64440 Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / Rules and Regulations

DEPARTMENT OF THE TREASURY

Community Development Financial

Institutions Fund

12 CFR Part 1806

RIN 1505–AA71

Bank Enterprise Award Program

AGENCY: Community Development

Financial Institutions Fund, Department

of the Treasury.

ACTION: Revised interim rule with

request for comment.

SUMMARY: The Department of the

Treasury is issuing a revised interim

rule implementing the Bank Enterprise

Award (BEA) Program administered by

the Community Development Financial

Institutions Fund (Fund). The purpose

of the BEA Program is to encourage

insured depository institutions to

increase their level of activities in the

form of loans, investments, services, and

technical assistance within distressed

communities and to provide financial

assistance to Community Development

Financial Institutions (CDFIs) through

grants, stock purchases, loans, deposits,

and other forms of financial and

technical assistance. The BEA Program

rewards participating insured

depository institutions for increasing

their activities in economically

distressed communities and investing in

CDFIs. The revisions contain a number

of changes which clarify current

requirements, but do not change them.

This rule also simplifies current

requirements and updates various

references, and contains one revision

that the Fund believes will generally

inure to the benefit of insured

depository institutions. Specifically, the

revision clarifies the measured value of

renewed loans and rolled over time

deposits to include the entire amount of

the renewed loans and rolled over

deposits. However, in order to facilitate

implementation of the BEA program

regulations by participating insured

depository institutions, the complete

text of the regulations, as amended, is

published by this interim rule.

DATES: Interim rule effective December

5, 1997; comments must be received on

or before April 6, 1998.

ADDRESSES: All comments concerning

this interim rule should be addressed to

the Director, Community Development

Financial Institutions Fund, Department

of the Treasury, 601 13th Street, NW,

Suite 200 South, Washington, DC 20005.

Comments may be inspected at the

above address between 9:30 a.m. and

4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT:

Director, the Community Development

Financial Institutions Fund at (202)

622–8662. (This is not a toll free

number.)

SUPPLEMENTARY INFORMATION:

I. Background

The Community Development

Financial Institutions Fund (Fund) was

established as a wholly owned

government corporation by the

Community Development Banking and

Financial Institutions Act of 1994 (the

Act). Subsequent legislation placed the

Fund within the Department of the

Treasury and gave the Secretary of the

Treasury all powers and rights of the

Administrator of the Fund as set forth

in the authorizing statute. The Fund’s

programs are designed to facilitate the

flow of lending and investment capital

into distressed communities and to

individuals who have been unable to

take full advantage of the financial

services industry. This initiative is an

important step in rebuilding povertystricken and transitional communities

and creating economic opportunity for

people often left behind by the

economic mainstream.

Access to credit and investment

capital is an essential ingredient for

creating and retaining jobs, revitalizing

neighborhoods, developing affordable

housing, and unleashing the economic

potential of small businesses. The Fund

recognizes the important role traditional

financial institutions have played, and

should continue to play, in serving the

credit needs of distressed communities

and their residents. As a means of

facilitating increased activity and

innovation among traditional financial

institutions, these revised regulations

amend the Bank Enterprise Award

(BEA) Program, which has its roots in

the Federal Deposit Insurance

Corporation Improvement Act of 1991.

The BEA Program was significantly

modified as part of the Act to enable it

to function as a companion to the

Community Development Financial

Institutions (CDFI) Program. Together,

the CDFI Program and BEA Program

will promote activity among the

spectrum of financial institutions that

serve distressed communities.

The purpose of the BEA Program is to

encourage insured depository

institutions to increase loans, services,

and technical assistance within

distressed communities and to make

Equity Investments or engage in CDFI

Support Activities. The BEA Program

rewards participating insured

depository institutions for increasing

their activities in economically

distressed communities and investing in

CDFIs. Applicants participate in the

Program through a competitive process

which evaluates applications based on

the value of proposed increases in their

specified activities. Program

participants receive monies only after

successful completion of the specified

activities.

Elsewhere in this issue of the Federal

Register is a separate Notice of Funds

Availability (NOFA) for this Program. A

final regulation will be published after

receipt and consideration of public

comments. The Fund previously

promulgated an interim regulation with

a request for comment, which was

published in the Federal Register on

March 7, 1997 (62 FR 10679). No

comments were received in response to

the March 7, 1997 interim rule. Since

these regulations were last amended, the

Fund has identified several provisions

that need to be updated, clarified, or

simplified.

II. Summary of Changes

Authorities

The current rule contains a list of

authorities. This interim rule updates

the list by adding 12 U.S.C. 4713, 12

U.S.C. 1834a, and 31 U.S.C. 321. Such

authorities concern the promulgation of

regulations, procedures and guidelines.

The current rule lists 12 U.S.C. 4703

note with a reference to Pub. L. 104–19.

The Fund is deleting the reference to

this public law, for purposes of

regulatory economy and because there is

more than one public law underlying

the section 4703 note.

Definition of Community Services

Section 1806.103(p)(1) of the current

rule defines the forms of assistance that

constitute Community Services. This

interim rule does not change the

definition of what constitutes

Community Services, but it clarifies that

all forms of such assistance may be

provided by officers, employees, or

agents (contractual or otherwise) of the

Applicant. This revision conforms with

the Fund’s interpretation of the current

rule.

Measuring the Value of Renewed Loans

and Rolled Over Deposits

Section 1806.202(c)(1) of the current

rule provides that for purposes of

calculating BEA Program awards, the

Fund will assess the value of Equity

Investments, loans, grants, and deposits

at the original amount of such

investments, loans, grants or deposits.

Section 1806.202(c)(1) of the current

rule excludes the value of any loans

which are renewed, rolled over, or
Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / Rules and Regulations 64441

refinanced in an amount equal to or less

than the principal amount outstanding

at the time of refinancing. Because the

Fund believes that the interim rule in its

current form: (1) Appears too restrictive

with regard to loans; and (2) is unclear

with regard to renewed loans and rolled

over time deposits, the Fund is revising

§ 1806.202(c)(1) as follows.

