12730 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules

1Pub. L. 103–328, 108 Stat. 2338, 12 U.S.C.

1835a.

2Before the Interstate Act, foreign banks were

permitted to establish agencies and limited

branches outside their home state under the

International Banking Act (IBA) (12 U.S.C. 3101 et

seq.). Since this authority was not conferred by the

Interstate Act, or any amendment by the Interstate

Act to any other provision of law, banks that only

establish interstate agencies and limited branches

under the IBA are not covered by section 109.

Domestic banks may also have branches located

outside a bank’s home state that are not within the

scope of section 109 because they are not

established or acquired pursuant to authority in the

Interstate Act. For example, domestic banks may

have branches grandfathered under the McFadden

Act (12 U.S.C. 36) and branches retained following

an interstate relocation under 12 U.S.C. 30.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 25

[Docket No. 97–04]

RIN 1557–AB50

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 211

[Regulations H and K; Docket No. R–0962]

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 369

RIN 3064–AB97

Prohibition Against Use of Interstate

Branches Primarily for Deposit

Production

AGENCIES: Office of the Comptroller of

the Currency, Treasury (OCC); Board of

Governors of the Federal Reserve

System (Board); and Federal Deposit

Insurance Corporation (FDIC).

ACTION: Joint notice of proposed

rulemaking.

SUMMARY: The OCC, Board, and FDIC

(collectively, agencies) propose to adopt

uniform regulations to implement

section 109 (section 109) of the RiegleNeal Interstate Banking and Branching

Efficiency Act of 1994 (Interstate Act).

As required by section 109, the

proposed rule would prohibit any bank

from establishing or acquiring a branch

or branches outside of its home state

under the Interstate Act primarily for

the purpose of deposit production, and

would provide guidelines for

determining whether such bank is

reasonably helping to meet the credit

needs of the communities served by the

interstate branches.

DATES: Comments must be received on

or before May 2, 1997.

ADDRESSES:

OCC: Comments should be directed to

Docket No. 97–04, Communications

Division, First Floor, Office of the

Comptroller of the Currency, 250 E

Street, SW., Washington, DC 20219.

Comments will be available for

inspection and photocopying at that

address. In addition, comments may be

sent by facsimile transmission to FAX

number (202) 874–5274, or by electronic

mail to

REGS.COMMENTS@OCC.TREAS.GOV.

Board: Comments should refer to

Docket No. R–0962, and may be mailed

to William W. Wiles, Secretary, Board of

Governors of the Federal Reserve

System, 20th Street and Constitution

Avenue, NW., Washington, DC 20551.

Comments also may be delivered to the

Board’s mail room between 8:45 and

5:15 p.m. on weekdays, and to the

security control room at all other times.

The mail room and the security control

room are accessible from the courtyard

entrance on 20th Street between

Constitution Avenue and C Street, NW.,

Comments may be inspected in Room

MP–500 of the Martin Building between

9:00 a.m. and 5:00 p.m. weekdays,

except as provided in 12 CFR 261.8 of

the Board’s Rules Regarding Availability

of Information.

FDIC: Written comments should be

directed to Jerry L. Langley, Executive

Secretary, Attention: Room F–400,

Federal Deposit Insurance Corporation,

550 17th Street NW., Washington, DC

20429. Comments may be hand

delivered to Room F–400, 1776 F Street

NW., Washington, DC 20429 on

business days between 8:30 a.m. and 5

p.m. (Fax number (202) 898–3838;

Internet address: comments@fdic.gov).

Comments will be available for

inspection and photocopying in Room

7118, 550 17th Street, NW., Washington,

DC 20429, between 9 a.m. and 4:30 p.m.

on business days.

FOR FURTHER INFORMATION CONTACT:

OCC: Neil M. Robinson, Senior

Attorney, or Kevin L. Lee, Senior

Attorney, Community & Consumer Law

Division (202) 874–5750; or Andrew T.

Gutierrez, Attorney, Legislative and

Regulatory Activities Division (202)

874–5090.

Board: Diane Koonjy, Senior

Attorney, (202) 452–3274, Lawranne

Stewart, Senior Attorney, (202) 452–

3513, or, with respect to foreign banks,

Christopher Clubb, Senior Attorney,

(202) 452–3778, Legal Division; or

Shawn McNulty, Assistant Director,

(202) 452–3946, Division of Consumer

and Community Affairs.

FDIC: Louise Kotoshirodo, Review

Examiner, Division of Consumer Affairs

(202) 942–3599; Doris L. Marsh,

Examination Specialist, Division of

Supervision (202) 898–8905; or Gladys

Cruz Gallagher, Counsel, Legal Division

(202) 898–3833.

SUPPLEMENTARY INFORMATION:

Background

The Interstate Act 1 provides

expanded authority for a domestic or

foreign bank to establish or acquire a

branch in a state other than the bank’s

home state (host state). Section 109

requires the agencies to prescribe

uniform rules that prohibit the use of

the authority under the Interstate Act to

engage in interstate branching primarily

for the purpose of deposit production.2

The agencies must also provide

guidelines to ensure that banks that

operate such branches are reasonably

helping to meet the credit needs of the

communities served by the branches.

Congress enacted section 109 to ensure

that the new interstate branching

authority provided by the Interstate Act

would not result in the taking of

deposits from a community without

concern for the credit needs of that

community. See H.R. Rep. No. 651,

103d Cong., 2d Sess. 62 (1994).

The agencies’ proposed uniform rules

apply to any bank that establishes or

acquires, directly or indirectly, a branch

under the authority of the Interstate Act

or amendments made by the Interstate

Act. These branches are referred to as

‘‘covered interstate branches.’’ The

proposed rules provide that, beginning

no earlier than one year after a bank

establishes or acquires a covered

interstate branch, the appropriate

agency will determine whether

reasonably available data exist that will

enable the agency to perform a ‘‘loan-todeposit ratio screen.’’

The loan-to-deposit ratio screen

compares the bank’s loan-to-deposit

ratio within the state where the bank’s

covered interstate branch is located

(covered interstate branch loan-todeposit ratio) with the loan-to-deposit

ratio of banks whose home state is that

state (host state loan-to-deposit ratio). If

the loan-to deposit ratio screen indicates

that the bank’s covered interstate branch

loan-to-deposit ratio is at least 50

percent of the host state loan-to-deposit

ratio, no further analysis is required.

However, if the appropriate agency

determines that the bank’s covered

interstate branch loan-to-deposit ratio is

less than 50 percent of the host state

loan-to-deposit ratio, or determines that

reasonably available data do not exist

that will permit the agency to determine

the bank’s covered interstate branch
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules 12731

loan-to-deposit ratio, the agency will

perform a ‘‘credit needs determination.’’

