY CAPITAL INVESTMENT PROGRAM

Contents

Subpart A—[RESERVED]

Subpart B—Compensation and Capital Distributions

Sec.

35.20 Purpose, applicability, and general provisions.

35.21 Definitions.

35.22 Restrictions on compensation.

35.23 Restrictions on dividends, share buybacks, and other capital distributions.

35.24 Annual certification.

35.25 Exemptive relief.

Appendix A to 31 CFR Part 35—Emergency Capital Investment Program Model Excessive or 

Luxury Expenditures Policy

Authority: Consolidated Appropriations Act, 2021 (Pub. L. 116-260), Division N, Title V, 

Subtitle B; Community Development Banking and Financial Institutions Act of 1994 (enacted as 

part of the Riegle Community and Regulatory Improvement Act of 1994 (Pub. L. 103–325)), as 

amended (12 U.S.C. 4701 et seq.), Section 104A.

Subpart A [RESERVED]

Subpart B – Compensation and Capital Distributions

§ 35.20 Purpose, applicability and general provisions.

(a) Purpose. Pursuant Section 104A of the Community Development Banking and 

Financial Institutions Act of 1994 (Act), as added by the Consolidated Appropriations Act, 2021 

(Pub. L. 116-260), this subpart establishes restrictions on executive compensation, dividend 

payments, and share buybacks for recipients of capital investments under the Department of the 

Treasury’s Emergency Capital Investment Program (ECIP or Program), as well as additional 

criteria for participation in the Program that the Secretary has determined are appropriate in 

furtherance of the Program goals.
26

(b) Applicability. This subpart applies on a consolidated basis to any insured depository 

institution, bank holding company, savings and loan holding company, or federally insured credit 

union that issues preferred stock or a subordinated debt instrument to the Department of the 

Treasury under the Program (an ECIP recipient, as defined in § 35.21 of this subpart). An ECIP 

recipient must comply with the requirements of this subpart during the ECIP period.

(c) Limitation of authority. Nothing in this subpart shall be interpreted to limit the 

authority of the appropriate federal banking agency to take action under other provisions of law, 

including action to address unsafe or unsound practices or conditions, deficient capital levels, or 

violations of law or regulation, under section 8 of the Federal Deposit Insurance Act, section 8 of 

the Bank Holding Company Act, or section 10 of the Home Owners’ Loan Act, or the Federal 

Credit Union Act, as may be applicable. 

§ 35.21 Definitions.

Except as modified in this regulation or unless the context otherwise requires, the terms 

used in this regulation have the same meaning as set forth in the relevant statutes.

For purposes of this subpart: 

Act means the Community Development Banking and Financial Institutions Act of 1994, 

as amended (12 U.S.C. 4701 et seq.).

Appropriate federal banking agency has the same meaning as in 12 U.S.C. 1813 and also 

includes the NCUA with respect to a federally insured credit union. 

Capital distributions means: 
27

(1) Dividends, including discretionary dividends, on non-senior securities and any other 

payments on a share of stock or other equity or equivalent interest;

(2) Payments, including interest payments, on non-senior securities, that the issuer has 

full discretion to permanently or temporarily suspend without triggering a default;

(3) Redemptions or repurchases of non-senior securities; or

(4) Any similar transaction that the Department of the Treasury determines to be in 

substance a capital distribution;

Provided, that a “capital distribution” does not include: 

(i) Redemptions or repurchases of shares that are part of an employee stock ownership 

plan for an ECIP recipient that is not publicly traded, provided that the repurchase is 

required solely by virtue of the Employee Retirement Income Security Act of 1974, as 

amended;

(ii) In the case of federally insured credit unions, (A) payments of dividends and interest 

(as defined by 12 CFR 707.2(h) and (o)) on accounts held by their members; provided 

that this exclusion does not apply to any extraordinary or special dividend by a credit 

union; or (B) redemptions of membership share interests upon voluntary or involuntary 

terminations of membership by a credit union or its members, as applicable; and

(iii) Solely in the case of § 35.23(b) (Limit on amount of capital distributions), 

redemptions or repurchases of non-senior securities if the issuer of the non-senior

securities being repurchased or redeemed fully funds the redemption or repurchase by 

issuing at least a corresponding amount of new non-senior securities that rank equally in 
28

liquidation with, receive the same capital treatment as and, if applicable, have a stated 

maturity date no earlier than the non-senior securities being redeemed or repurchased.