With regard to loans, the Fund

believes that where a loan matures, is

fully paid, and is then renewed during

an applicable Baseline or Assessment

period, the renewed loan constitutes a

new origination. As such, the Fund will

assess the full principal amount of the

renewed loan in calculating a BEA

Program award. However, the Fund is

not changing the current interim rule

with regard to refinancings. Specifically,

where a loan is refinanced during an

applicable Baseline or Assessment

period, the Fund will only assess the

value of any increase in the principal

amount of the refinanced loan.

With regard to deposits, the Fund will

assess the full amount of any deposit

which is rolled over during an

applicable Baseline or Assessment

period. For example, where an

Applicant made a time deposit with an

insured CDFI, e.g. a five year certificate

of deposit with an interest rate

materially below market rates, which

matures and is rolled over during an

Assessment Period, the Fund will assess

the full amount of the rolled over time

deposit in calculating a BEA Program

award.

Estimated Award Amounts for

Development and Service Activities

The current rule at 12 CFR

1806.203(c)(3) describes a calculation

step for estimating an award amount for

Development and Service Activities.

This step requires adding the weighted

values of deposit liabilities and

Financial Services to yield a service

score. This revised rule corrects an

omission to the step by adding

Community Services. This addition

conforms with previous and the most

current BEA Program Application

packets.

For purposes of regulatory economy,

the Fund is deleting the parenthetical

reference in § 1806.203(c)(5) of the

current rule, which references the Act.

This deletion is technical in scope and

will have no substantive effect on the

implementation of the BEA Program.

Application Contents for Equity

Investment and CDFI Support Activities

Section 1806.206(b)(9) of the current

rule describes the collection of

information requirements set forth in

the Application packet for those

Applicants proposing to engage in CDFI

Related Activities. The current rule

describes the Application packet as

requiring each Applicant to submit a

narrative description of each CDFI in

which it proposes to engage in CDFI

Related Activities and a description of

the amount, terms, and conditions of the

assistance to be provided or,

alternatively, a list of potential CDFIs

and a description of the Applicant’s

investment, lending, or selection

criteria. However, the most recently

revised Application packet, which has

been reviewed and approved by the

Office of Management and Budget

(OMB) in accordance with the

Paperwork Reduction Act of 1995,

simplifies the collection of information

from Applicants. Specifically, the

revised Application packet requires

Applicants to list the potential CDFIs to

which they may provide assistance and

provide a description of the amount,

terms, and conditions for such

assistance. Because the revised

Application packet does not require a

narrative description of each potential

CDFI or a description of the Applicant’s

investment, lending or selection criteria,

the Fund is revising § 1806.206(b)(9) in

this interim rule to accurately reflect the

collection of information requirements

set forth in the most current Application

packet.

III. Rulemaking Analysis

Executive Order 12866

It has been determined that this

regulation is not a significant regulatory

action as defined in Executive Order

12866. Therefore, a Regulatory

Assessment is not required.

Regulatory Flexibility Act

Because no notice of proposed

rulemaking is required for this revised

interim rule, the provisions of the

Regulatory Flexibility Act (5 U.S.C. 601

et seq.) do not apply.

Paperwork Reduction Act

The collections of information

contained in this interim rule have been

previously reviewed and approved by

OMB in accordance with the Paperwork

Reduction Act of 1995 and assigned

OMB Control Number 1505–0153. An

agency may not conduct or sponsor, and

a person is not required to respond to,

a collection of information unless it

displays a valid control number

assigned by OMB. This document

restates the collections of information

without substantive change.

Comments concerning suggestions for

reducing the burden of the collections of

information should be directed to the

Director, Community Development

Financial Institutions Fund, 601 13th

Street, NW., Suite 200 South,

Washington, DC 20005.

National Environmental Policy Act

Pursuant to Treasury Directive 75–02

(Department of the Treasury

Environmental Quality Program), the

Department has determined that these

revised interim regulations are

categorically excluded from the

National Environmental Policy Act and

do not require an environmental review.

Administrative Procedure Act

The Fund is promulgating this revised

interim rule without opportunity for

prior public comment pursuant to the

Administrative Procedure Act (APA), 5

U.S.C. 553, because the BEA Program

involves grants and is thereby exempt

from the procedural requirements of the

APA pursuant to 5 U.S.C. 553(a)(2). The

Fund also finds good cause for

dispensing with a notice of proposed

rulemaking because such advance

notice and public procedure are

unnecessary. First, most of the changes

in this interim rule are minor or

technical amendments which do not

affect the substance of the regulation.

Second, the changes to this interim rule

are narrow in scope, clarify existing

requirements, and inure to the benefit of

the regulated community, namely

insured depository institutions, by

making participation in the BEA

Program easier for Applicants, reducing

regulatory burden, and clarifying the

measured value of renewed loans and

rolled over time deposits.

The Fund also is making this interim

rule effective upon publication without

providing the 30-day period between

publication and effective date

contemplated by the APA because, as

noted above, the BEA Program involves

grants and is thereby exempt from the

procedural requirements of the APA

found at 5 U.S.C. 553(d). The Fund also

believes that an immediate effective

date is necessary for the convenience of

the persons affected. Specifically, an

immediate effective date will minimize

the risk of confusion on the affected

community by ensuring that there will

be a single and uniform regulation in

effect during the Assessment Period,

which as stated in the NOFA published

elsewhere in this issue of the Federal

Register, will begin on January 1, 1998.