Under the credit needs determination,

the appropriate agency will review the

loan portfolio of the bank and determine

whether the bank is reasonably helping

to meet the credit needs of the

communities served by the bank in the

host state. Consistent with section 109,

the agencies will consider the following

in making a credit needs determination:

(1) Whether the covered interstate

branches were formerly part of a failed

or failing depository institution; (2)

whether the covered interstate branches

were acquired under circumstances

where there was a low loan-to-deposit

ratio because of the nature of the

acquired institution’s business; (3)

whether the covered interstate branches

have a higher concentration of

commercial or credit card lending, trust

services, or other specialized activities;

(4) the ratings received by the bank

under the Community Reinvestment Act

of 1977 (CRA)(12 U.S.C. 2901 et seq.);

(5) economic conditions, including the

level of loan demand, within the

communities served by the covered

interstate branches; and (6) the safe and

sound operation and condition of the

bank.

If the appropriate agency concludes

after taking these considerations into

account that the bank is not reasonably

helping to meet the credit needs of the

communities served by the bank in the

host state: (1) The appropriate agency

may order that covered interstate

branches in the host state be closed

unless the bank provides reasonable

assurances to the satisfaction of the

appropriate agency that the bank has an

acceptable plan that will reasonably

help to meet the credit needs of the

communities served by the bank in the

host state; and (2) the bank may not

open a new covered interstate branch in

the host state unless the bank provides

reasonable assurances to the satisfaction

of the appropriate agency that the bank

will reasonably help to meet the credit

needs of the community that the new

branch will serve.

Before exercising the authority to

order closure of branches, the agencies

will issue a notice of intent to close

covered interstate branches to the bank

and schedule a hearing under the

provisions of section 8(h) of the Federal

Deposit Insurance Act (12 U.S.C.

1818(h)).

Regulatory Burden and Limitations on

Available Data

The language of section 109 and its

legislative history indicate that Congress

intended that the provision not impose

any additional regulatory or paperwork

burdens on any institution. See H. Rep.

No. 651, 103d Cong., 2nd Sess. 62

(1994). Section 109 directs the agencies

to calculate the covered interstate

branch loan-to-deposit ratio from

available information, including an

agency’s sampling of the bank’s loan

files during an examination, or such

data as are otherwise available. The

agencies are also required by section

109 to calculate the host state loan-todeposit ratio as determinable from

relevant sources.

As discussed in greater detail later,

data that are currently required to be

reported by banks have significant

limitations for purposes of making the

calculations described in section 109. In

addition, the agencies’ supervisory

experience indicates that data collection

and availability vary substantially from

bank to bank. Although sampling during

an examination may produce relevant

data, the extent and duration of an

examination to gather complete

information could impose significant

regulatory burdens on the bank.

To address these concerns in a

manner consistent with section 109’s

intent not to impose additional

regulatory burdens on banks, the

agencies propose to determine the

covered interstate branch loan-todeposit ratio by reviewing the relevant

data reasonably available for each bank

covered by the proposed rule. These

data would include deposit and loan

data that are readily available and

provided by the bank, and data already

required to be reported by the bank or

reasonably available to the agencies

during an examination. If these data are

sufficient to determine that a bank’s

covered interstate branch loan-todeposit ratio is less than 50 percent of

the host state loan-to-deposit ratio, or if

reasonably available data are

insufficient to calculate the bank’s

covered interstate branch loan-todeposit ratio, the agencies would make

a credit needs determination for the

bank. During the credit needs

determination, the bank may provide

the agencies with any relevant

information, including deposit and loan

data.

The agencies believe that this

approach will accomplish the purpose

of section 109 while minimizing

regulatory burden on the bank to

produce or to assist the agencies in

obtaining data to calculate the bank’s

covered interstate branch loan-todeposit ratio. In this regard, the ratios

required to be calculated provide a

screen to identify when the appropriate

agency is required to make a more

comprehensive credit needs

determination under section 109. The

proposed rule ensures that the credit

needs determination will be made in all

cases in which the appropriate agency is

unable to readily verify compliance by

means of the section 109 loan-to-deposit

ratio screen.

The agencies seek comment on all

aspects of the proposal, particularly data

availability issues as they relate to the

required calculations of the loan-todeposit ratios for banks with covered

interstate branches and the host states,

and the agencies’ proposed resolutions

of these issues. The agencies also seek

comment on all other aspects of the

proposed rule.

Available Deposit and Loan Data

The most relevant data for calculating

the ratios required under section 109 are

data that provide the geographic

location of the depositor or borrower. As

discussed later, currently available data

have significant limitations with respect

to depositor or borrower location.

Deposit Data

Domestic banks report deposit data to

the agencies primarily through three

submissions: (1) The annual Summary

of Deposits, (2) the quarterly

Consolidated Reports of Condition and

Income (Call Reports), and (3) the

Report of Transaction Accounts, Other

Deposits, and Vault Cash (FR 2900). The

Summary of Deposits collects deposit

data on a branch-by-branch basis and

can be aggregated by state or other

geographical region. The data in this

report reflect the location where

deposits are booked, however, and not

the location of the depositor. Deposits

may be booked at centralized locations

and may include deposits from sources

in other states. The Summary of

Deposits therefore has limitations as a

source of deposit data for calculating

loan-to-deposit ratios in a particular

area or state. The Call Report and the FR

2900 also provide deposit data that are

of limited value in making the necessary

calculations. The data in these reports

are collected for each institution on a

consolidated basis and are not

segregated by geographic area.

The data reported by foreign banks

have similar limitations. The principal

source of deposit data for U.S. branches

of foreign banks is the Report of Assets

and Liabilities of United States

Branches and Agencies of a Foreign

Bank (FFIEC 002). While this form

separately identifies U.S. and non-U.S.

depositors, it does not otherwise

segregate depositors by location.

Moreover, since foreign banks generally

compete in wholesale deposit markets,

the location where deposits are booked

is likely to bear little relation to the
12732 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules

3HMDA imposes reporting requirements on

federally insured depository institutions that in any

year make at least one first-lien home-purchase loan

secured by a one- to four-family dwelling, other

than institutions that did not have a home or branch

office in an MSA or that had assets of $28 million

or less at the end of the previous calendar year. The

reporting requirements also are imposed on certain

mortgage lending subsidiaries and affiliates of

depository institutions and independent mortgage

companies, unless the subsidiary, affiliate, or

independent company did not have a home or

branch office in an MSA at the end of the previous

calendar year, or had, together with its parent,

assets of $28 million or less and originated less than

100 mortgages in the previous calendar year.