ECIP means the Emergency Capital Investment Program established under Section 104A 

of the Community Development Banking and Financial Institutions Act of 1994, as amended.

ECIP investment means any preferred stock, subordinated debt, or other instrument 

(including any successor to any such instrument) issued by an ECIP recipient to the Department 

of the Treasury under the ECIP. 

ECIP investment agreement means the agreement between an ECIP recipient and the 

Department of the Treasury with respect to the ECIP investment in that ECIP recipient.

ECIP investment date means the date on which an ECIP recipient first issued an ECIP 

investment.

ECIP period means the period from the ECIP investment date until the earliest of:

(1) The date on which the ECIP recipient has fully redeemed or repaid the ECIP 

investment received under ECIP;

(2) The date on which the investment the ECIP recipient received under the ECIP is no 

longer held, in full or in part, by the Department of the Treasury or any affiliate thereof; and

(3) Ten years after the ECIP investment date.

ECIP recipient means any entity that has received a capital investment under the ECIP. 

Excessive or luxury expenditures means excessive expenditures on any of the following 

to the extent such expenditures are not reasonable expenditures for staff development, reasonable 
29

performance incentives, or other similar reasonable measures conducted in the normal course of 

the ECIP recipient’s business operations:

(1) Entertainment or events;

(2) Office and facility renovations;

(3) Aviation or other transportation services; 

(4) Tax gross-ups; and

(5) Other similar items, activities, or events for which the ECIP recipient may reasonably 

anticipate incurring expenses, or reimbursing an employee for incurring expenses; 

Provided, that reasonable capital investments in technology, equipment, and similar items 

that expand the long-term capability of an ECIP recipient to provide products and services to its 

customers and community are not excessive or luxury expenditures.

Excessive or luxury expenditures policy means written standards applicable to the ECIP 

recipient and its employees that address the five categories of expenses set forth in the definition 

of “excessive or luxury expenditures,” and that are reasonably designed to eliminate excessive 

and luxury expenditures. Such written standards must:

(1) Identify the types or categories of expenditures which are prohibited (which may 

include a threshold expenditure amount per item, activity, or event or a threshold expenditure 

amount per employee receiving the item or participating in the activity or event);

(2) Identify the types or categories of expenditures for which prior approval is required 

(which may include a threshold expenditure amount per item, activity, or event or a threshold 

expenditure amount per employee receiving the item or participating in the activity or event);
30

(3) Provide reasonable approval procedures for expenditures requiring prior approval;

(4) Require the ECIP recipient to deliver a certification, executed by two senior executive 

officers (one of which must be its principal executive officer or principal financial officer) 

certifying that the approval of any expenditure requiring the prior approval of any senior 

executive officer, any executive officer of a substantially similar level of responsibility, or the 

ECIP recipient’s board of directors (or a committee of such board of directors), was properly 

obtained with respect to each such expenditure;

(5) Require the prompt internal reporting of violations to an appropriate person or 

persons identified in this policy; and

(6) Mandate accountability for adherence to the policy.

FDIC means the Federal Deposit Insurance Corporation.

Federal Reserve Board means the Board of Governors of the Federal Reserve System.

NCUA means the National Credit Union Administration.

Non-senior security means any equity interest or equivalent interest (including but not 

limited to membership share interests in the case of a credit union) or any other interest in, or 

instrument issued by, an ECIP recipient that is pari passu with, or junior to, the ECIP investment 

with respect to capital distributions or ranking in liquidation, including but not limited to the 

common stock (or equivalent equity interest) of the ECIP recipient, or any equity interest or 

equivalent interest or any other interest in or instrument issued by a depository institution 

holding company of which the ECIP recipient is a subsidiary.

OCC means the Office of the Comptroller of the Currency.
31

Principal executive officer means the chief executive officer of an ECIP recipient (or 

individual performing a similar function).

Principal financial officer means the chief financial officer of an ECIP recipient (or 

individual performing a similar function). 

Senior executive officer means an ECIP recipient’s president, any vice president in charge 

of a principal business unit, division or function, any other officer who performs a policy making 

function, or any other person who performs similar policy making functions. 