The Fund also believes that an

immediate effective date is appropriate

because this interim rule inures to the

benefit of the affected community by

removing a potential restriction on the

measured value of renewed loans and

rolled over time deposits.
64442 Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / Rules and Regulations

Comment

Public comment is solicited on all

aspects of this interim regulation. The

Fund will consider all comments made

on the substance of this interim

regulation, but does not intend to hold

hearings.

IV. Catalog of Federal Financial

Assistance Numbers

Bank Enterprise Award Program—

21.021.

List of Subjects in 12 CFR Part 1806

Banks, banking, Community

development, Grant programs—housing

and community development, Reporting

and recordkeeping requirements,

Savings associations.

For the reasons set forth in the

preamble, 12 CFR part 1806 is revised

to read as follows:

PART 1806—BANK ENTERPRISE

AWARD PROGRAM

Subpart A—General Provisions

Sec.

1806.100 Purpose.

1806.101 Summary.

1806.102 Relationship to the Community

Development Financial Institutions

Program.

1806.103 Definitions.

1806.104 Waiver authority.

1806.105 OMB control number.

Subpart B—Awards

1806.200 Community eligibility and

designation.

1806.201 Qualified Activities.

1806.202 Measuring activities.

1806.203 Estimated award amounts.

1806.204 Selection process.

1806.205 Actual award amounts.

1806.206 Applications for Bank Enterprise

Awards.

Subpart C—Terms and Conditions of

Assistance

1806.300 Award Agreement; sanctions.

1806.301 Records, reports and audits of

Awardees.

1806.302 Compliance with government

requirements.

1806.303 Fraud, waste and abuse.

1806.304 Books of account, records and

government access.

1806.305 Retention of records.

Authority: 12 U.S.C. 1834a, 4703, 4703

note, 4713, 4717; 31 U.S.C. 321.

Subpart A—General Provisions

§ 1806.100 Purpose.

The purpose of the Bank Enterprise

Award Program is to encourage insured

depository institutions to make Equity

Investments and carry out CDFI Support

Activities and Development and Service

Activities to revitalize distressed urban

and rural communities.

§ 1806.101 Summary.

(a) Under the Bank Enterprise Awards

Program, the Fund makes awards to

selected Applicants that:

(1) Invest in or otherwise support

Community Development Financial

Institutions;

(2) Increase lending and investment

activities within Distressed

Communities; or

(3) Increase the provision of certain

services and assistance.

(b) Distressed Communities must

meet minimum poverty and

unemployment criteria. Applicants are

selected to participate in the program

through a competitive application

process. Awards are based on increases

in Qualified Activities that are carried

out by the Applicant during an

Assessment Period. Bank Enterprise

Awards are distributed after successful

completion of projected Qualified

Activities. All awards shall be made

subject to the availability of funding.

§ 1806.102 Relationship to the Community

Development Financial Institutions

Program.

(a) Prohibition against double

funding. No CDFI may receive a Bank

Enterprise Award if it has:

(1) An application pending for

assistance under the Community

Development Financial Institutions

Program (part 1805 of this chapter);

(2) Received assistance from the

Community Development Financial

Institutions Program within the

preceding 12-month period; or

(3) Ever received assistance under the

Community Development Financial

Institutions Program for the same

activities for which it is seeking a Bank

Enterprise Award.

(b) Matching funds. Equity

Investments and CDFI Support

Activities (except technical assistance)

provided to a CDFI under this part can

be used by the CDFI to meet the

matching funds requirements of the

Community Development Financial

Institutions Program.

§ 1806.103 Definitions.

For the purpose of this part:

(a) Act means the Community

Development Banking and Financial

Institutions Act of 1994, as amended (12

U.S.C. 4701 et seq.);

(b) Agricultural Loan means an

origination of a loan secured by farm

land (including farm residential and

other improvements), a loan to finance

agricultural production, or a loan to a

farmer (other than a Single Family Loan

or Consumer Loan);

(c) Applicant means any insured

depository institution (as defined in

section 3(c)(2) of the Federal Deposit

Insurance Act (12 U.S.C. 1813)) that is

applying for a Bank Enterprise Award;

(d) Appropriate Federal Banking

Agency has the same meaning as in

section 3 of the Federal Deposit

Insurance Act (12 U.S.C. 1813);

(e) Assessment Period means an

annual or semi-annual period specified

in the applicable Notice of Funds

Availability (NOFA) in which an

Applicant will carry out Qualified

Activities;

(f) Award Agreement means a formal

agreement between the Fund and an

Awardee pursuant to § 1806.300;

(g) Awardee means an Applicant

selected by the Fund to receive a Bank

Enterprise Award;

(h) Bank Enterprise Award means an

award made to an Applicant pursuant to

this part;

(i) Bank Enterprise Award Program

means the program authorized by

section 114 of the Act and implemented

under this part;

(j) Baseline Period means an annual or

semi-annual period specified in the

applicable NOFA in which an Applicant

has previously carried out Qualified

Activities;

(k) Business Loan means an

origination of a loan used for

commercial or industrial activities

(other than an Agricultural Loan,

Commercial Real Estate Loan, MultiFamily Loan or Single Family Loan);

(l) Commercial Real Estate Loan

means an origination of a loan (other

than a Multi-Family Loan or a Single

Family Loan) used for commercial

purposes to finance construction and

land development or an origination of a

loan that is secured by real estate and

used to finance the acquisition or

rehabilitation of a building used for

commercial purposes;