4These reporting requirements do not apply to a

bank that, as of December 31 of either of the prior

two calendar years, had total assets of less than

$250 million and was independent or an affiliate of

a holding company that, as of December 31 of either

of the prior two calendar years, had total banking

and thrift assets of less than $1 billion.

location of the depositors. Other sources

of deposit data for foreign banks are the

FDIC’s Summary of Deposits (for

insured U.S. branches of foreign banks,

which are relatively few in number) and

the FR 2900—Report of Transaction

Accounts, Other Deposits, and Vault

Cash (for U.S. branches of foreign banks

with consolidated worldwide assets in

excess of $1 billion) which, for the

reasons previously discussed, are of

limited use in the loan-to-deposit

calculations required under section 109.

Loan data

The quarterly Call Reports provide

information about the lending activity of

domestic banks on a consolidated basis

and do not require this information to

be segregated by state or branch.

Moreover, the Call Reports reflect only

those loans actually held on the books

of the bank as of the end of the reporting

period, and do not reflect loans that

have been originated and sold or that

have been booked through affiliates.

Certain types of loans by domestic

banks are required to be reported under

the Home Mortgage Disclosure Act (12

U.S.C. 2801 et seq.) (HMDA) and the

new CRA regulations promulgated by

the Federal financial supervisory

agencies (60 FR 22156). An institution

that is subject to HMDA reporting

requirements must report annually the

number of home-purchase and homeimprovement loans originated or

purchased, and refinancings of both, by

geographic location of the property

subject to the mortgage.3 Additionally,

large institutions are required under the

new CRA regulations to report the

following information annually on loans

to small businesses and small farms,

aggregated for each census tract or block

numbering area: (1) Number and

amount of loans with an original

amount of $100,000 or less, more than

$100,000 and less than or equal to

$250,000, and more than $250,000; and

(2) number and amount of loans to small

businesses and small farms with gross

annual revenues of $1 million or less

(using the revenues the institution

considered in making the credit

decision).4 While these sources contain

lending data broken down by

geographical location, the limited nature

of the types of loans reported and of the

lenders required to report significantly

limit the usefulness of these data for

purposes of calculating the ratios

required under section 109.

Loan data for U.S. branches of foreign

banks are also reported on an aggregate

basis in the FFIEC 002, which

distinguishes only between U.S. and

non-U.S. borrowers for some types of

loans. These branches typically make

very few loans that are subject to HMDA

reporting requirements.

The Section 109 Loan-to-Deposit Ratio

Screen

Covered Interstate Branch Loan-toDeposit Ratio

Section 109 indicates that in

calculating the covered interstate branch

loan-to-deposit ratio, the agencies

should consider available information,

including information from the agency’s

sampling of the bank’s loan files during

an examination. As discussed later,

sampling loan files to calculate this

loan-to-deposit ratio could result in

significantly increased regulatory

burden.

Sampling at a particular branch could

produce unreliable data if a bank books

loans or deposits at locations outside

the state where the borrowers or

depositors are located. In this regard,

many domestic and foreign institutions

consolidate certain types of business at

the main office or other location. For

example, commercial loans and deposits

may be consolidated at a bank’s main

office, while mortgage lending may be

booked at a mortgage lending

subsidiary. Although the loans may

have been made through a bank’s

covered interstate branch, they would

not be booked at that branch. Sampling

of loan files also would not provide

information on loans that have been

sold. Since practices regarding loan

sales differ from bank to bank, there

may be large variations in the loan-todeposit ratios for individual banks over

time that do not reflect underlying

lending activity. If loans were booked at

the covered interstate branch closest to

the borrower, the agencies would have

to expand significantly the extent and

duration of their current examinations

in order to obtain this information

through sampling of loan files at the

bank’s covered interstate branches.

Under the proposed rule, the agencies

would take into account all reasonably

available data relevant to calculating the

covered interstate branch loan-todeposit ratio on a case-by-case basis.

The agencies would consider any

deposit and loan data that are readily

available and provided by the bank, and

data reasonably available to the agencies

through currently required reports and

the examination process. In determining

whether to sample a bank’s loan and

deposit records, the agencies would

consider whether the information would

accurately reflect the bank’s activities in

a host state, and whether the

information could be obtained without

imposing an undue regulatory burden

on the bank. As previously noted, the

agencies would conduct a credit needs

determination in all cases where the

agencies concluded that sufficient data

were not available without imposing an

additional regulatory burden on the

bank to calculate the covered interstate

branch loan-to-deposit ratio.

The agencies seek comment on this

approach and alternative approaches for

accomplishing the purpose of section

109 without imposing regulatory

burden. In particular, the agencies seek

comment on the availability of deposit

and lending data broken down by

geographical area, and banking practices

for allocating deposits and loans to

branches or particular states. The

agencies also seek comment on the

regulatory burden associated with

providing data, or permitting the

agencies to obtain data through

sampling in the examination process,

that would be necessary to calculate a

bank’s covered interstate branch loan-todeposit ratio.

Host State Loan-to-Deposit Ratio

The agencies anticipate that the host

state loan-to-deposit ratio would be

calculated jointly by the agencies from

the data reported by banks in the Call

Reports by dividing the total dollar

amount of outstanding loans held by

home state banks by the total dollar

amount of deposits held by such banks.

The ratio, which would be periodically

updated, and the methodology used to

calculate the ratio would be made

available to the public. Determining the

appropriate method of calculating a

ratio that accurately reflects the deposit

taking and lending activities of home

state banks raises several issues

discussed later.

Data for specialized banks that do not

engage in traditional deposit taking or

lending may distort the host state loanto-deposit ratio. Limited purpose banks,
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules 12733

5See Profit and Balance Sheet Developments at

U.S. Commercial Banks in 1995, Federal Reserve

Bulletin, June 1996, table A.2, pgs. 496–505.

6The new CRA regulations permit the agencies to

evaluate a bank’s performance in the context of a

number of considerations, including the nature of

the bank’s product offerings and business strategy,

the lending opportunities within a bank’s

assessment area, and any constraints on the bank

such as the financial condition of the bank, the

economic climate (national, regional and local), and

safety and soundness limitations. See 12 CFR

25.21(b) (OCC), 12 CFR 228.21(b) (Board) and 12

CFR 345.21(b) (FDIC).

