[Federal Register Volume 87, Number 107 (Friday, June 3, 2022)]
[Proposed Rules]
[Pages 33884-34066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10111]



[[Page 33883]]

Vol. 87

Friday,

No. 107

June 3, 2022

Part II





Department of the Treasury





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 Office of the Comptroller of the Currency





Federal Reserve System





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Federal Deposit Insurance Corporation





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12 CFR Parts 25, 228, and 345





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Community Reinvestment Act; Proposed Rule

Federal Register / Vol. 87 , No. 107 / Friday, June 3, 2022 / 
Proposed Rules

[[Page 33884]]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 25

[Docket ID OCC-2022-0002]
RIN 1557-AF15

FEDERAL RESERVE SYSTEM

12 CFR Part 228

[Regulation BB; Docket No. R-1769]
RIN 7100-AG29

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 345

RIN 3064-AF81


Community Reinvestment Act

AGENCY:  Board of Governors of the Federal Reserve System; Federal 
Deposit Insurance Corporation; and Office of the Comptroller of the 
Currency, Treasury

ACTION: Joint notice of proposed rulemaking; request for comment.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board), 
the Federal Deposit Insurance Corporation (FDIC), and the Office of the 
Comptroller of the Currency (OCC) propose to amend their regulations 
implementing the Community Reinvestment Act of 1977 (CRA) to update how 
CRA activities qualify for consideration, where CRA activities are 
considered, and how CRA activities are evaluated.

DATES:  Comments must be received on or before August 5, 2022.

ADDRESSES: Comments should be directed to:
    OCC: Commenters are encouraged to submit comments through the 
Federal eRulemaking Portal. Please use the title ``Community 
Reinvestment Act'' to facilitate the organization and distribution of 
the comments. You may submit comments by any of the following methods:
    <bullet> Federal eRulemaking Portal--Regulations.gov: Go to https://regulations.gov/. Enter ``Docket ID OCC-2022-0002'' in the Search Box 
and click ``Search.'' Public comments can be submitted via the 
``Comment'' box below the displayed document information or by clicking 
on the document title and then clicking the ``Comment'' box on the top-
left side of the screen. For help with submitting effective comments 
please click on ``Commenter's Checklist.'' For assistance with the 
Regulations.gov site, please call (877) 378-5457 (toll free) or (703) 
454-9859 Monday-Friday, 9 a.m.-5 p.m. EST or email 
<a href="/cdn-cgi/l/email-protection#d0a2b5b7a5bcb1a4b9bfbea390b5a2a5bcb5bdb1bbb9beb7b8b5bca0b4b5a3bbfeb3bfbd"><span class="__cf_email__" data-cfemail="8ffdeae8fae3eefbe6e0e1fccfeafdfae3eae2eee4e6e1e8e7eae3ffebeafce4a1ece0e2">[email protected]</span></a>.
    <bullet> Mail: Chief Counsel's Office, Attention: Comment 
Processing, Office of the Comptroller of the Currency, 400 7th Street 
SW, Suite 3E-218, Washington, DC 20219.
    <bullet> Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218, 
Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2022-0002'' in your comment. In general, the OCC will 
enter all comments received into the docket and publish the comments on 
the Regulations.gov website without change, including any business or 
personal information provided such as name and address information, 
email addresses, or phone numbers. Comments received, including 
attachments and other supporting materials, are part of the public 
record and subject to public disclosure. Do not include any information 
in your comment or supporting materials that you consider confidential 
or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this action by the following method:
    <bullet> Viewing Comments Electronically--Regulations.gov: Go to 
https://regulations.gov/. Enter ``Docket ID OCC-2022-0002'' in the 
Search Box and click ``Search.'' Click on the ``Documents'' tab and 
then the document's title. After clicking the document's title, click 
the ``Browse Comments'' tab. Comments can be viewed and filtered by 
clicking on the ``Sort By'' drop-down on the right side of the screen 
or the ``Refine Results'' options on the left side of the screen. 
Supporting materials can be viewed by clicking on the ``Documents'' tab 
and filtered by clicking on the ``Sort By'' drop-down on the right side 
of the screen or the ``Refine Documents Results'' options on the left 
side of the screen.'' For assistance with the Regulations.gov site, 
please call (877) 378-5457 (toll free) or (703) 454-9859 Monday-Friday, 
9 a.m.-5 p.m. EST or email <a href="/cdn-cgi/l/email-protection#097b6c6e7c65687d6066677a496c7b7c656c64686260676e616c65796d6c7a62276a6664"><span class="__cf_email__" data-cfemail="b4c6d1d3c1d8d5c0dddbdac7f4d1c6c1d8d1d9d5dfdddad3dcd1d8c4d0d1c7df9ad7dbd9">[email protected]</span></a>.
    The docket may be viewed after the close of the comment period in 
the same manner as during the comment period.
    Board: You may submit comments, identified by Docket No. R-1769 and 
RIN 7100-AG29, by any of the following methods:
    <bullet> Agency Website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#04766163772a676b6969616a7077443865246c76616239" http: federalreserve.gov">federalreserve.gov</a>">regs.comments@federalreserve.gov</a>. Include docket 
and RIN numbers in the subject line of the message.
    <bullet> Fax: (202) 452-3819 or (202) 452-3102.
    <bullet> Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.
    Instructions: All public comments are available from the Board's 
website at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted. Accordingly, comments will not be edited 
to remove any identifying or contact information. Public comments may 
also be viewed electronically or in paper in Room M-4365A, 2001 C 
Street NW, Washington, DC 20551, between 9:00 a.m. and 5:00 p.m. during 
Federal business weekdays. For security reasons, the Board requires 
that visitors make an appointment to inspect comments. You may do so by 
calling (202) 452-3684. Upon arrival, visitors will be required to 
present valid government-issued photo identification and to submit to 
security screening in order to inspect and photocopy comments. For 
users of TTY-TRS, please call 711 from any telephone, anywhere in the 
United States.
    FDIC: You may submit comments, identified by RIN 3064-AF81, by any 
of the following methods:
    <bullet> Agency Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow instructions for 
submitting comments on the Agency website.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#b1d2dedcdcd4dfc5c2f1d7d5d8d29fd6dec7"><span class="__cf_email__" data-cfemail="5734383a3a323923241731333e3479303821">[email protected]</span></a>. Include RIN 3064-AF81 on the 
subject line of the message.
    <bullet> Mail: James P. Sheesley, Assistant Executive Secretary, 
Attention: Comments RIN 3064-AF81, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC 20429.
    <bullet> Hand Delivery/Courier: Comments may be hand delivered to 
the guard station at the rear of the 550 17th Street NW building 
(located on F Street NW) on business days between 7:00 a.m. and 5:00 
p.m.
    Public Inspection: Comments received, including any personal 
information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/. 
Commenters should submit only information that the commenter wishes to 
make available publicly. The FDIC may review, redact, or refrain from 
posting all or any portion