(m) Community Development

Financial Institution (or CDFI) means an

entity whose certification as a CDFI

under § 1805.201 of this chapter is in

effect as of the end of the applicable

Assessment Period (the Assessment

Period in which the Qualified Activity

takes place) and that meets the

requirements of § 1805.200(b) through

(h) of this chapter at the time of the

Qualified Activity, subject to the rest of

this paragraph (m). If an Applicant is

proposing to make an Equity Investment

or engage in CDFI Support Activities

with an uncertified CDFI, the

uncertified CDFI may apply for

certification by submitting the

information described in § 1805.701(b)

of this chapter. In order for the

Applicant to be eligible to receive an

award for its activity, the required

information with respect to the
Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / Rules and Regulations 64443

uncertified CDFI shall be submitted to

the Fund as specified in the applicable

NOFA published in the Federal

Register, and certification must be

completed by the end of the applicable

Assessment Period as specified in the

applicable NOFA. Notwithstanding

anything in this paragraph (m) to the

contrary, an Applicant may receive an

award pursuant to this part for

assistance provided to an uncertified

CDFI that, at the time of the Qualified

Activity, does not meet the

requirements of § 1805.200(b) through

(h) of this chapter if:

(1) The Applicant requires the

uncertified CDFI to refrain from using

the assistance provided until the entity

is certified;

(2) The uncertified CDFI is certified

by the end of the applicable Assessment

Period; and

(3) The Applicant retains the option

of recapturing said assistance in the

event that the uncertified CDFI is not

certified by the end of the applicable

Assessment Period;

(n) CDFI Related Activities means

Equity Investments and CDFI Support

Activities;

(o) CDFI Support Activity means

assistance provided by an Applicant or

its Subsidiary to a CDFI that is integrally

involved in a Distressed Community in

the form of the origination of a loan,

technical assistance, or deposits if such

deposits are:

(1) Uninsured and committed for a

term of at least three years; or

(2) Insured, committed for a term of

at least three years, and provided at an

interest rate that is materially (in the

determination of the Fund) below

market rates;

(p) Community Services means the

following forms of assistance provided

by officers, employees or agents

(contractual or otherwise) of the

Applicant:

(1) Provision of technical assistance to

Residents in managing their personal

finances through consumer education

programs;

(2) Provision of technical assistance

and consulting services to newly formed

small businesses located in the

Distressed Community;

(3) Provision of technical assistance

to, or servicing the loans of, Low- or

Moderate-Income homeowners and

homeowners located in the Distressed

Community; and

(4) Other services provided for Lowand Moderate-Income persons in a

Distressed Community or enterprises

integrally involved in a Distressed

Community deemed appropriate by the

Fund;

(q) Consumer Loan means an

origination of a loan to one or more

individuals for household, family, or

other personal expenditures;

(r) Distressed Community means a

geographic community which meets the

minimum area eligibility requirements

specified in § 1806.200;

(s) Development and Service

Activities means activities described in

§ 1806.201(b)(4) that are carried out by

the Applicant or its Subsidiary;

(t) Equity Investment means financial

assistance provided by an Applicant or

its Subsidiary to a CDFI in the form of

a grant, a stock purchase, a purchase of

a partnership interest, a purchase of a

limited liability company membership

interest, a loan made on such terms that

it has characteristics of equity (and is

considered as such by the Fund and is

consistent with requirements of the

Applicant’s Appropriate Federal

Banking Agency), or any other

investment deemed to be an Equity

Investment by the Fund;

(u) Financial Services means checkcashing, providing money orders and

certified checks, automated teller

machines, safe deposit boxes, and other

comparable services as may be specified

by the Fund that are provided to Lowand Moderate-Income persons in the

Distressed Community or enterprises

integrally involved with the Distressed

Community;

(v) Fund means the Community

Development Financial Institutions

Fund established under section 104(a)

of the Act (12 U.S.C. 4703(a));

(w) Geographic Units means counties

(or equivalent areas), incorporated

places, minor civil divisions that are

units of local government, census tracts,

block numbering areas, block groups,

and American Indian or Alaska Native

areas (as each is defined by the U.S.

Bureau of the Census) or other areas

deemed appropriate by the Fund;

(x) Indian Reservation means a

geographic area that meets the

requirements of section 4(10) of the

Indian Child Welfare Act of 1978 (25

U.S.C. 1903(10)), and shall include land

held by incorporated Native groups,

regional corporations, and village

corporations, as defined in and pursuant

to the Alaska Native Claims Settlement

Act (43 U.S.C. 1601 et seq.), public

domain Indian allotments, and former

Indian Reservations in the State of

Oklahoma;

(y) Low- and Moderate-Income means

income that does not exceed 80 percent

of the median income of the area

involved, as determined by the

Secretary of Housing and Urban

Development with adjustments for

smaller and larger families pursuant to

section 102(a)(20) of the Housing and

Community Development Act of 1974

(42 U.S.C. 5302(a)(20));

(z) Metropolitan Area means an area

designated as such (as of the date of the

application) by the Office of

Management and Budget pursuant to 44

U.S.C. 3504(d)(3), 31 U.S.C. 1104(d),

and Executive Order 10253 (3 CFR,

1949–1953 Comp., p. 758), as amended;

(aa) Multi-Family Loan means an

origination of a loan secured by a fiveor more family residential property;

(bb) Project Investment means

providing financial assistance in the

form of a purchase of stock, limited

partnership interest, other ownership

instrument, or a grant to an entity that

is integrally involved with a Distressed

Community and formed for the sole

purpose of engaging in a project or

activity, approved by the Fund, related

to commercial real estate, single family

housing, multi-family housing, business

or agriculture (as defined in this part);

(cc) Qualified Activities means CDFI

Related Activities and Development and

Service Activities;

(dd) Resident means an individual

domiciled in a Distressed Community;

(ee) Single Family Loan means an

origination of a loan secured by a oneto-four family residential property;

(ff) Subsidiary has the same meaning

as in section 3 of the Federal Deposit

Insurance Act, except that a CDFI shall

not be considered a subsidiary of any

insured depository institution or any

depository institution holding company

that controls less than 25 percent of any

class of the voting shares of such

corporation and does not otherwise

control, in any manner, the election of

a majority of directors of the

corporation; and

(gg) Unit of General Local Government

means any city, county town, township,

parish, village or other general purpose

political subdivision of a State or

Commonwealth of the United States, or

general purpose subdivision thereof,

and the District of Columbia.