7A special purpose bank does not perform

commercial or retail banking services by granting

credit to the public in the ordinary course of

business, and is not evaluated for CRA performance

by the agencies. See 12 CFR 25.11(c)(3) (OCC); 12

CFR 228.11(c)(3) (Board); and 12 CFR 345.11(c)(3)

(FDIC). An uninsured branch of a foreign bank also

is not evaluated for CRA performance unless it

results from an acquisition described in section

5(a)(8) of the IBA (12 U.S.C. 3103(a)(8)). See 12 CFR

25.11(c)(2) (OCC); 12 CFR 228.11(c)(2) (Board); and

12 CFR 345.11(c)(1) (FDIC).

such as credit card banks and wholesale

banks, could have very large loan

portfolios, but few, if any deposits. In

addition, certain loan and deposit data

reported on the Call Report relate to

international banking activities that are

not attributable to any state. These data

include loans to banks in foreign

countries, commercial and industrial

loans to non-U.S. addresses, loans to

foreign governments and official

institutions, deposits from banks in

foreign countries, and deposits from

foreign governments and official

institutions. The agencies anticipate that

the host state loan-to-deposit ratio

would exclude data from the types of

limited purpose banks and the

categories of Call Report data discussed

earlier.

The deposit taking and lending

activities of multistate banks also could

distort the host state loan-to-deposit

ratio of their home states. Accounting

for these activities, however, is difficult

because consolidated reporting does not

allow assignment of a multistate bank’s

loans and deposits to particular states.

Attributing all loans and deposits from

banks with operations in more than one

state to its home state could materially

distort the host state loan-to-deposit

ratio, particularly since multistate

banks, which are likely to be large

institutions, generally maintain higher

loan-to-deposit ratios than smaller

institutions.5 On the other hand,

excluding multistate banks completely

also could distort the host state loan-todeposit ratio.

Multistate banks that have more than

50 percent of their branches outside

their home state could be excluded from

the host state loan-to-deposit ratio

calculation since these institutions

would be more likely to have more than

50 percent of their deposits and loans

originated outside the host state under

consideration. However, any

methodology that excludes multistate

banks could eventually result in a host

state with few, if any, banks eligible for

calculating the host state loan-to-deposit

ratio as interstate branching becomes

more prevalent. Under these

circumstances, the agencies may need to

include multistate banks.

The agencies seek comment on the

approaches to resolving the issues

discussed earlier, and on any

methodology that, using available data,

would most accurately reflect the

deposit taking and lending activities of

retail banks in a host state. Commenters

should also consider the extent to which

a methodology could calculate a host

state loan-to-deposit ratio that would be

roughly comparable to the calculation of

the bank’s covered interstate branch

loan-to-deposit ratio. In addition, the

agencies anticipate that any

methodology used to calculate the host

state loan-to-deposit ratio could be

adjusted in the future to take into

account changes in reporting

requirements or additional sources of

relevant data. In this light, the agencies

have not included the methodology for

calculating the host state loan-to-deposit

ratio in the regulation and seek

comment on this approach.

Credit Needs Determination

As discussed earlier, the proposed

rule would require the appropriate

agency to review the loan portfolio of a

bank and determine whether the bank is

reasonably helping to meet the credit

needs of the communities served by the

bank in the host state if the bank’s

covered interstate branch loan-todeposit ratio is less than 50 percent of

the host state loan-to-deposit ratio, or if

reasonably available data are

insufficient to calculate the bank’s

covered interstate branch loan-todeposit ratio.

In making a credit needs

determination, the appropriate agency

will consider all of the factors specified

in section 109, including the

circumstances under which the

branches were acquired, the nature of

the branches’ business, economic

conditions, safety and soundness

considerations, and the CRA rating of

the bank. The agencies also would

consider any information provided by

the bank, including loan and deposit

data.

The agencies believe that it is

consistent with the language and intent

of section 109 to carefully weigh the

CRA rating of the bank in making a

credit needs determination under the

factors enumerated in section 109.

Section 109 specifies the bank’s CRA

rating as a factor to be considered, and

most of the other considerations listed

in section 109 are taken into account

under the new CRA regulations as part

of the performance context used to rate

a bank’s CRA performance.6

For a bank with interstate branches,

section 110 of the Interstate Act requires

separate written evaluations of the

institution’s CRA performance: as a

whole; in each state in which it

maintains a branch; and in any

multistate metropolitan area in which it

maintains a branch in two or more

states. Section 110 also requires that the

statewide written evaluation of a

multistate bank must contain separate

discussions of the institution’s

performance in any metropolitan area in

the state in which it maintains a branch,

as well as in the nonmetropolitan area

of the state if a branch is maintained

there. Data considered in evaluating the

bank’s CRA performance in a particular

state would include information that

contains the geographical location of

housing-related, small business and

small farm loans that are required to be

reported under HMDA and the new

CRA regulations. Accordingly, the

agencies believe that information from a

CRA performance examination is

particularly relevant in determining

compliance with section 109 because it

directly evaluates a bank’s efforts to

assist in meeting the credit needs of its

communities.

The agencies would expect that a

credit needs determination for a bank

with satisfactory or better ratings for

CRA performance in the host state

would be favorable. The agencies would

also expect that a credit needs

determination for a bank with less than

satisfactory ratings for CRA performance

in the host state would be adverse

unless mitigated by the other factors

enumerated in section 109. If the section

109 review is not performed in

connection with the bank’s CRA

performance examination, the agencies

would also consider any available

information that would indicate an

improvement or weakening in a bank’s

CRA performance since its most recent

performance rating.

Some entities that could be subject to

section 109, including special purpose

banks and uninsured branches of

foreign banks,7 are not evaluated for

CRA performance by the agencies. For

these institutions, the agencies propose

to use the new CRA regulations as

guidelines in making a credit needs
12734 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules

8U.S. branches of foreign banks generally accept

only uninsured wholesale deposits. In 1991, the

Federal Deposit Insurance Corporation

Improvement Act amended the IBA to prohibit U.S.

branches of foreign banks from taking deposits in

amounts of less than $100,000, other than through

the relatively few branches that were already

insured by the FDIC in 1991. 12 U.S.C. 3104(d).

Congress reaffirmed this prohibition in the

Interstate Act, directing the OCC and the FDIC to

revise their regulations to reduce further the

opportunities for retail deposit-taking available to

these branches. See section 107(b) of the Interstate

Act. As a result, interstate branches of foreign banks

established under the Interstate Act cannot take

retail deposits or draw a significant level of deposits

from the community, retail-oriented deposit

markets where the branches are located.

determination. However, the new CRA

regulations would provide guidance

only for determining the relevance of a

particular activity to the credit needs

determination, and would not obligate

the institution to have a record of

performance under the CRA or require

that the bank pass any performance tests

in the new CRA regulations.