[[Page 33885]]

of any comment that it may deem to be inappropriate for publication, 
such as irrelevant or obscene material. The FDIC may post only a single 
representative example of identical or substantially identical 
comments, and in such cases will generally identify the number of 
identical or substantially identical comments represented by the posted 
example. All comments that have been redacted, as well as those that 
have not been posted, that contain comments on the merits of this 
notice will be retained in the public comment file and will be 
considered as required under all applicable laws. All comments may be 
accessible under the Freedom of Information Act.

FOR FURTHER INFORMATION CONTACT: 
    OCC: Heidi Thomas, Special Counsel, or Emily Boyes, Counsel, Chief 
Counsel's Office, (202) 649-5490; or Vonda Eanes, Director for CRA and 
Fair Lending Policy, or Karen Bellesi, Director for Community 
Development, Bank Supervision Policy, (202) 649-5470, Office of the 
Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219. 
If you are deaf, hard of hearing, or have a speech disability, please 
dial 7-1-1 to access telecommunications relay services.
    Board: S. Caroline (Carrie) Johnson, Manager, Division of Consumer 
and Community Affairs, (202) 452-2762; Amal S. Patel, Counsel, Division 
of Consumer and Community Affairs, (202) 912-7879, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551. For users of TTY-TRS, please call 711 from any 
telephone, anywhere in the United States.
    FDIC: Patience R. Singleton, Senior Policy Analyst, Supervisory 
Policy Branch, Division of Depositor and Consumer Protection, (202) 
898-6859; Pamela Freeman, Chief Fair Lending and CRA Examination 
Section, Division of Depositor and Consumer Protection, (202) 898-3656; 
Richard M. Schwartz, Counsel, Legal Division, (202) 898- 7424; or 
Sherry Ann Betancourt, Counsel, Legal Division, (202) 898- 6560, 
Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, 
DC 20429.