§ 1806.104 Waiver authority.

The Fund may waive any requirement

of this part that is not required by law,

upon a determination of good cause.

Each such waiver will be in writing and

supported by a statement of the facts

and grounds forming the basis of the

waiver. For a waiver in any individual

case, the Fund must determine that

application of the requirement to be

waived would adversely affect the

achievement of the purposes of the Act.

For waivers of general applicability, the

Fund will publish notification of

granted waivers in the Federal Register.
64444 Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / Rules and Regulations

§ 1806.105 OMB control number.

The collection of information

requirements in this part have been

approved by the Office of Management

and Budget and assigned OMB control

number 1505–0153.

Subpart B—Awards

§ 1806.200 Community eligibility and

designation.

(a) General. If an Applicant proposes

to carry out CDFI Support Activities or

Development and Service Activities, the

Applicant shall designate one or more

Distressed Communities in which it

proposes to carry out those activities. If

an Applicant proposes to carry out CDFI

Support Activities, the Applicant shall

provide evidence that the CDFI it is

proposing to support is integrally

involved with such a Distressed

Community. In the case of an Applicant

proposing to make an Equity

Investment, the Fund reserves the right

to request information on Distressed

Communities served by such a CDFI

should such information be deemed

necessary by the Fund to complete the

selection process described in

§ 1806.204. In the case of an Applicant

that proposes to carry out both CDFI

Support Activities and Development

and Service Activities it may designate

different Distressed Communities for

these two categories of activity.

(b) Minimum area eligibility

requirements. A Distressed Community

must meet the minimum area eligibility

requirements contained in this

paragraph (b).

(1) Geographic requirements. A

Distressed Community must be a

geographic area:

(i) That is located within the

boundaries of a Unit of General Local

Government;

(ii) The boundaries of which are

contiguous; and

(iii) (A) The population of which must

be at least 4,000 if any portion of the

area is located within a Metropolitan

Area with a population of 50,000 or

greater;

(B) The population must be at least

1,000 if no portion of the area is located

within such a Metropolitan Area; or

(C) The area is located entirely within

an Indian Reservation.

(2) Distress requirements. A

Distressed Community must be a

geographic area where:

(i) At least 30 percent of the Residents

have incomes which are less than the

national poverty level, as published by

the U.S. Bureau of the Census in the

1990 decennial census; and

(ii) The unemployment rate is at least

1.5 times greater than the national

average, as determined by the U.S.

Bureau of Labor Statistics’ most recent

data including estimates of

unemployment developed using the

U.S. Bureau of Labor Statistics’ Census

Share calculation method. U.S. Bureau

of Labor Statistics data and information

necessary for Census Share calculations

may be obtained from the Fund.

(c) Area designation. An Applicant

shall designate an area as a Distressed

Community by:

(1) Selecting Geographic Units which

individually meet the minimum area

eligibility requirements; or

(2) Selecting two or more Geographic

Units which, in the aggregate, meet the

minimum area eligibility requirements

set forth in paragraph (b) of this section

provided that no Geographic Unit

selected by the Applicant within the

area has a poverty rate of less than 20

percent.

(d) Designation and notification

process. Upon request, the Fund will

provide a prospective Applicant with

data and other information to help it

identify areas eligible to be a Distressed

Community. A prospective Applicant is

encouraged to contact the Fund prior to

filing an application to determine if an

area meets the minimum area eligibility

requirements.

§ 1806.201 Qualified Activities.

(a) CDFI Related Activities. An

Applicant may receive a Bank

Enterprise Award for making an Equity

Investment or carrying out CDFI

Support Activities during an

Assessment Period.

(b) Development and Service

Activities. (1) General. An Applicant

may receive a Bank Enterprise Award

for carrying out Development and

Service Activities during an Assessment

Period.

(2) Area served. The Development and

Service Activities listed in paragraphs

(b)(4)(i) through (x) of this section must

serve a Distressed Community. An

activity is considered to serve a

Distressed Community if it is:

(i) Undertaken in the Distressed

Community; or

(ii) Provided to Low- and ModerateIncome Residents or enterprises

integrally involved in the Distressed

Community.

(3) Priority factors. Each Development

and Service Activity is assigned a

priority factor. A priority factor

represents the Fund’s assessment of the

degree of difficulty, the extent of

innovation, and the extent of benefits

accruing to the Distressed Community

for each type of activity.

(4) Development and Service

Activities. Development and Service

Activities are listed in this paragraph

with their corresponding priority

factors:

(i) Deposit liabilities in the form of

savings or other demand or time

accounts accepted from Residents at

offices located within the Distressed

Community (priority factor = 1.0);

(ii) Financial Services (priority factor

= 1.2);

(iii) Community Services (priority

factor = 1.4);

(iv) Consumer Loans (priority factor =

1.2);

(v) Single Family Loans and related

Project Investments (priority factor =

1.4);

(vi) Multi-Family Loans and related

Project Investments (priority factor =

1.6);

(vii) Commercial Real Estate Loans

and related Project Investments (priority

factor = 1.6);

(viii) Business Loans, Agricultural

Loans, and related Project Investments

of $100,000 or less (priority factor =

1.9);

(ix) Business Loans, Agricultural

Loans, and related Project Investments

of more than $100,000 through $250,000

(priority factor = 1.8); and

(x) Business Loans and related Project

Investments of more than $250,000

through $1,000,000 and Agricultural

Loans and related Project Investments of

more than $250,000 through $500,000

(priority factor = 1.7).

(c) Limitation. Financial assistance

provided by an Applicant for which the

Applicant receives benefits through the

Low Income Housing Tax Credit

authorized pursuant to Section 42 of the

Internal Revenue Code of 1986, as

amended (26 U.S.C. 42), shall not

constitute an Equity Investment, Project

Investment, or other Qualified Activity,

as defined in this part, for the purposes

of calculating or receiving an award.