The agencies also intend to give

substantial weight to the factor in

section 109 relating to specialized

activities in making a credit needs

determination for institutions not

evaluated under the CRA. For example,

most branches of foreign banks derive

substantially all of their deposits from

the wholesale deposit markets that are

generally national or international in

scope.8 The agencies believe that this

approach is consistent with section

109’s overall purpose of preventing

banks from using the Interstate Act to

establish branches primarily to gather

deposits in their host state without

engaging in activities designed to

reasonably help meet the credit needs of

the communities served by the bank in

the host state.

Before a bank could be sanctioned

under section 109, the appropriate

agency would be required to

demonstrate that the bank failed to

comply with the section 109 loan-todeposit ratio screen as well as failed to

reasonably help in meeting the credit

needs of the communities served by the

bank in the host state. Accordingly, the

proposed rule would require the

agencies to determine a bank’s

compliance with the section 109 loanto-deposit ratio screen, even if the

agencies previously determined that the

data are not reasonably available.

The agencies seek comment on the

proposed approach for making credit

needs determinations, particularly the

proposal to make credit needs

determinations when data are

insufficient to calculate the covered

interstate branch loan-to-deposit ratio,

and alternative approaches for

accomplishing the purpose of section

109 without imposing regulatory

burden. The agencies also solicit

comments on whether the agencies

should carefully weigh the extent to

which banks receive deposits from the

host state if they are evaluated by the

agencies under the CRA but engage in

specialized activities.

Timing of Review and Agency

Consultation

The agencies anticipate that they will

conduct a review under section 109 for

all banks evaluated for CRA

performance when the agencies initially

rate the CRA performance of an

interstate bank in a particular state as

required by section 110 of the Interstate

Act. Subsequent reviews, and reviews of

banks not subject to CRA evaluations,

would be conducted as deemed

appropriate by the agencies. The

agencies also intend to coordinate and

consult in applying section 109 to banks

that are subject to regulation by more

than one agency. The agencies seek

comment on these proposals for

conducting section 109 reviews.

Regulatory Flexibility Act Analysis

Consistent with the requirement in

section 109 that the agencies use only

available information to conduct the

relevant analyses, the proposed rule

does not impose any burden on banks

beyond what is required by statute.

Thus, the agencies reasonably believe

that the rule, if promulgated, will not

have a significant economic impact on

a substantial number of small entities.

However, in light of the issues

discussed previously in the preamble to

the proposed rule relating to data

availability, the agencies seek the views

of interested parties on whether they

believe that the proposed rule would

have a significant impact on a

substantial number of small business

entities in accord with the Regulatory

Flexibility Act (5 U.S.C. 601 et seq.).

The agencies note that the proposal

affects only banks that have branches in

more than one state, which are likely to

be primarily larger banks. Consistent

with Congressional intent, the proposal

would not require any additional

paperwork or regulatory reporting. As

discussed earlier, however, the agencies

are concerned that the proposal would

create additional regulatory burden for

some institutions with covered

interstate branches, as some institutions

may be subject to more extensive

examinations or requests for

information necessary to obtain the data

required under the proposed rule. In

practice, institutions subject to the rule

may need to provide additional data to

examiners to avoid prolonged

examinations. The agencies have

requested comment on alternatives for

reducing regulatory burden under the

proposed rule.

Paperwork Reduction Act

The agencies have determined that

this proposal would not increase the

regulatory paperwork burden of banking

organizations pursuant to the provisions

of the Paperwork Reduction Act (44

U.S.C. 3501 et seq.).

OCC Executive Order 12866

Determination

The Office of Management and Budget

has concurred with the OCC’s

determination that this proposal is not

a significant regulatory action under

Executive Order 12866.

OCC Unfunded Mandates Reform Act of

1995 Determination

The OCC has determined that this

proposal would not result in

expenditures by State, local, and tribal

governments, or by the private sector, of

$100 million or more in any one year.

Accordingly, a budgetary impact

statement is not required under section

202 of the Unfunded Mandates Reform

Act of 1995.

List of Subjects

12 CFR Part 25

Community development, Credit,

Investments, National banks, Reporting

and recordkeeping requirements.

12 CFR Part 208

Accounting, Agriculture, Banks,

banking, Confidential business

information, Crime, Currency, Federal

Reserve System, Mortgages, Reporting

and recordkeeping requirements,

Securities.

12 CFR Part 211

Exports, Federal Reserve System,

Foreign banking, Holding companies,

Investments, Reporting and

recordkeeping requirements.

12 CFR Part 369

Banks, banking, Community

development.

Office of the Comptroller of the

Currency

12 CFR CHAPTER I

Authority and Issuance

For the reasons set forth in the joint

preamble, the Office of the Comptroller

of the Currency proposes to amend part

25 of chapter I of title 12 of the Code

of Federal Regulations as follows:
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules 12735

PART 25—COMMUNITY

REINVESTMENT ACT REGULATIONS

1. The authority citation for part 25 is

revised to read as follows:

Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36,

93a, 161, 215, 215a, 481, 1814, 1816, 1828(c),

1835a, 2901 through 2907, and 3101 through

3111.

2. Part 25 is amended by adding a

new subpart E to read as follows:

Subpart E—Prohibition Against Use of

Interstate Branches Primarily for

Deposit Production

Sec.

25.61 Authority, purpose, and scope.

25.62 Definitions.

25.63 Loan-to-deposit ratio screen.

25.64 Credit needs determination.

25.65 Sanctions.

Subpart E—Prohibition Against Use of

Interstate Branches Primarily for

Deposit Production

§ 25.61 Authority, purpose, and scope.

(a) Authority. The authority for this

part is 12 U.S.C. 21, 22, 26, 27, 30, 36,

93a, 161, 215, 215a, 481, 1814, 1816,

1828(c), 1835a, 2901 through 2907, and

3101 through 3111.

(b) Purpose. The purpose of this

section is to implement section 109 (12

U.S.C. 1835a) of the Riegle-Neal

Interstate Banking and Branching

Efficiency Act of 1994 (Pub. L. 103–328,

108 Stat. 2338) (Interstate Act).

(c) Scope. (1) This subpart applies to

any national bank that has operated a

covered interstate branch for a period of

at least one year, and any foreign bank

that has operated a covered interstate

branch that is a Federal branch for a

period of at least one year.

(2) This subpart describes the

requirements imposed under 12 U.S.C.

1835a, which prohibits a bank from

using any authority to engage in

interstate branching pursuant to the

Interstate Act, or any amendment made

by the Interstate Act to any other

provision of law, primarily for the

purpose of deposit production.

§ 25.62 Definitions.