SUPPLEMENTARY INFORMATION: In this Notice of Proposed Rulemaking (NPR 
or proposal), the OCC, Board, and the FDIC, (together referred to as 
``the agencies'') seek feedback on changes to update and clarify the 
regulations to implement the CRA.\1\ The CRA encourages banks \2\ to 
help meet the credit needs of the local communities in which they are 
chartered, consistent with a bank's safe and sound operations, by 
requiring the Federal banking regulatory agencies to examine banks' 
records of meeting the credit needs of their entire community, 
including low- and moderate-income neighborhoods.
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    \1\ 12 U.S.C. 2901 et seq.
    \2\ For purposes of this SUPPLEMENTARY INFORMATION, the term 
``bank'' includes insured national and state banks, Federal and 
state savings associations, Federal branches as defined in 12 CFR 
part 28, insured State branches as defined in 12 CFR 345.11(c), and 
state member banks as defined in 12 CFR part 208, except as provided 
in 12 CFR __.11(c).
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    The agencies implement the CRA through their CRA regulations.\3\ 
The CRA regulations establish the framework and criteria by which the 
agencies assess a bank's record of helping to meet the credit needs of 
its community, including low- and moderate-income neighborhoods, 
consistent with safe and sound operations. Under the CRA regulations, 
the agencies apply different evaluation standards for banks of 
different asset sizes and types.
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    \3\ See 12 CFR part 25 (OCC), 12 CFR part 228 (Regulation BB) 
(Board), and 12 CFR part 345 (FDIC). For clarity and to streamline 
references, citations to the agencies' existing common CRA 
regulations are provided in the following format: 12 CFR __.xx; for 
example, references to 12 CFR 25.12 (OCC), 12 CFR 228.12 (Board), 
and 12 CFR 345.12 (FDIC) would be streamlined as follows: ``12 CFR 
__.12.'' Likewise, references to the agencies' proposed common CRA 
regulations are provided in the following format: ``proposed Sec.  
__.xx.''
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    This NPR seeks to update the CRA regulations in adherence with 
objectives that include the following:
    <bullet> Update CRA regulations to strengthen the achievement of 
the core purpose of the statute;
    <bullet> Adapt to changes in the banking industry, including the 
expanded role of mobile and online banking;
    <bullet> Provide greater clarity and consistency in the application 
of the regulations;
    <bullet> Tailor performance standards to account for differences in 
bank size and business models and local conditions;
    <bullet> Tailor data collection and reporting requirements and use 
existing data whenever possible;
    <bullet> Promote transparency and public engagement;
    <bullet> Confirm that CRA and fair lending responsibilities are 
mutually reinforcing; and
    <bullet> Create a consistent regulatory approach that applies to 
banks regulated by all three agencies.
    A key part of the proposal is a new evaluation framework for 
evaluating CRA performance for banks. The agencies propose an 
evaluation framework that would establish the following four tests for 
large banks: Retail Lending Test; Retail Services and Products Test; 
Community Development Financing Test; and Community Development 
Services Test. Intermediate banks would be evaluated under the Retail 
Lending Test and the status quo community development test, unless they 
choose to opt into the Community Development Financing Test. Small 
banks would be evaluated under the status quo small bank lending test, 
unless they choose to opt into the Retail Lending Test. Wholesale and 
limited purpose banks would be evaluated under a tailored version of 
the Community Development Financing Test.
    The agencies request feedback on all aspects of the proposal, 
including but not limited to the specific questions outlined in the 
SUPPLEMENTARY INFORMATION. The agencies are setting forth in this 
SUPPLEMENTARY INFORMATION the proposed rule using common regulation 
text for ease of commenter review. The agencies are proposing agency-
specific amendatory text where necessary to account for differing 
agency authority and terminology.

Table of Contents

I. Introduction
II. Overview of Proposed Rule
III. Community Development Definitions
IV. Qualifying Activities Confirmation and Illustrative List of 
Activities
V. Impact Review of Community Development Activities
VI. Assessment Areas and Areas for Eligible Community Development 
Activity
VII. Performance Tests, Standards, and Ratings in General
VIII. Retail Lending Test Product Categories and Major Product Lines
IX. Retail Lending Test Evaluation Framework for Facility-Based 
Assessment Areas and Retail Lending Assessment Areas
X. Retail Lending Test Evaluation Framework for Retail Lending Test 
Conclusions at the State, Multistate MSAs, and Institution Level
XI. Retail Services and Products Test
XII. Community Development Financing Test
XIII. Community Development Services Test
XIV. Wholesale and Limited Purpose Banks
XV. Strategic Plans
XVI. Assigned Conclusions and Ratings
XVII. Performance Standards for Small Banks and Intermediate Banks
XVIII. Effect of CRA Performance on Applications
XIX. Data Collection, Reporting, and Disclosure
XX. Content and Availability of Public File, Public Notice by Banks, 
Publication of Planned Examination Schedule, and Public Engagement
XXI. Transition
XXII. Regulatory Analysis
XXIII. Text of Common Proposed Rule (All Agencies)

[[Page 33886]]

