[Federal Register Volume 60, Number 87 (Friday, May 5, 1995)]
[Rules and Regulations]
[Pages 22256-22257]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11087]



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FEDERAL RESERVE SYSTEM

12 CFR Part 265

[Docket No. R-0877]


Rules Regarding Delegation of Authority

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board is amending its delegation rules to allow Federal 
Reserve Banks to approve certain public welfare investments by state 
member banks under the Board's Regulation H. This amendment should 
provide for more expeditious processing of these requests.

EFFECTIVE DATE: June 5, 1995.

FOR FURTHER INFORMATION CONTACT: Stephanie Martin, Senior Attorney 
(202-452-3198), Legal Division; Sandra [[Page 22257]] Braunstein, 
Manager for Community Affairs (202-452-3378), Division of Consumer and 
Community Affairs; Larry Cunningham, Supervisory Financial Analyst, 
Division of Banking Supervision and Regulation (202-452-2701); for 
users of the Telecommunications Device for the Deaf (TDD) only, 
Dorothea Thompson (202-452-3544); Board of Governors of the Federal 
Reserve System, Washington, DC 20551.

SUPPLEMENTARY INFORMATION: Section 9(23) of the Federal Reserve Act (12 
U.S.C. 338a) allows state member banks, under certain conditions, to 
make investments designed primarily to promote the public welfare. 
Section 9(23) provides that public welfare investments must not violate 
state law or expose the bank to unlimited liability. Section 9(23) 
limits the aggregate of the bank's public welfare investments to 5 
percent of the bank's capital stock and surplus, but allows the Board 
to increase this limit to as much as 10 percent on a case-by-case 
basis.
    The Board's Regulation H (12 CFR 208.21) permits state member banks 
to make public welfare investments without prior approval if the 
investment is one that is listed in the regulation and if the bank 
meets the regulation's capital and condition requirements. 
Specifically, a state member bank may make an investment, without prior 
approval, that the Board or the Comptroller of the Currency (OCC) 
previously has determined to be a public welfare investment or that is 
an investment in a community development financial institution.<SUP>1 
In addition, Regulation H allows state member banks to invest without 
prior approval in an entity established solely to engage in certain 
community development activities, such as low- and moderate-income 
housing, nonresidential real estate development, small business 
development, and job training.

    \1\``Community development financial institution'' is defined in 
the Community Development Banking and Financial Institutions Act of 
1994 (Title I of Pub. L. 103-325, 108 Stat. 2160, section 103(5)).
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    In order to make a public welfare investment without prior 
approval, a state member bank must (1) Limit any single investment to 
not more than 2 percent of the bank's capital stock and surplus, (2) be 
at least adequately capitalized, (3) be rated a composite CAMEL ``1'' 
or ``2,'' (4) be rated at least ``satisfactory'' (i.e., ``2'') in its 
last consumer compliance examination, and (5) not be subject to any 
written agreement, cease and desist order, capital directive, or prompt 
corrective action directive.
    The Board is delegating to the Federal Reserve Banks the authority 
to approve certain public welfare investments by state member banks 
that do not meet the ``no-prior-approval'' conditions in Regulation H. 
Specifically, Reserve Banks may approve investments that meet all the 
conditions in Sec. 208.21(b) of Regulation H, except that:
    <bullet> The bank's compliance rating is ``3;''
    <bullet> The investment would exceed 2 percent (but not 5 percent) 
of the bank's capital and surplus; or
    <bullet> The aggregate of all such investments of the bank exceeds 
5 percent (but not 10 percent) of its capital stock and surplus.

Administrative Procedure Act

    The Administrative Procedure Act (5 U.S.C. 553(b)(A)) exempts 
``rules of agency organization, procedure, or practice'' from the 
notice of proposed rulemaking and public comment requirements. As the 
Board's delegation rules fall under this exemption, the Board is 
adopting these amendments without notice-and-comment procedures.

List of Subjects in 12 CFR Part 265

    Authority delegations (Government agencies), Banks, banking, 
Federal Reserve System.

    For the reasons set forth in the preamble, the Board is amending 12 
CFR Part 265 as set forth below:

PART 265--RULES REGARDING DELEGATION OF AUTHORITY

    1. The authority citation for Part 265 continues to read as 
follows:

    Authority: 12 U.S.C. 248 (i) and (k).

    2. Section 265.11 is amended by adding a new paragraph (e)(12) to 
read as follows:


Sec. 265.11  Functions delegated to Federal Reserve Banks.

* * * * *
    (e) * * *
    (12) Public welfare investments. To permit a state member bank to 
make a public welfare investment that meets the conditions set forth in 
Sec. 208.21(b) (1)-(8) of Regulation H (12 CFR 208), except that:
    (i) The state member bank received an overall rating of ``3'' as of 
its most recent consumer compliance examination;
    (ii) The investment exceeds 2 percent, but does not exceed 5 
percent, of the state member bank's capital stock and surplus as 
defined under 12 CFR 250.162; or
    (iii) The aggregate of all such investments of the state member 
bank exceeds 5 percent, but does not exceed 10 percent, of its capital 
stock and surplus as defined under 12 CFR 250.162.
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System, May 1, 1995.
William W. Wiles,
Secretary of the Board.
[FR Doc. 95-11087 Filed 5-4-95; 8:45 am]
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