For purposes of this subpart, the

following definitions apply:

(a) Bank means, unless the context

indicates otherwise:

(1) A national bank; and

(2) A foreign bank as that term is

defined in 12 U.S.C. 3101(7) and 12 CFR

28.11(j).

(b) Covered interstate branch means

any branch of a national bank and any

Federal branch of a foreign bank, that:

(1) Is established or acquired outside

the bank’s home state under the

interstate branching authority granted

by the Interstate Act, or any amendment

made by the Interstate Act to any other

provision of law; or

(2) Could not have been established or

acquired outside of the bank’s home

state but for the establishment or

acquisition of a branch described in

paragraph (b)(1) of this section.

(c) Covered interstate branch loan-todeposit ratio means the ratio of a bank’s

loans to its deposits in a state in which

the bank has a covered interstate

branch, as determined by the OCC.

(d) Federal branch means federal

branch as that term is defined in 12

U.S.C. 3101(7) and 12 CFR 28.11(i).

(e) Home state means:

(1) With respect to a state bank, the

state that chartered the bank;

(2) With respect to a national bank,

the state in which the main office of the

bank is located; and

(3) With respect to a foreign bank, the

home state of the foreign bank as

determined in accordance with 12

U.S.C. 3103(c) and 12 CFR 28.11(o).

(f) Host state means a state in which

a bank establishes or acquires a covered

interstate branch.

(g) Host state loan-to-deposit ratio

means, with respect to a particular host

state, the ratio of total loans in the host

state relative to total deposits from the

host state for all banks (including all

institutions covered under the

definition of ‘‘bank’’ in 12 U.S.C.

1813(a)(1)) that have that state as their

home state, as updated periodically and

made available to the public.

(h) State means state as that term is

defined in 12 U.S.C. 1813(a)(3).

§ 25.63 Loan-to-deposit ratio screen.

(a) Application of screen. Beginning

no earlier than one year after a bank

establishes or acquires a covered

interstate branch, the OCC will consider

whether the bank’s covered interstate

branch loan-to-deposit ratio is less than

50 percent of the relevant host state

loan-to-deposit ratio.

(b) Results of screen. (1) If the OCC

determines that the bank’s covered

interstate branch loan-to-deposit ratio is

50 percent or more of the host state

loan-to-deposit ratio, no further

consideration under this subpart is

required.

(2) If the OCC determines that the

bank’s covered interstate branch loan-todeposit ratio is less than 50 percent of

the host state loan-to-deposit ratio, or if

reasonably available data are

insufficient to calculate the bank’s

covered interstate branch loan-todeposit ratio, the OCC will make a

credit needs determination for the bank

as provided in § 25.64.

§ 25.64 Credit needs determination.

(a) In general. The OCC will review

the loan portfolio of the bank and

determine whether the bank is

reasonably helping to meet the credit

needs of the communities served by the

bank in the host state.

(b) Guidelines. The OCC will use the

following considerations as guidelines

when making the determination

pursuant to paragraph (a) of this section:

(1) Whether covered interstate

branches were formerly part of a failed

or failing depository institution;

(2) Whether covered interstate

branches were acquired under

circumstances where there was a low

loan-to-deposit ratio because of the

nature of the acquired institution’s

business or loan portfolio;

(3) Whether covered interstate

branches have a high concentration of

commercial or credit card lending, trust

services, or other specialized activities,

including the extent to which the

covered interstate branches accept

deposits in the host state;

(4) The CRA ratings received by the

bank, if any, and if the credit needs

determination is not made concurrently

with a CRA evaluation, available

information that would indicate an

improvement or weakening in the

bank’s CRA performance since its most

recent CRA evaluation;

(5) Economic conditions, including

the level of loan demand, within the

communities served by the covered

interstate branches;

(6) The safe and sound operation and

condition of the bank; and

(7) The OCC’s Community

Reinvestment Act Regulations (subparts

A through D of this part) and

interpretations of those regulations.

§ 25.65 Sanctions.

(a) In general. If the OCC determines

that a bank is not reasonably helping to

meet the credit needs of the

communities served by the bank in the

host state, and that the bank’s covered

interstate branch loan-to-deposit ratio is

less than 50 percent of the host state

loan-to-deposit ratio, the OCC:

(1) May order that a bank’s covered

interstate branch or branches be closed

unless the bank provides reasonable

assurances to the satisfaction of the OCC

that the bank has an acceptable plan

under which the bank will reasonably

help to meet the credit needs of the

communities served by the bank in the

host state; and

(2) Will not permit the bank to open

a new interstate branch in the host state

that would be considered to be a

covered interstate branch under

§ 25.62(b) unless the bank provides
12736 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules

reasonable assurances to the satisfaction

of the OCC that the bank will reasonably

help to meet the credit needs of the

community that the new interstate

branch will serve.

(b) Notice prior to closure of covered

interstate branches. Before exercising

the OCC’s authority to order the bank to

close a covered interstate branch or

branches, the OCC will issue to the bank

notice of the OCC’s intent to order the

closure and will schedule a hearing

within 60 days of issuing the notice.

(c) Hearing. A hearing scheduled

under paragraph (b) of this section will

be conducted under the provisions of 12

U.S.C. 1818(h) and 12 CFR part 19.

Dated: March 11, 1997.

Eugene A. Ludwig,

Comptroller of the Currency.

Federal Reserve System

12 CFR CHAPTER II

Authority and Issuance

For the reasons set forth in the joint

preamble, the Board of Governors of the

Federal Reserve System proposes to

amend parts 208 and 211 of chapter II

of title 12 of the Code of Federal

Regulations as follows:

PART 208—MEMBERSHIP OF STATE

BANKING INSTITUTIONS IN THE

FEDERAL RESERVE SYSTEM

(REGULATION H)

1. The authority citation for part 208

is revised to read as follows:

Authority: 12 U.S.C. 24, 248(a), 248(c),

321–338a, 371d, 461, 481–486, 601, 611,

1814, 1820(d)(9), 1823(j), 1828(o), 1831o,

1831p-1, 1835a, 3105, 3310, 3331–3351, and

3906–3909; 15 U.S.C. 78b, 781(b), 781(g),

781(i), 78o-4(c)(5), 78q, 78q-1, and 78w; 31

U.S.C. 5318.

2. A new § 208.28 is added to subpart

A to read as follows:

§ 208.28 Prohibition against use of

interstate branches primarily for deposit

production.

(a) Purpose and scope—(1) Purpose.

The purpose of this section is to

implement section 109 (12 U.S.C.

1835a) of the Riegle-Neal Interstate

Banking and Branching Efficiency Act

of 1994 (Pub. L. 103–328, 108 Stat.