Severance payment means any payment or benefit provided to an officer or employee of 

an ECIP recipient in connection with any termination of such officer or employee’s employment 

with the ECIP recipient (including resignation, severance, retirement, or constructive 

termination), except for payment for services performed or benefits accrued. A severance 

payment includes cash payments, health care benefits, perquisites, the enhancement or 

acceleration of any payment or vesting of any payment or benefit, or any other in-kind benefit 

payable or provided in connection with any termination of an officer or employee of the ECIP 

recipient.

Total compensation means all compensation, other than any severance payment, provided 

by an ECIP recipient to an officer or employee, including salary, wages, bonuses, awards of 

stock, deferred compensation, and other financial benefits. 

§ 35.22 Restrictions on compensation.

(a) Restriction on executive compensation. An ECIP recipient must ensure that the total 

compensation paid to its senior executive officers is appropriate and not excessive. Unless 

informed otherwise by the Department of the Treasury, an ECIP recipient is considered to have 
32

satisfied the requirements regarding executive compensation in this section if it, and, if 

applicable, all insured depository institution subsidiaries of the ECIP recipient, maintains 

compliance with the following (or any successor requirement, as applicable): 

(1) For an ECIP recipient or subsidiary of an ECIP recipient that is an insured depository 

institution, except for federally insured credit unions, the Interagency Guidelines Establishing 

Standards for Safety and Soundness as issued by the appropriate federal banking agency for the 

ECIP recipient or subsidiary (i.e., for national banks and federal savings associations, 12 CFR 

part 30, Appendix A; state member banks, 12 CFR part 208, Appendix D-1; insured state 

nonmember banks and state savings associations, 12 CFR part 364, Appendix A);

(2) For an ECIP recipient that is a bank holding company, the requirements for corporate 

practices of bank holding companies as issued by the Federal Reserve Board at 12 CFR 225.4;

(3) For an ECIP recipient that is a savings and loan holding company, the requirements 

regarding safe and sound operations of savings and loan holding companies as issued by the 

Federal Reserve Board at 12 CFR 238.8; and

(4) For an ECIP recipient that is a federally insured credit union, the requirements on 

compensation and benefits for federally insured credit unions as issued by the NCUA at 12 CFR 

701.19(a); 12 CFR 701.21(c)(8); 12 CFR 702.203(b)(10); and 12 CFR 702.204(b)(10). 

(b) Restriction on severance payments. An ECIP recipient shall not make excessive 

severance payments to any senior executive officer. Unless informed otherwise by the 

Department of the Treasury, an ECIP is considered to have satisfied the requirements regarding 

severance payments in this section if it maintains compliance with the following (or any 

successor requirement, as applicable): 
33

(1) For an ECIP recipient that is an insured depository institution, a bank holding 

company or a savings and loan holding company, the limits and prohibitions to enter into 

contracts to pay and to make golden parachute and indemnification payments to institutionaffiliated parties to the extent applicable to the ECIP recipient, as issued by the FDIC at 12 CFR 

part 359; and 

(2) For an ECIP recipient that is a federally insured credit union, the limits and 

prohibitions on the ability of federally insured credit unions to enter into contracts to pay and to 

make golden parachute and indemnification payments to institution-affiliated parties as issued by 

the NCUA at 12 CFR 750.1.

(c) Excessive or luxury expenditures.

(1) Policy required. Ninety days after an ECIP investment date with respect to an ECIP 

recipient, the board of directors of the ECIP recipient must adopt an excessive or luxury 

expenditures policy, provide such policy to the Department of the Treasury and the ECIP 

recipient’s appropriate federal banking agency, and post the text of such policy on its Internet 

website, if the ECIP recipient maintains an Internet website. 

(2) If, after adopting an excessive or luxury expenditures policy, the board of directors of 

the ECIP recipient makes any material amendments to such policy, within ninety days of the 

adoption of the amended policy the board of directors must provide the amended policy to the 

Department of the Treasury and the ECIP recipient’s appropriate federal banking agency and 

post the amended policy on its Internet website, if the ECIP recipient maintains an Internet 

website.
34

(3) The ECIP recipient must maintain, and continue the disclosure of any material 

amendments to, the excessive or luxury expenditures policy during the ECIP period, unless the 

Department of the Treasury determines that discontinuation of the policy would not be contrary 

to the public interest. 