I. Introduction

A. Background

    The CRA is designed to encourage regulated banks to help meet the 
credit needs of the local communities in which they are chartered. 
Specifically, Congress found that ``(1) regulated financial 
institutions are required by law to demonstrate that their deposit 
facilities serve the convenience and needs of the communities in which 
they are chartered to do business; (2) the convenience and needs of 
communities include the need for credit as well as deposit services; 
and (3) regulated financial institutions have continuing and 
affirmative obligation to help meet the credit needs of the local 
communities in which they are chartered.'' \4\
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    \4\ 12 U.S.C. 2901(a).
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    The CRA statute requires the agencies to ``assess the institution's 
record of meeting the credit needs of its entire community, including 
low- and moderate-income neighborhoods, consistent with the safe and 
sound operation of such institution.'' \5\ Upon completing this 
assessment, the statute requires the agencies to ``prepare a written 
evaluation of the institution's record of meeting the credit needs of 
its entire community, including low- and moderate-income 
neighborhoods.'' \6\ In addition, the statute requires making portions 
of these written evaluations, referred to by the agencies as 
performance evaluations, available to the public.\7\ The statute 
further provides that each agency must consider a bank's CRA 
performance ``in its evaluation of an application for a deposit 
facility by such institution.'' \8\
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    \5\ 12 U.S.C. 2903(a)(1).
    \6\ 12 U.S.C. 2906(a).
    \7\ 12 U.S.C. 2906(b).
    \8\ 12 U.S.C. 2903(a)(2).
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    Since its enactment, Congress has amended the CRA several times, 
including through: the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 \9\ (which required public disclosure of a 
bank's CRA written evaluation and rating); the Federal Deposit 
Insurance Corporation Improvement Act of 1991 \10\ (which required the 
inclusion of a bank's CRA examination data in the determination of its 
CRA rating); the Housing and Community Development Act of 1992 \11\ 
(which included assessment of the record of nonminority-owned and 
nonwomen-owned banks in cooperating with minority-owned and women-owned 
banks and low-income credit unions); the Riegle-Neal Interstate Banking 
and Branching Efficiency Act of 1994 \12\ (which (i) required an agency 
to consider an out-of-state national bank's or state bank's CRA rating 
when determining whether to allow interstate branches, and (ii) 
prescribed certain requirements for the contents of the written CRA 
evaluation for banks with interstate branches); and the Gramm-Leach-
Bliley Act of 1999 \13\ (which, among other things, provided regulatory 
relief for smaller banks by reducing the frequency of their CRA 
examinations).
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    \9\ Public Law 101-73, 103 Stat. 183 (Aug. 9, 1989).
    \10\ Public Law 102-242, 105 Stat. 2236 (Dec. 19, 1991).
    \11\ Public Law 102-550, 106 Stat. 3874 (Oct. 28, 1992).
    \12\ Public Law 103-328, 108 Stat. 2338 (Sept. 29, 1994).
    \13\ Public Law 106-102, 113 Stat. 1338 (Nov. 12, 1999).
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    Congress directed the agencies to publish regulations to carry out 
the CRA's purposes,\14\ and in 1978 the agencies promulgated the first 
CRA regulations, which included evidence of prohibited discriminatory 
or other illegal credit practices as a performance factor.\15\ Since 
then, the agencies have together significantly revised and sought to 
clarify their CRA regulations twice, in 1995 and 2005--with the most 
substantive interagency update occurring in 1995. In addition, the 
agencies have periodically jointly published the Interagency Questions 
and Answers Regarding Community Reinvestment (Interagency Questions and 
Answers) \16\ to provide guidance on the CRA regulations.
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    \14\ 12 U.S.C. 2905.
    \15\ 43 FR 47144 (Oct. 12, 1978). Congress also charged, in 
addition to the agencies, the Office of Thrift Supervision (OTS) and 
its predecessor agency, the Federal Home Loan Bank Board, with 
implementing the CRA. The OTS had CRA rulemaking and supervisory 
authority for all savings associations. Pursuant to Title III of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act, Public 
Law 111-203, 124 Stat. 1376, 1522 (2010), the OTS's CRA rulemaking 
authority for all savings associations transferred to the OCC and 
the OTS's CRA supervisory authority for State savings associations 
transferred to the FDIC. As a result, the OCC's CRA regulation 
applies to both State and Federal savings associations, in addition 
to national banks, and the FDIC enforces the OCC's CRA regulations 
with respect to State savings associations.
    \16\ See 81 FR 48506 (July 25, 2016). ``Interagency Questions 
and Answers'' refers to the ``Interagency Questions and Answers 
Regarding Community Reinvestment'' guidance in its entirety. ``Q&A'' 
refers to an individual question and answer within the Interagency 
Questions and Answers.
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B. The Current CRA Regulations and Guidance for Performance Evaluations

1. CRA Performance Evaluations
    The agencies' CRA regulations provide different methods to evaluate 
a bank's CRA performance depending on its asset size and business 
strategy.\17\ Under the current framework:
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    \17\ See generally 12 CFR _.21 through _.27. The agencies 
annually adjust the CRA asset-size thresholds based on the annual 
percentage change in a measure of the Consumer Price Index.
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    <bullet> Small banks--currently, those with assets of less than 
$346 million as of December 31 of either of the prior two calendar 
years--are evaluated under a lending test and may receive an 
``Outstanding'' rating based only on their retail lending performance. 
Qualified investments, services, and delivery systems that enhance 
credit availability in a bank's assessment areas may be considered for 
an ``Outstanding'' rating, but only if the bank meets or exceeds the 
lending test criteria in the small bank performance standards.
    <bullet> Intermediate small banks--currently, those with assets of 
at least $346 million as of December 31 of both of the prior two 
calendar years and less than $1.384 billion as of December 31 of either 
of the prior two calendar years--are evaluated under the lending test 
for small banks and a community development test. The intermediate 
small bank community development test evaluates all community 
development activities together.
    <bullet> Large banks--currently, those with assets of more than 
$1.384 billion as of December 31 of both of the prior two calendar 
years--are evaluated under separate lending, investment, and service 
tests. The lending and service tests consider both retail and community 
development activities, and the investment test focuses on qualified 
community development investments. To facilitate the agencies' CRA 
analysis, large banks are required to report annually certain data on 
community development loans, small business loans, and small farm loans 
(small banks and intermediate small banks are not required to report 
these data unless they opt into being evaluated under the large bank 
lending test).
    <bullet> Designated wholesale banks (those engaged in only 
incidental retail lending) and limited purpose banks (those offering a 
narrow product line to a regional or broader market) are evaluated 
under a standalone community development test.
    <bullet> Banks of any size may elect to be evaluated under a 
strategic plan that sets out measurable, annual goals for lending, 
investment, and service activities in order to achieve a 
``Satisfactory'' or an ``Outstanding'' rating. A strategic plan must be 
developed with community input and approved by the appropriate Federal 
banking agency.