2338) (Interstate Act).

(2) Scope. (i) This section applies to

any State member bank that has

operated a covered interstate branch for

a period of at least one year, and any

foreign bank that has operated a covered

interstate branch licensed by a State for

a period of at least one year.

(ii) This section describes the

requirements imposed under 12 U.S.C.

1835a, which prohibits a bank from

using any authority to engage in

interstate branching pursuant to the

Interstate Act, or any amendment made

by the Interstate Act to any other

provision of law, primarily for the

purpose of deposit production.

(b) Definitions. For purposes of this

section, the following definitions apply:

(1) Bank means, unless the context

indicates otherwise:

(i) A State member bank as that term

is defined in 12 U.S.C. 1813(d)(2); and

(ii) A foreign bank as that term is

defined in 12 U.S.C. 3101 (7) and 12

CFR 211.21.

(2) Covered interstate branch means

any branch of a State member bank and

any branch of a foreign bank licensed by

a State, that:

(i) Is established or acquired outside

the bank’s home state under the

interstate branching authority granted

by the Interstate Act, or any amendment

made by the Interstate Act to any other

provision of law; or

(ii) Could not have been established

or acquired outside of the bank’s home

state but for the establishment or

acquisition of a branch described in

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

(3) Home state means:

(i) With respect to a state bank, the

state that chartered the bank;

(ii) With respect to a national bank,

the state in which the main office of the

bank is located; and

(iii) With respect to a foreign bank,

the home state of the foreign bank as

determined in accordance with 12

U.S.C. 3103(c) and 12 CFR 211.22.

(4) Host state means a state in which

a bank establishes or acquires a covered

interstate branch.

(5) Host state loan-to-deposit ratio

means, with respect to a particular host

state, the ratio of total loans in the host

state relative to total deposits from the

host state for all banks (including all

institutions covered under the

definition of ‘‘bank’’ in 12 U.S.C.

1813(a)(1)) that have that state as their

home state, as updated periodically and

made available to the public.

(6) Covered interstate branch loan-todeposit ratio means the ratio of a bank’s

loans to its deposits in a state in which

the bank has a covered interstate

branch, as determined by the Board.

(7) State means state as that term is

defined in 12 U.S.C. 1813(a)(3).

(c) Loan-to-deposit ratio screen—(1)

Application of screen. Beginning no

earlier than one year after a bank

establishes or acquires a covered

interstate branch, the Board will

consider whether the bank’s covered

interstate branch loan-to-deposit ratio is

less than 50 percent of the relevant host

state loan-to-deposit ratio.

(2) Results of screen. (i) If the Board

determines that the bank’s covered

interstate branch loan-to-deposit ratio is

50 percent or more of the host state

loan-to-deposit ratio, no further

consideration under this section is

required.

(ii) If the Board determines that the

bank’s covered interstate branch loan-todeposit ratio is less than 50 percent of

the host state loan-to-deposit ratio, or if

reasonably available data are

insufficient to calculate the bank’s

covered interstate branch loan-todeposit ratio, the Board will make a

credit needs determination for the bank

as provided in paragraph (d) of this

section.

(d) Credit needs determination—(1) In

general. The Board will review the loan

portfolio of the bank and determine

whether the bank is reasonably helping

to meet the credit needs of the

communities served by the bank in the

host state.

(2) Guidelines. The Board will use the

following considerations as guidelines

when making the determination

pursuant to paragraph (a) of this section:

(i) Whether covered interstate

branches were formerly part of a failed

or failing depository institution;

(ii) Whether covered interstate

branches were acquired under

circumstances where there was a low

loan-to-deposit ratio because of the

nature of the acquired institution’s

business or loan portfolio;

(iii) Whether covered interstate

branches have a high concentration of

commercial or credit card lending, trust

services, or other specialized activities,

including the extent to which the

covered interstate branches accept

deposits in the host state;

(iv) The Community Reinvestment

Act (CRA) ratings received by the bank,

if any, under 12 U.S.C. 2901 et seq. and,

if the credit needs determination is not

made concurrently with a CRA

evaluation, available information that

would indicate an improvement or

weakening in the bank’s CRA

performance since its most recent CRA

evaluation;

(v) Economic conditions, including

the level of loan demand, within the

communities served by the covered

interstate branches;

(vi) The safe and sound operation and

condition of the bank; and

(vii) The Board’s Regulation BB—

Community Reinvestment (12 CFR part

228) and interpretations of that

regulation.

(e) Sanctions—(1) In general. If the

Board determines that a bank is not

reasonably helping to meet the credit

needs of the communities served by the
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules 12737

bank in the host state, and that the

bank’s covered interstate branch loan-todeposit ratio is less than 50 percent of

the host state loan-to-deposit ratio, the

Board:

(i) May order that a bank’s covered

interstate branch or branches be closed

unless the bank provides reasonable

assurances to the satisfaction of the

Board that the bank has an acceptable

plan under which the bank will

reasonably help to meet the credit needs

of the communities served by the bank

in the host state; and

(ii) Will not permit the bank to open

a new interstate branch in the host state

that would be considered to be a

covered interstate branch under

paragraph (b)(2) of this section unless

the bank provides reasonable assurances

to the satisfaction of the Board that the

bank will reasonably help to meet the

credit needs of the community that the

new interstate branch will serve.

(2) Notice prior to closure of covered

interstate branches. Before exercising

the Board’s authority to order the bank

to close a covered interstate branch or

branches, the Board will issue to the

bank notice of the Board’s intent to

order the closure and will schedule a

hearing within 60 days of issuing the

notice.

(3) Hearing. A hearing scheduled

under paragraph (e)(2) of this section

will be conducted under the provisions

of 12 U.S.C. 1818(h) and 12 CFR part

263.

PART 211—INTERNATIONAL

BANKING OPERATIONS

(REGULATION K)

1. The authority citation for part 211

is revised to read as follows:

Authority: 12 U.S.C. 221 et seq., 1818,

1835a, 1841 et seq., 3101 et seq., and 3901

et seq.

2. In § 211.22, a new paragraph (d) is

added to read as follows:

§ 211.22 Interstate banking operations of

foreign banking organizations.

* * * * *

(d) Prohibition against interstate

deposit production offices. A covered

interstate branch of a foreign bank may

not be used as a deposit production

office in accordance with the provisions

in § 208.28 of the Board’s Regulation H

(12 CFR 208.28).

By order of the Board of Governors of the

Federal Reserve System, March 11, 1997.