(d) Material changes in policies or procedures. An ECIP recipient must obtain prior 

approval from the Department of the Treasury before making any material change to the policies 

or procedures that it maintains for purposes of compliance with paragraphs (a), (b), or (c) of this 

section. A change to the compensation, severance pay, or excessive or luxury expenditures 

policies or procedures will be considered material for purposes of this section if the change is 

likely to have a negative effect on the financial condition of the ECIP recipient, limit the ability 

of the ECIP recipient to make payments under the terms of an ECIP instrument, or otherwise 

impair the ECIP recipient’s ability to meet its obligations to the Department of the Treasury 

under the ECIP. 

(1) A request to make a material change to compensation, severance pay or excessive 

luxury expenditures policies or procedures, must be submitted by an ECIP recipient in writing 

and received by the Department of the Treasury at least thirty days prior to the effective date of 

the policy change. The request should describe the change, reason for the change, and 

anticipated financial or other impact of the change on the condition of the ECIP recipient. 

(2) The request will be deemed approved thirty days after the ECIP recipient has 

provided a complete request to the Department of the Treasury, unless, prior to the expiration of 

the thirty-day period, the Department of the Treasury objects to the proposed change or notifies 

the ECIP recipient that additional time is required in order to complete review of the proposed 

change to policy or procedures
35

§ 35.23 Restrictions on dividends, share buybacks, and other capital distributions.

(a) Restriction on capital distributions due to nonpayment. An ECIP recipient shall not 

make any capital distribution on a non-senior security, unless:

(1) If the ECIP investment is in the form of preferred stock, the ECIP recipient has paid 

in full the dividends for the last completed dividend period on the preferred stock; or

(2) If the ECIP investment is in a form other than preferred stock (including, 

subordinated debt), the ECIP recipient has paid in full the principal, interest, and other amounts 

due and payable under the terms of the ECIP investment, and no amount that has been deferred 

remains unpaid.

(b) Limit on amount of capital distributions.

(1) If an ECIP recipient is an insured depository institution, bank holding company, or 

savings and loan holding company, the ECIP recipient shall obtain the approval of the 

Department of the Treasury prior to making any capital distribution if the total of capital 

distributions made during the calendar year, including the proposed capital distribution, exceeds 

its eligible distributable income; provided, however, that any prior approval of a capital 

distribution by the Department of the Treasury does not supersede any applicable regulatory 

requirements of the ECIP recipient’s appropriate federal banking agency, or other actions taken 

by such agency. For purposes of this paragraph, “eligible distributable income” means (A) the 

ECIP recipient’s reported year-to-date net income as of the end of the most recent calendar 

quarter, plus net income for the two preceding calendar years, less (B) any dividends or 

distributions for the year to date as of the end of the most recent calendar quarter, and the two 
36

preceding calendar years, where (A) and (B) are calculated in accordance with the instructions to 

the Call Report or applicable reporting form. 

(2) If the ECIP recipient is federally insured credit union, the ECIP recipient shall obtain 

the Department of the Treasury’s prior approval to make any capital distributions if the 

distribution would (i) in the case of a dividend, be payable from retained earnings (as defined in 

12 CFR 702.2(f)) other than undivided earnings; or (ii) cause the ECIP recipient’s net worth 

classification to fall below “adequately capitalized” (as defined in 12 CFR 702.102(a)(2)).

(c) Exception for Subchapter S Corporations and other pass-through entities. 

Notwithstanding anything to the contrary in paragraphs (a) and (b) of this section, any ECIP 

recipient that is an S corporation, as defined in 26 U.S.C. 1361(a), or other pass-through entity 

may make capital distributions, to the extent reasonably required to cover its owners’ tax 

obligations in respect to the entity’s earnings. Such distributions shall be subject to an annual 

reconciliation, with any surplus or deficiency to be deducted or added to distributions, as 

applicable, in the following year. Any tax-related distributions permitted under this paragraph 

(c) must also comply with any applicable limitations or determinations established by an ECIP 

recipient’s federal regulators. 

§ 35.24 Annual certification

On an annual basis an ECIP recipient shall, in accordance with the terms and conditions 

of its ECIP investment agreement, submit to the Department of the Treasury a certification 

executed by two senior executive officers (one of which must be either its principal executive 

officer or principal financial officer) that the ECIP recipient is in compliance with each of the 
37

excessive compensation, severance pay, and excessive or luxury expenditures requirements and 

restrictions on capital distributions set forth in §§ 35.22 and 35.23.

§ 35.25 Exemptive relief.