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    The agencies also consider applicable performance context 
information to inform their analysis and conclusions when conducting 
CRA examinations. Performance context comprises a broad range of 
economic, demographic, and bank- and community-specific information 
that examiners review to calibrate a bank's CRA evaluation to its local 
communities.
2. Assessment Areas
    The existing CRA regulations require a bank to delineate one or 
more assessment areas in which its record of meeting its CRA 
obligations will be evaluated.\18\ The regulations require a bank to 
delineate assessment areas consisting of geographic areas (metropolitan 
statistical areas (MSAs) or metropolitan divisions) or political 
subdivisions \19\ in which its main office, branches, and deposit-
taking automated teller machines (ATMs) are located, as well as the 
surrounding geographies (i.e., census tracts) \20\ where a substantial 
portion of its loans are originated or purchased.
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    \18\ 12 CFR _.41.
    \19\ Political subdivisions include cities, counties, towns, 
townships, and Indian reservations. See Q&A Sec.  _.41(c)(1)-1.
    \20\ 12 CFR _.12(k).
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    The assessment area requirements and emphasis on branches reflects 
the prevailing business model for financial service delivery when the 
CRA was enacted. The statute instructs the agencies to assess a bank's 
record of meeting the credit needs of its ``entire community, including 
low- and moderate-income neighborhoods, consistent with the safe and 
sound operation of such institution, and to take such record into 
account in its evaluation of an application for a deposit facility by 
such institution.'' \21\ The statute does not prescribe the delineation 
of assessment areas, but they are an important aspect of the regulation 
because they define ``community'' for purposes of the evaluation of a 
bank's CRA performance.
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    \21\ 12 U.S.C. 2903(a).
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3. Qualifying Activities
    The CRA regulations and the Interagency Questions and Answers 
provide detailed information, including applicable definitions and 
descriptions, respectively, regarding activities that are eligible for 
CRA consideration in the evaluation of a bank's CRA performance. Banks 
that are evaluated under a performance test that includes a review of 
their retail activities are assessed in connection with retail lending 
activity (as applicable, home mortgage loans, small business loans, 
small farm loans, and consumer loans) \22\ and, where applicable, 
retail banking service activities (e.g., the current distribution of a 
bank's branches in geographies of different income levels, and the 
availability and effectiveness of the bank's alternative systems for 
delivering banking services to low- and moderate-income geographies and 
individuals).\23\
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    \22\ 12 CFR_.12(j), (l), (v), and (w).
    \23\ See generally 12 CFR _.21 through _.27 and _.24(d).
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    Banks evaluated under a performance test that includes a review of 
their community development activities are assessed with respect to 
community development lending, qualified investments, and community 
development services, which by definition must have a primary purpose 
of community development.\24\
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    \24\ See generally 12 CFR _.12(g), (h), (i), and (t) and 12 CFR 
_.21 through _.27.
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4. Guidance for Performance Evaluations
    In addition to information included in their CRA regulations, the 
agencies also provide information to the public regarding how CRA 
performance tests are applied, where CRA activities are considered, and 
what activities are eligible through publicly available CRA performance 
evaluations,\25\ the Interagency Questions and Answers, interagency CRA 
examination procedures,\26\ and interagency instructions for writing 
performance evaluations.\27\
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    \25\ See, e.g., https://apps.occ.gov/crasearch/default.aspx 
(OCC); https://www.federalreserve.gov/apps/CRAPubWeb/CRA/BankRating 
(Board); https://crapes.fdic.gov/ (FDIC).
    \26\ See, e.g., Federal Financial Institutions Examination 
Council (FFIEC), ``Community Reinvestment Act: CRA Examinations,'' 
https://www.ffiec.gov/cra/examinations.htm.
    \27\ Id.
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C. Stakeholder Feedback and Recent Rulemaking

    The financial services industry has undergone transformative 
changes since the CRA statute was enacted, including the removal of 
national bank interstate branching restrictions and the expanded role 
of mobile and online banking. To better understand how these 
developments impact both consumer access to banking products and 
services and a bank's CRA performance, the agencies have reviewed 
feedback from the banking industry, community groups, academics, and 
other stakeholders on several occasions.
1. Economic Growth and Regulatory Paperwork Reduction Act of 1996 
(EGRPRA)
    From 2013 to 2016, the agencies solicited feedback on the CRA as 
part of the EGRPRA review process.\28\ Stakeholders raised issues 
related to assessment area definitions; incentives for banks to serve 
low- and moderate-income, unbanked, underbanked, and rural individuals 
and communities; recordkeeping and reporting requirements; the need for 
clarity regarding performance measures and better examiner training to 
ensure consistency in examinations; and refinement of CRA ratings.\29\
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    \28\ See, e.g., 80 FR 7980 (Feb. 13, 2015).
    \29\ See FFIEC, Joint Report to Congress: Economic Growth and 
Regulatory Paperwork Reduction Act, 82 FR 15900 (Mar. 30, 2017), 
https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.
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2. OCC CRA Advance Notice of Proposed Rulemaking and Federal Reserve 
Outreach Sessions
    On September 5, 2018, the OCC published an Advance Notice of 
Proposed Rulemaking (ANPR) to solicit ideas for a new CRA regulatory 
framework.\30\ More than 1,500 comment letters were submitted in 
response. To augment that input, the Federal Reserve System (the Board 
and the Federal Reserve Banks) held about 30 outreach meetings with 
representatives of banks, community organizations, and the other 
agencies.\31\
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    \30\ 83 FR 45053 (Sept. 5, 2018).
    \31\ For a summary of the Federal Reserve outreach session 
feedback, see ``Perspectives from Main Street: Stakeholder Feedback 
on Modernizing the Community Reinvestment Act'' (June 2019), https://www.federalreserve.gov/publications/files/stakeholder-feedback-on-modernizing-the-community-reinvestment-act-201906.pdf.
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3. OCC-FDIC CRA Notice of Proposed Rulemaking and OCC CRA Final Rule
    On December 12, 2019, the FDIC and the OCC issued a joint NPR to 
revise and update their CRA regulations.\32\ In response, the FDIC and 
the OCC received over 7,500 comment letters.
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    \32\ 85 FR 1204 (Jan. 9, 2020).
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    On May 20, 2020, the OCC issued a CRA final rule (OCC 2020 CRA 
final rule), retaining the most fundamental elements of the proposal 
but also making adjustments to reflect stakeholder input.\33\ The OCC 
deferred establishing the metrics-framework for evaluating banks' CRA 
performance until it was able to assess additional data,\34\ with the 
final rule having an