Jennifer J. Johnson,

Deputy Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR CHAPTER III

Authority and Issuance

For the reasons set forth in the joint

preamble, the Board of Directors of the

Federal Deposit Insurance Corporation

proposes to add part 369 to chapter III

of title 12 of the Code of Federal

Regulations to read as follows:

PART 369—PROHIBITION AGAINST

USE OF INTERSTATE BRANCHES

PRIMARILY FOR DEPOSIT

PRODUCTION

Sec.

369.1 Purpose and scope.

369.2 Definitions.

369.3 Loan-to-deposit ratio screen.

369.4 Credit needs determination.

369.5 Sanctions.

Authority: 12 U.S.C. 1819 (Tenth) and

1835a.

§ 369.1 Purpose and scope.

(a) Purpose. The purpose of this part

is to implement section 109 (12 U.S.C.

1835a) of the Riegle-Neal Interstate

Banking and Branching Efficiency Act

of 1994 (Pub. L. 103–328, 108 Stat.

2338) (Interstate Act).

(b) Scope. (1) This part applies to any

State nonmember bank that has

operated a covered interstate branch for

a period of at least one year.

(2) This part describes the

requirements imposed under 12 U.S.C.

1835a, which prohibits a bank from

using any authority to engage in

interstate branching pursuant to the

Interstate Act, or any amendment made

by the Interstate Act to any other

provision of law, primarily for the

purpose of deposit production.

§ 369.2 Definitions.

For purposes of this part, the

following definitions apply:

(a) Bank means, unless the context

indicates otherwise, a State nonmember

bank.

(b) Covered interstate branch means

any branch of a State nonmember bank,

that:

(1) Is established or acquired outside

the bank’s home state under the

interstate branching authority granted

by the Interstate Act, or any amendment

made by the Interstate Act to any other

provision of law; or

(2) Could not have been established or

acquired outside of the bank’s home

state but for the establishment or

acquisition of a branch described in

paragraph (b)(1) of this section.

(c) Covered interstate branch loan-todeposit ratio means the ratio of a bank’s

loans to its deposits in a state in which

the bank has a covered interstate

branch, as determined by the FDIC.

(d) Home state means:

(1) With respect to a state bank, the

state that chartered the bank;

(2) With respect to a national bank,

the state in which the main office of the

bank is located; and

(3) With respect to a foreign bank, the

home state of the foreign bank as

determined in accordance with 12

U.S.C. 3103(c).

(e) Host state means a state in which

a bank establishes or acquires a covered

interstate branch.

(f) Host state loan-to-deposit ratio

means, with respect to a particular host

state, the ratio of total loans in the host

state relative to total deposits from the

host state for all banks (including all

institutions covered under the

definition of ‘‘bank’’ in 12 U.S.C.

1813(a)(1)) that have that state as their

home state, as updated periodically and

made available to the public.

(g) State means state as that term is

defined in 12 U.S.C. 1813(a)(3).

§ 369.3 Loan-to-deposit ratio screen.

(a) Application of screen. Beginning

no earlier than one year after a bank

establishes or acquires a covered

interstate branch, the FDIC will consider

whether the bank’s covered interstate

branch loan-to-deposit ratio is less than

50 percent of the relevant host state

loan-to-deposit ratio.

(b) Results of screen. (1) If the FDIC

determines that the bank’s covered

interstate branch loan-to-deposit ratio is

50 percent or more of the host state

loan-to-deposit ratio, no further

consideration under this part is

required.

(2) If the FDIC determines that the

bank’s covered interstate branch loan-todeposit ratio is less than 50 percent of

the host state loan-to-deposit ratio, or if

reasonably available data are

insufficient to calculate the bank’s

covered interstate branch loan-todeposit ratio, the FDIC will make a

credit needs determination for the bank

as provided in § 369.4.

§ 369.4 Credit needs determination.

(a) In general. The FDIC will review

the loan portfolio of the bank and

determine whether the bank is

reasonably helping to meet the credit

needs of the communities served by the

bank in the host state.

(b) Guidelines. The FDIC will use the

following considerations as guidelines

when making the determination

pursuant to paragraph (a) of this section:
12738 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules

(1) Whether covered interstate

branches were formerly part of a failed

or failing depository institution;

(2) Whether covered interstate

branches were acquired under

circumstances where there was a low

loan-to-deposit ratio because of the

nature of the acquired institution’s

business or loan portfolio;

(3) Whether covered interstate

branches have a high concentration of

commercial or credit card lending, trust

services, or other specialized activities,

including the extent to which the

covered interstate branches accept

deposits in the host state;

(4) The Community Reinvestment Act

(CRA) ratings received by the bank, if

any, under 12 U.S.C. 2901 et seq. and,

if the credit needs determination is not

made concurrently with a CRA

evaluation, available information that

would indicate an improvement or

weakening in the bank’s CRA

performance since its most recent CRA

evaluation;

(5) Economic conditions, including

the level of loan demand, within the

communities served by the covered

interstate branches;

(6) The safe and sound operation and

condition of the bank; and

(7) The FDIC’s Community

Reinvestment Act Regulations (12 CFR

Part 345) and interpretations of those

regulations.

§ 369.5 Sanctions.

(a) In general. If the FDIC determines

that a bank is not reasonably helping to

meet the credit needs of the

communities served by the bank in the

host state, and that the bank’s covered

interstate branch loan-to-deposit ratio is

less than 50 percent of the host state

loan-to-deposit ratio, the FDIC:

(1) May order that a bank’s covered

interstate branch or branches be closed

unless the bank provides reasonable

assurances to the satisfaction of the

FDIC that the bank has an acceptable

plan under which the bank will

reasonably help to meet the credit needs

of the communities served by the bank

in the host state; and

(2) Will not permit the bank to open

a new interstate branch in the host state

that would be considered to be a

covered interstate branch under

§ 369.2(b) unless the bank provides

reasonable assurances to the satisfaction

of the FDIC that the bank will

reasonably help to meet the credit needs

of the community that the new

interstate branch will serve.

(b) Notice prior to closure of covered

interstate branches. Before exercising

the FDIC’s authority to order the bank

to close a covered interstate branch or

branches, the FDIC will issue to the

bank notice of the FDIC’s intent to order

the closure and will schedule a hearing

within 60 days of issuing the notice.

(c) Hearing. A hearing scheduled

under paragraph (b) of this section will

be conducted under the provisions of 12

U.S.C. 1818(h) and 12 CFR part 308.

By order of the Board of Directors.

Dated at Washington, D.C., this 11th day of

March, 1997.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Deputy Executive Secretary.

[FR Doc. 97–6599 Filed 3–14–97; 8:45 am]

BILLING CODE 4810–33–P, 6210–01–P, 6714–01–P