§ 1806.202 Measuring activities.

(a) General. Qualified Activities shall

be measured by comparing the Qualified

Activities carried out during the

Baseline Period with the Qualified

Activities projected to be carried out

during the Assessment Period. Increases

in the values of Qualified Activities

between the Baseline Period and

Assessment Period will be used in

determining award amounts. If an

Applicant is seeking assistance only for

CDFI Related Activities, it should only

report its activities for CDFI Related

Activities categories. If an Applicant is

seeking assistance only for Development

and Service Activities, it should only

report its activities for Development and

Service Activities categories. If an

Applicant is seeking assistance for both
Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / Rules and Regulations 64445

CDFI Related Activities and

Development and Service Activities, it

should report its activities for both types

of categories. If an Applicant is unable

to report its activities in the

aforementioned manner, the Applicant

shall provide an explanation satisfactory

to the Fund as to why it cannot report

required information and

simultaneously submit to the Fund a

certification that during the Assessment

Period the Applicant did not reduce its

total activity in any unreported

categories. The form and content of any

certification shall be determined by the

Fund. The dates of the Baseline Period

and Assessment Period will be

published in a NOFA for each funding

round.

(b) Exception. An Applicant may

select not to report its deposit liabilities

as described in § 1806.201(b)(4)(i). In

such a case, an Applicant’s deposit

liabilities will not be considered in

calculating the service score pursuant to

§ 1806.203(c).

(c) Value. The Fund will assess the

value of:

(1) Equity Investments, loans, grants

and deposits described in § 1806.103 at

the original amount of such

investments, loans, grants or deposits.

Where a loan matures, is fully paid and

is then renewed, the Fund will assess

the value of the principal amount of the

renewed loan. Where a deposit, such as

a certificate of deposit, matures and is

then rolled over, the Fund will assess

the value of the full amount of the rolled

over deposit. However, where an

existing loan is refinanced, the Fund

will only assess the value of any

increase in the principal amount of the

refinanced loan;

(2) Deposit liabilities at the face dollar

amount of monies deposited as

measured by comparing the net change

in the amount of applicable funds (as

described in § 1806.201(b)(4)(i)) on

deposit at the Applicant institution

during the period described in this

paragraph (c)(2). An Applicant shall

measure the net changes in deposit

liabilities during:

(i) The Baseline Period, by comparing

the amount of applicable funds on

deposit at the close of business the day

before the beginning of the Baseline

Period and at the close of business on

the last day of the Baseline Period; and

(ii) The Assessment Period, by

comparing the amount of applicable

funds on deposit at the close of business

the day before the beginning of the

Assessment Period and at the close of

business on the last day of the

Assessment Period;

(3) Financial Services, Community

Services, and CDFI Support Activities

consisting of technical assistance based

on the administrative costs of providing

such services; and

(4) Project Investments at the original

amount of the purchase of stock, limited

partnership interest, other ownership

interest, or grant.

(d) Closed transactions. A transaction

shall be considered to have been carried

out during the Baseline Period or the

Assessment Period if:

(1) The documentation evidencing the

transaction:

(i) Is executed on a date within the

applicable Baseline Period or

Assessment Period, respectively, as

specified in the applicable NOFA; and

(ii) Constitutes a legally binding

agreement between the Applicant and a

borrower or investee which specifies the

final terms and conditions of the

transaction, except that any

contingencies included in the final

agreement must be typical of such

transaction and acceptable (both in the

judgment of the Fund); and

(2) An initial disbursement of loan or

investment proceeds has occurred in a

manner that is consistent with

customary business practices and is

reasonable given the nature of the

transaction, (both as determined by the

Fund).

(e) Reporting. An Applicant shall

report Qualified Activities on the basis

of transactions that were:

(1) Completed during the Baseline

Period; and

(2) Are expected to be completed

during the Assessment Period and

disbursed by the Applicant to a

borrower or investee within the period

described in § 1806.205(a).

§ 1806.203 Estimated award amounts.

Award amounts will be determined at

the sole discretion of the Fund and

estimated as described in this section.

(a) Equity Investments. The estimated

award amount for an Equity Investment

will be equal to 15 percent (or such

lower percentage as may be requested

by the Applicant) of the anticipated

increase in the value of such investment

between the Baseline Period and

Assessment Period.

(b) CDFI Support Activities. If an

Applicant is not a CDFI, the estimated

award amount for CDFI Support

Activities will be equal to 11 percent of

the anticipated increase in the dollar

amount of such support between the

Baseline Period and Assessment Period.

If Applicant is a CDFI, the estimated

award amount for CDFI Support

Activities will be equal to 33 percent of

the anticipated increase in the dollar

amount of such support between the

Baseline Period and Assessment Period.

(c) Development and Service

Activities. The estimated award amount

for Development and Service Activities

will be calculated as follows:

(1) Step 1. For each type of

Development and Service Activity,

subtract the value in the Baseline Period

from the estimated value for the

Assessment Period to yield a remainder;

(2) Step 2. Multiply the remainder for

each Development and Service Activity

by the assigned priority factor to yield

a weighted value for each activity;

(3) Step 3. Add the weighted values

for deposit liabilities, Financial Services

and Community Services to yield a

service score;

(4) Step 4. Add the weighted values

for all other categories of Development

and Service Activities to yield a

development score. If the development

score is negative, an Applicant will be

ineligible to receive a Bank Enterprise

Award. If the development score is

positive, go to Step 5;

(5) Step 5. If the service score is

greater than the development score,

reduce the service score to equal the

same amount as the development score

to yield an adjusted service score;

(6) Step 6. Add the service score (or

adjusted service score if applicable) and

the development score to yield a total

score; and

(7) Step 7. If the Applicant is:

(i) A CDFI, multiply the total score by

15 percent to yield an estimated award

amount; or

(ii) Not a CDFI, multiply the total

score by 5 percent to yield an estimated

award amount.