[[Page 33888]]

October 1, 2020 effective date and January 1, 2023 and January 1, 2024 
compliance dates for certain provisions.\35\
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    \33\ 85 FR 34734 (June 5, 2020).
    \34\ See OCC, News Release 2020-63, ``OCC Finalizes Rule to 
Strengthen and Modernize Community Reinvestment Act Regulations'' 
(May 20, 2020), https://www.occ.gov/news-issuances/news-releases/2020/nr-occ-2020-63.html; see also 85 FR at 34736.
    \35\ 85 FR at 34784.
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4. Board CRA Advance Notice of Proposed Rulemaking
    On September 21, 2020, the Board issued a CRA ANPR (Board CRA ANPR) 
requesting public comment on an approach to modernize the CRA 
regulations by strengthening, clarifying, and tailoring them to reflect 
the current banking landscape and better meet the core purpose of the 
CRA.\36\ The Board CRA ANPR sought feedback on ways to evaluate how 
banks meet the needs of low- and moderate-income communities and 
address inequities in credit access. The Board received over 600 
comment letters on this ANPR.
---------------------------------------------------------------------------

    \36\ 85 FR 66410 (Oct. 19, 2020).
---------------------------------------------------------------------------

5. Recent Developments
    On July 20, 2021, the agencies issued an interagency statement 
indicating their commitment to working collectively to, in a consistent 
manner, strengthen and modernize their CRA regulations.\37\ On the same 
day, the OCC stated its intention to rescind the OCC 2020 CRA final 
rule.\38\ Subsequently, on September 8, 2021, the OCC issued a notice 
of proposed rulemaking to rescind the OCC 2020 CRA final rule and 
replace it with CRA regulations based on those that the agencies 
jointly issued in 1995, as amended.\39\ On December 15, 2021, the OCC 
issued a final rule completing the rescission and replacement effective 
January 1, 2022. The final rule also integrated the OCC's CRA 
regulation for savings associations into its national bank CRA 
regulation at 12 CFR part 25.\40\
---------------------------------------------------------------------------

    \37\ See Interagency Statement on Community Reinvestment Act, 
Joint Agency Action (July 20, 2021), https://www.occ.gov/news-issuances/news-releases/2021/nr-ia-2021-77.html (OCC); https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210720a.htm 
(Board); https://www.fdic.gov/news/press-releases/2021/pr21067.html 
(FDIC).
    \38\ See OCC, News Release 2021-76, Statement on Rescinding its 
2020 Community Reinvestment Act Rule (July 20, 2021), https://www.occ.gov/news-issuances/news-releases/2021/nr-occ-2021-76.html.
    \39\ 86 FR 52026 (Sept. 17, 2021).
    \40\ 86 FR 71328 (Dec. 15, 2021).
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D. CRA, Illegal Discrimination, and Fair Lending

    The CRA was one of several laws enacted in the 1960s and 1970s to 
address fairness and financial inclusion in access to housing and 
credit. During this period, Congress passed the Fair Housing Act (FHA) 
in 1968,\41\ to prohibit discrimination in renting or buying a 
home,\42\ and the Equal Credit Opportunity Act (ECOA) in 1974 \43\ 
(amended in 1976), to prohibit creditors from discriminating against an 
applicant in any aspect of a credit transaction on the basis of race, 
color, religion, national origin, sex, marital status, or age. These 
fair lending laws provide the legal basis for prohibiting 
discriminatory lending practices based on race and ethnicity.\44\
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    \41\ 42 U.S.C. 3601 et seq.
    \42\ 42 U.S.C. 3604 through 3606.
    \43\ 15 U.S.C. 1691 et seq.
    \44\ See Interagency Fair Lending Examination Procedures (Aug. 
2009), available at https://www.ffiec.gov/pdf/fairlend.pdf.
---------------------------------------------------------------------------