The Department of the Treasury may grant exemptions or waivers from some or all of the 

restrictions on share buybacks and dividend payments under this part if such exemption or 

waiver is necessary or appropriate to effectuate the goals of the ECIP or to protect the public 

interest. Such exemptions or waivers may be subject to such terms and conditions as deemed 

necessary or appropriate by the Department of the Treasury.

Appendix A to 31 CFR Part 35—Emergency Capital Investment Program Model Excessive 

or Luxury Expenditures Policy

I. Introduction

A participant in the Emergency Capital Investment Program (ECIP recipient, as defined at 31

CFR 35.21) is required to establish and maintain policies designed to eliminate excessive or 

luxury expenditures. The term “excessive or luxury expenditures” means excessive expenditures 

on any of the following to the extent such expenditures are not reasonable expenditures for staff 

development, reasonable performance incentives, or other similar reasonable measures 

conducted in the normal course of the ECIP recipient’s business operations: (1) entertainment or 

events; (2) office and facility renovations; (3) aviation or other transportation services; (4) tax 

gross-ups; and (5) other similar items, activities, or events for which the ECIP recipient may 

reasonably anticipate incurring expenses, or reimbursing an employee for incurring expenses.
38

To facilitate compliance with this requirement, the Department of the Treasury is making 

available a model excessive or luxury expenditures policy. An ECIP recipient may refer to this 

model policy for guidance in satisfying the requirement at 31 CFR 35.22(c) to adopt and 

maintain an excessive or luxury expenditures policy. Alternatively, ECIP recipients may use 

other forms of, or existing policies relating to, excessive or luxury expenditures, provided that 

such other forms or policies satisfy all the requirements of the regulation at 31 CFR 35.22(c). 

An ECIP recipient’s luxury or excessive expenditure policy should be posted on the ECIP 

recipient’s website. Any material amendments to an ECIP recipient’s excessive or luxury 

expenditures policy must made in accordance with the provisions set forth in 31 CFR 35.22(d) 

(Material changes in policies or procedures). If the ECIP recipient makes any material 

amendments to this policy, then the ECIP recipient must submit a copy of the amended policy to

the Department of the Treasury and post the amended policy on the ECIP recipient’s website.

ECIP recipients should refer to 31 CFR Part 35, Subpart B for additional information regarding 

definitions of terms used in the model policy, disclosure, material changes, certification, and 

other compliance requirements.

II. Model Excessive or Luxury Expenditures Policy

A. Purpose 

The purpose of this policy is to establish parameters and internal controls governing the 

expenditures of [NAME OF ECIP RECIPIENT] (together with its subsidiaries and controlled 

affiliates, referred to hereafter as the Organization). Expenditures of the Organization should be

customary, prudent, consistent with applicable laws and regulations, and reasonably related to 

the Organization’s business objectives and needs. This policy identifies expenditures that are 
39

excessive or luxury expenditures, creates processes that are reasonably designed to eliminate 

such expenditures, and establishes accountability for compliance. Routine operating expenses, 

capital expenditures, and other reasonable expenses are not prohibited by this policy. 

B. Authority

The Organization has authority to provide compensation and benefits that are reasonable. 

This policy establishes a prohibition on expenditures that are excessive or luxury expenditures as 

required by the Department of the Treasury’s Emergency Capital Investment Program 

regulations (31 CFR Part 35), and as may be required by other statutes and regulations.

C. Responsibility

This policy is the responsibility of the Organization’s board of directors (board). The 

board has approved this policy and will review compliance with this policy no less frequently 

than annually, and summary data on excessive or luxury expenditures will be reported to the 

board as part of the compliance review.

D. Scope

This policy applies to all employees, officers, and directors of the Organization with 

regard to any expenditure of the Organization. In making any expenditure on behalf of the 

Organization, employees, officers, and directors should consider whether the expenditure is an 

excessive or luxury expenditure that is prohibited under this policy.

E. Excessive or Luxury Expenditures 

“Excessive or luxury expenditures” means excessive expenditures on any of the 

following to the extent not reasonable or appropriate expenditures for business development,
40

staff development, reasonable performance incentives, or other similar reasonable measures 

conducted in the normal course of the Organization’s business operations:

(1) Entertainment or events. This category includes fees, dues, tickets costs related to 

social, athletic, artistic and dining clubs, activities, celebrations or other events, and similar 

expenditures. Expenditures for charitable contributions and charitable events are not prohibited 

under this policy. Entertainment or events expenditures in an amount less than $____ per 

instance, and $____ on an annual aggregate basis per individual, are exempt from this policy.