§ 1806.204 Selection process.

(a) Availability of funds. All awards

are subject to the availability of funds.

If the amount of funds available during

a funding round is sufficient for all

estimated award amounts, an Applicant

that meets all of the program

requirements specified in this part shall

receive an award that is calculated in

the manner specified in § 1806.205. If

the amount of funds available during a

funding round is insufficient for all

estimated award amounts, Awardees

will be selected based on the process

described in this section.

(b) Priority of categories—(1) General.

The Fund will rank an Applicant’s

estimated award amount for Qualified

Activities according to the priority

categories described in this paragraph

(b). All Applicants in the first priority

category will be selected as Awardees

before Applicants in the second priority

category. Selections within each priority

category will be based on the relative

rankings within each such category,

subject to the availability of funds.
64446 Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / Rules and Regulations

(2) First priority. (i) If the amount of

funds available during a funding round

is insufficient for all estimated award

amounts, first priority will be given to

Applicants that propose to engage in

CDFI Related Activities in the following

order:

(A) Equity Investments in CDFIs

serving Distressed Communities;

(B) Equity Investments in CDFIs not

serving Distressed Communities; and

(C) CDFI Support Activities.

(ii) Ranking Equity Investments.

Estimated awards for Equity

Investments may be ranked within each

applicable priority subcategory based on

the extent to which an Applicant

proposes to reduce the percentage used

to calculate its award amount (e.g., an

Applicant that chooses to reduce its

award to 13 percent will be ranked

higher than an Applicant that reduces

its award to 14 percent). The Applicant,

however, may not reduce its award

percentage below 12 percent. For

Applicants that propose the same

percentage, estimated awards will be

ranked by the ratio of the proposed

Equity Investment to the asset size of

the Applicant (as reported in the

Applicant’s most recent Report of

Condition or Thrift Financial Report) at

the time of submission of an

application.

(iii) Ranking CDFI Support Activities.

Estimated awards for CDFI Support

Activities may be ranked based on the

ratio of the proposed CDFI Support

Activity to the asset size of the

Applicant (as reported in the

Applicant’s most recent Report of

Condition or Thrift Financial Report) at

the time of submission of an

application.

(3) Second priority. (i) If the amount

of funds available during a funding

round is sufficient for all CDFI Related

Activities but insufficient for all

estimated award amounts, second

priority will go to Applicants that

propose to engage in Development and

Service Activities.

(ii) Ranking Development and Service

Activities. Estimated awards for

Development and Service Activities

may be ranked by the ratio of the total

score to the asset size of the Applicant

(as reported in the Applicant’s most

recent Report of Condition or Thrift

Financial Report) at the time of the

submission of an application. If the

ratios of two Applicants are the same,

the estimated awards will be ranked

based on the degree of the poverty of

each Applicant’s Distressed

Community.

(4) Combined awards. If an Applicant

receives an award for more than one

priority category described in this

section, the award amounts will be

combined into a single Bank Enterprise

Award.

§ 1806.205 Actual award amounts.

(a) General. The Fund will assess an

Applicant’s success in achieving the

Qualified Activities projected in its

application. The extent of such success

will be measured based on the activities

that were actually carried out during the

Assessment Period and expected to be

disbursed to an investee, borrower, or

other recipient within three years of the

end of the applicable Assessment

Period. The Fund reserves the right to

extend this period on a case-by-case

basis where it has a high degree of

confidence that disbursement will occur

and the activity will promote the

purposes of the Act. Subject to

§ 1806.204 and any recapture sanction

for failure to perform pursuant to this

part, the actual award amount that an

Awardee will receive will be equal to

the estimated award previously

calculated and (if necessary) adjusted

pursuant to this section.

(b) Achievement. If an Applicant

carries out all or a portion of its

projected Qualified Activities and

satisfies all program requirements

described in this part, its award amount

will be calculated on a pro-rata basis to

reflect the increase in activities actually

carried out except that if:

(1) The amount of funds available is

insufficient for all estimated award

amounts; and

(2) An Applicant carries out less than

75 percent of its projected Qualified

Activities, the Fund in its sole

discretion, may limit the amount or

deny an award.

(c) Unobligated or deobligated funds.

The Fund, in its sole discretion, may

use any deobligated funds or funds not

obligated during a funding round:

(1) Using the calculation and selection

process contained in this part:

(i) To increase an award amount of an

Awardee for achievement in excess of

the projected Qualified Activities; or

(ii) To select Applicants not

previously selected;

(2) To make additional monies

available for a subsequent funding

round; or

(3) As otherwise authorized by the

Act.

(d) Limitation. The Fund, in its sole

discretion, may deny or limit the

amount of an award for any reason,

including if an Applicant submits an

application based on unrealistic

Assessment Period projections.

§ 1806.206 Applications for Bank

Enterprise Awards.

(a) Notice of Funds Availability. An

Applicant shall submit an application

for a Bank Enterprise Award in

accordance with this section and the

applicable NOFA published by the

Fund in the Federal Register. The

NOFA will advise potential Applicants

with respect to obtaining an application

packet and will establish submission

deadlines. The NOFA also will establish

any other requirements or restrictions

applicable for the funding round

including any restrictions on award

amounts. After receipt of an application,

the Fund may request clarifying or

technical information on materials

submitted as part of such application.