    Prior to passage of these laws, inequitable access to credit and 
other financial services--due in large part to a practice known as 
``redlining''--along with a lack of public and private investment, 
greatly contributed to the economic distress experienced by lower-
income and minority communities. The former Federal Home Owners' Loan 
Corporation (HOLC), established in 1933, employed color-coded maps \45\ 
to designate its perception of the relative risk of lending in a range 
of neighborhoods, with ``hazardous'' (the highest risk) areas coded in 
red often with reference to the racial makeup of the neighborhood.\46\ 
In addition to referring to HOLC maps, the term redlining has also been 
used to more broadly describe excluding neighborhoods or areas from 
provision of credit or other financial services on account of the race 
or ethnicity of residents in those areas. As Senator William Proxmire, 
who authored the CRA legislation, testified when discussing its 
purpose:
---------------------------------------------------------------------------

    \45\ See University of Richmond's Digital Scholarship Lab, 
``Mapping Inequality: Redlining in New Deal America,'' https://dsl.richmond.edu/panorama/redlining/#loc=5/39.1/-94.58 (archive of 
HOLC maps).
    \46\ See, e.g., Daniel Aaronson, Daniel Hartley, and Bhashkar 
Mazumder, Federal Reserve Bank of Chicago, ``The Effects of the 
1930s HOLC `Redlining' Map'' (Revised Aug. 2020), https://www.chicagofed.org/publications/working-papers/2017/wp2017-12, p.1 
(``Neighborhoods were classified based on detailed risk-based 
characteristics, including housing age, quality, occupancy, and 
prices. However, non-housing attributes such as race, ethnicity, and 
immigration status were influential factors as well. Since the 
lowest rated neighborhoods were drawn in red and often had the vast 
majority of African American residents, these maps have been 
associated with the so-called practice of `redlining' in which 
borrowers are denied access to credit due to the demographic 
composition of their neighborhood.'').

    By redlining let me make it clear what I am talking about. I am 
talking about the fact that banks and savings and loans will take 
their deposits from a community and instead of reinvesting them in 
that community, they will actually or figuratively draw a red line 
on a map around the areas of their city, sometimes in the inner 
city, sometimes in the older neighborhoods, sometimes ethnic and 
sometimes black, but often encompassing a great area of their 
neighborhood.\47\
---------------------------------------------------------------------------

    \47\ 123 Cong. Rec. 17630 (June 6, 1977).

    Even with the implementation of the CRA and the other complementary 
laws, the wealth gap and disparities in other financial outcomes remain 
persistent. For example, ``data from the 2019 Survey of Consumer 
Finances (SCF) show that long-standing and substantial wealth 
disparities between families in different racial and ethnic groups were 
little changed since the last survey in 2016; the typical White family 
has eight times the wealth of the typical Black family and five times 
the wealth of the typical Hispanic family.'' \48\
---------------------------------------------------------------------------

    \48\ Neil Bhutta et al., ``Disparities in Wealth by Race and 
Ethnicity in the 2019 Survey of Consumer Finances'' (Sept. 28, 
2020), https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.htm.
---------------------------------------------------------------------------

    The Board CRA ANPR discussed this history of redlining and racial 
discrimination prior to the enactment of these laws and asked for 
feedback on the following question: ``In considering how the CRA's 
history and purpose relate to the nation's current challenges, what 
modifications and approaches would strengthen CRA regulatory 
implementation in addressing ongoing systemic inequity in credit access 
for minority individuals and communities?'' \49\ The Board received 
comments from a number of stakeholders on this question, providing 
feedback across different topics.
---------------------------------------------------------------------------

    \49\ 85 FR at 66413.
---------------------------------------------------------------------------

    As has been the case since the first regulations were issued by the 
agencies, the agencies continue to recognize that CRA and fair lending 
are mutually reinforcing. In this NPR, the agencies propose to retain 
the conditions that bank assessment areas are prohibited from 
reflecting illegal discrimination or arbitrarily excluding low- or 
moderate-income census tracts. The agencies also propose to retain the 
regulatory provision that CRA ratings can be downgraded as a result of 
discriminatory practices, among other practices. The agencies are 
committed to upholding their regulatory responsibilities for both fair 
lending and CRA examinations, and the agencies seek to coordinate those 
examinations where feasible to do so.
    In furtherance of the agencies' objective to promote transparency, 
the agencies propose providing additional information to the public in 
CRA performance evaluations for large banks related to the distribution 
by borrower

[[Page 33889]]

race and ethnicity of the bank's home mortgage loan originations and 
applications in each of the bank's assessment areas. This disclosure 
would leverage existing data available under the Home Mortgage 
Disclosure Act (HMDA). As discussed in Section XIX of this 
SUPPLEMENTARY INFORMATION, providing the data in this disclosure would 
have no independent impact on the conclusions or ratings of the bank 
and would not on its own reflect any fair lending finding or violation. 
Instead, this proposal is intended to provide transparent information 
to the public.