(2) Office and facility renovations. This category includes costs and allowances for

office renovation, including expenditures related to furniture, art, office personalization, interior 

finishing, design and decoration, and similar expenditures. Office and facility renovations 

expenditures in an amount less than $____ per instance, and $____ on an annual aggregate basis 

per individual, are exempt from this policy.

(3) Aviation or other transportation services. This category includes charter fees, tickets, 

slip or docking fees, vehicle installment payments, reservation and travel agent expenses, and 

similar expenditures associated with transportation services (e.g., airline, train, rental cars, or 

vans). Mileage reimbursable according to current Internal Revenue Service mileage rates is 

exempt from this policy. Transportation services in an amount less than $____ per instance, and 

$____ on an annual aggregate basis per individual, are exempt from this policy. 

The principal executive officer may establish or delegate to an appropriate executive 

officer the authority to establish processes for reimbursement of reasonable travel expenditures, 

which processes must be reviewed by executive management no less frequently than annually. 
41

(4) Tax gross-ups. This category includes any reimbursement of taxes owed with respect 

to any compensation. This category does not apply to tax equalization agreements for employees 

subject to tax from a non-U.S. jurisdiction.

(5) Other similar items, activities, or events for which the Organization may reasonably 

anticipate incurring expenses or reimbursing an employee for incurring expenses. Expenditures 

related to other items not listed in the preceding categories are exempt from this policy in an 

amount less than $____ per instance, and together with all expenditures permitted under this 

policy, may not exceed $____ on an annual aggregate basis per individual.

For the avoidance of doubt, reasonable capital investments in technology, equipment, and 

similar items that expand the long-term capability of an ECIP recipient to provide products and 

services to its customers and community are not excessive or luxury expenditures.

The principal executive officer may establish or delegate to an appropriate executive 

officer the authority to establish processes for the evaluation and approval of expenditures in the 

preceding categories that are not luxury or excessive expenditures and that are not otherwise 

exempt from this policy. These processes must be reviewed by executive management no less 

frequently than annually, as well as any additional threshold expenditure amounts per item, 

activity, or event, or a threshold expenditure amount per employee receiving the item or 

participating in the activity or event under this policy. Such approvals must be reported to the 

board of directors (which may be in an appropriate summary form) no less frequently than 

annually.
42

F. Exceptions or Violations

Any exception or violation of this policy must be promptly reported to the Organization’s

(i) principal executive officer, (ii) officer with primary responsibility for the Organization’s 

compliance function, or (iii) officer designated with primary responsibility for overseeing the 

administration, monitoring, and compliance with this policy. Exceptions and violations must be 

reported to the board of directors no less frequently than annually, or more frequently as the 

nature and severity of violation may warrant. All employees, officers, and directors of the 

Organization must adhere to this policy and will be held accountable for compliance. Any 

employee or officer who violates this policy may be subject to disciplinary action up to and 

including termination of employment.

Any employee or officer that is aware of any circumstance that may indicate a violation 

of this policy is required to report such circumstance to their supervisor or the Organization’s 

principal compliance officer or compliance group. The Organization prohibits retaliation against 

any employee or officer for making a good faith report of actual or suspected violations of the 

Organization’s code of conduct, laws, regulations, or other Organization policies, including this 

policy. A finding of retaliation against any such employee or officer may result in disciplinary 

action up to and including termination. Failure to promptly report known violations by others 

may also be deemed a violation of the Organization’s code of conduct. 

Employees and officers may ask questions, raise concerns, or report instances of noncompliance with this policy and/or any of the existing underlying relevant policies by contacting 

the following: [COMPLIANCE HELP LINE OR E-MAIL].
43

G. Certification

On an annual basis, the ECIP recipient will deliver to the Department of the Treasury a 

certification, executed by two senior executive officers (one of which must be either the ECIP 

recipient’s principal executive officer or principal financial officer) certifying that (i) the 

Organization is in compliance with this policy and (ii) the approval of any expenditure requiring 

the prior approval of any senior executive officer, any executive officer of a substantially similar 

level of responsibility, or the board of directors (or a committee of such board), was properly 

obtained with respect to each such expenditure. 

________________________________

David Lebryk

Fiscal Assistant Secretary