(b) Application contents. Each

application must contain the

information required in the application

packet, which includes:

(1) A copy of the Applicant’s

certificate of insurance issued by the

Federal Deposit Insurance Corporation

and a copy of the Applicant’s

incorporation, charter, organizing,

formation, or otherwise establishing

documents to be used to establish

eligibility for an award;

(2) A completed Bank Enterprise

Award Rating and Calculations

worksheet. (If an Applicant intends to

complete a merger with another

institution during the Assessment

Period, it shall submit a separate

Baseline Period worksheet for each

subject institution and one Assessment

Period worksheet that represents the

projected activities of the merged

institutions. If such a merger is

unexpectedly delayed beyond the

Assessment Period, the Fund reserves

the right to withhold distribution of an

award until the merger has been

completed.);

(3) A narrative summary of each

Qualified Activity expected to be

performed in the Assessment Period;

(4) The asset size of the Applicant, as

reported in its most recent Report of

Condition or Thrift Financial Report, to

its Appropriate Federal Banking

Agency;

(5) Information necessary for the Fund

to complete its environmental review

requirements pursuant to part 1815 of

this chapter;

(6) Certifications that the Applicant

will comply with all relevant provisions

of this chapter and all applicable

Federal, State, and local laws,

ordinances, regulations, policies,

guidelines, and requirements;

(7) A copy of the Applicant’s most

recent annual report;

(8) In the case of an Applicant

proposing to engage in Development
Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / Rules and Regulations 64447

and Service Activities, a completed

Distressed Community Designation

worksheet and a map and narrative

description of the Distressed

Community;

(9) In the case of an Applicant

proposing to engage in CDFI Related

Activities:

(i) Equity Investment. An Applicant

shall submit a list of potential CDFIs to

which assistance may be provided, and

a description of the amount, terms and

conditions of any Equity Investment

that may be provided.

(ii) CDFI Support Activities. An

Applicant shall submit:

(A) A list of potential CDFIs to which

assistance may be provided and a

description of the amount, terms and

conditions of the assistance that may be

provided; and

(B) Information that indicates that

each CDFI to which an Applicant

proposes to provide CDFI Support

Activities is integrally involved within

a Distressed Community, a completed

Distressed Community Designation

worksheet, and a map and narrative

description of the Distressed

Community.

Subpart C—Terms and Conditions of

Assistance

§ 1806.300 Award Agreement; sanctions.

(a) General. After the Fund selects an

Awardee, the Fund and the Awardee

will enter into an Award Agreement.

The Award Agreement shall provide

that an Awardee shall:

(1) Carry out its Qualified Activities

in accordance with applicable law, the

approved application, and all other

applicable requirements;

(2) Comply with such other terms and

conditions (including record keeping

and reporting requirements) that the

Fund may establish; and

(3) Not receive any monies until the

Fund has determined that the Awardee

has fulfilled all applicable requirements.

(b) Sanctions. In the event of any

fraud, misrepresentation, or

noncompliance with the terms of the

Award Agreement by the Awardee, the

Fund may terminate, reduce, or

recapture the award and pursue any

other available legal remedies.

(c) Notice. Prior to imposing any

sanctions pursuant to this section or an

Award Agreement, the Fund will, to the

maximum extent practicable, provide

the Awardee with written notice of the

proposed sanction and an opportunity

to comment. Nothing in this section,

however, will provide an Awardee with

the right to any formal or informal

hearing or comparable proceeding not

otherwise required by law.

§ 1806.301 Records, reports and audits of

Awardees.

At the end of an Assessment Period,

each Applicant shall submit to the

Fund:

(a) Worksheet. A Bank Enterprise

Award worksheet that reports the

Qualified Activities actually carried out

during the Assessment Period;

(b) Certification. A certification that

the information provided to the Fund is

true and accurately reflects the

Qualified Activities carried out during

an Assessment Period; and

(c) Documentation. The Applicant

shall make available the following:

(1) With respect to Equity Investments

and CDFI Support Activities, the

Applicant shall submit documentation

that meets the conditions described in

§ 1806.202(d);

(2) With respect to Development and

Services Activities where the original

amount of the value of the activity is

$250,000 or greater, the Applicant shall

submit documentation that meets the

conditions described in § 1806.202(d);

(3) With respect to Development and

Services Activities where the original

amount of the value of the activity is

less than $250,000, the Applicant shall

submit a schedule that describes the

original amount, census tract served,

and the dates of execution, initial

disbursement, and final disbursement of

the instrument; and

(4) Any other information reasonably

requested by the Fund in order to

document or otherwise assess the

validity of information provided by the

Applicant to the Fund.

§ 1806.302 Compliance with government

requirements.

In carrying out its responsibilities

pursuant to an Award Agreement, the

Awardee shall comply with all

applicable Federal, State, and local

laws, regulations and ordinances, OMB

Circulars, and Executive Orders.

§ 1806.303 Fraud, waste and abuse.

Any person who becomes aware of

the existence or apparent existence of

fraud, waste, or abuse of assistance

provided under this part should report

such incidences to the Office of

Inspector General of the U.S.

Department of the Treasury.

§ 1806.304 Books of account, records and

government access.

An Awardee shall submit such

financial and activity reports, records,

statements, and documents at such

times, in such forms, and accompanied

by such supporting data, as required by

the Fund and the U.S. Department of the

Treasury to ensure compliance with the

requirements of this part. The United

States Government, including the U.S.

Department of the Treasury, the

Comptroller General, and its duly

authorized representatives, shall have

full and free access to the Awardee’s

offices and facilities, and all books,

documents, records, and financial

statements relevant to the award of the

Federal funds and may copy such

documents as they deem appropriate.

§ 1806.305 Retention of records.

An Awardee shall comply with all

record retention requirements as set

forth in OMB Circular A–110 (as

applicable). This circular may be

obtained from Office of Administration,

Publications Office, 725 17th Street,

NW., Room 2200, New Executive Office

Building, Washington, DC 20503.

Dated: November 25, 1997.

Maurice A. Jones,

Acting Deputy Director.

[FR Doc. 97–31452 Filed 12–4–97; 8:45 am]

BILLING CODE 4810–70–P