II. Overview of Proposed Rule

    This SUPPLEMENTARY INFORMATION includes a detailed discussion of 
the proposed rule, including on the following topics:
    Community Development Definitions. Section III discusses the 
following proposed definitions for community development activities: 
Affordable housing; economic development that supports small businesses 
and small farms; community supportive services; revitalization 
activities; essential community facilities; essential community 
infrastructure; recovery activities in designated disaster areas; 
disaster preparedness and climate resiliency activities; activities 
with minority depository institutions (MDIs), women's depository-
institutions (WDIs), low-income credit unions (LICUs), and Community 
Development Financial Institutions (CDFIs) certified by the U.S. 
Department of the Treasury (Treasury Department), referred to as 
Treasury Department-certified CDFIs; financial literacy; and qualifying 
activities in Native Land Areas. The agencies propose using a primary 
purpose standard for determining eligibility of the above activities, 
with pro rata consideration for certain affordable housing activities.
    Qualifying Activities Confirmation and Illustrative List of 
Activities. Section IV describes the agencies' proposal to maintain a 
publicly available illustrative, non-exhaustive list of activities 
eligible for CRA consideration. In addition, the agencies propose a 
process, open to banks, for confirming eligibility of community 
development activities in advance.
    Impact Review of Community Development Activities. Section V 
describes the agencies' proposal for specific impact review factors to 
inform the impact and responsiveness evaluation of a bank's activities 
under the Community Development Financing Test, the Community 
Development Services Test, and the Community Development Financing Test 
for Wholesale or Limited Purpose Banks.
    Assessment Areas and Areas for Eligible Community Development 
Activity. Section VI describes proposals on delineating facility-based 
assessment areas for main offices, branches, and deposit-taking remote 
service facilities (to include ATMs). Under the proposal, large banks 
would delineate assessment areas comprised of full counties, 
metropolitan divisions, or MSAs. Intermediate and small banks could 
continue to delineate partial county facility-based assessment areas, 
consistent with current practice.
    The section also describes the proposal for large banks to 
delineate retail lending assessment areas where a bank has 
concentrations of home mortgage and/or small business lending outside 
of its facility-based assessment areas. Under this proposal, a large 
bank would delineate retail lending assessment areas where it has an 
annual lending volume of at least 100 home mortgage loan originations 
or at least 250 small business loan originations in an MSA or 
nonmetropolitan area of a state for two consecutive years.
    The section also discusses the proposal to allow banks to receive 
CRA credit for any qualified community development activity, regardless 
of location, although performance within facility-based assessment 
areas would be emphasized.
    Performance Tests, Standards, and Ratings in General. Section VII 
describes the agencies' proposed evaluation framework tailored for 
differences in bank size and business model. The agencies propose the 
following four tests for large banks: Retail Lending Test; Retail 
Services and Products Test; Community Development Financing Test; and 
Community Development Services Test. Intermediate banks would be 
evaluated under the Retail Lending Test and the status quo community 
development test, unless they choose to opt into the Community 
Development Financing Test. Small banks would be evaluated under the 
status quo small bank lending test, unless they choose to opt into the 
Retail Lending Test. Wholesale and limited purpose banks would be 
evaluated under a tailored version of the Community Development 
Financing Test.
    Under this framework, large banks would be banks that had average 
quarterly assets, computed annually, of at least $2 billion in both of 
the prior two calendar years; intermediate banks would be banks that 
had average quarterly assets, computed annually, of at least $600 
million in both of the prior two calendar years and less than $2 
billion in either of the prior two calendar years; and small banks 
would be banks that had average quarterly assets, computed annually, of 
less than $600 million in either of the prior two calendar years. The 
agencies are in the process of seeking approval from the U.S. Small 
Business Administration (SBA) to use the $600 million threshold, where 
applicable and adjusted annually for inflation, rather than the SBA's 
recently updated size standards.\50\
---------------------------------------------------------------------------

    \50\ 87 FR 18627, 18830 (Mar. 31, 2022). Of particular relevance 
to the Agencies' CRA regulations, the SBA revised the size standards 
applicable to small commercial banks and savings institutions, 
respectively, from $600 million to $750 million, based upon the 
average assets reported on such a financial institution's four 
quarterly financial statements for the preceding year. The final 
rule has a May 2, 2022 effective date.
---------------------------------------------------------------------------

    The agencies propose to further tailor aspects of the proposal 
within the large bank category. The agencies propose that certain 
provisions of the Retail Services and Products Test and Community 
Development Services Test would apply only to large banks that had 
average quarterly assets, computed annually, of over $10 billion in 
both of the prior two calendar years. These banks are referred to in 
this SUPPLEMENTARY INFORMATION as large banks with assets of over $10 
billion. Large banks that had average quarterly assets, computed 
annually, of $10 billion or less in either of the prior two calendar 
years are referred to in this SUPPLEMENTARY INFORMATION as large banks 
with assets of $10 billion or less.
    The section also discusses a new proposed definition of 
``operations subsidiary'' to the Board's CRA regulation and ``operating 
subsidiary'' for the FDIC's and OCC's CRA regulations (referred to 
collectively in this SUPPLEMENTARY INFORMATION as ``bank 
subsidiaries'') to identify those bank affiliates whose activities 
would be required to be attributed to a bank's CRA performance. The 
agencies propose to maintain the current flexibilities that would allow 
a bank to choose to include or exclude the activities of other bank 
affiliates that are not considered ``bank subsidiaries.'' The section 
also discusses performance context, and the requirement for activity in 
accordance with safe and sound operations.
    Retail Lending Test Product Categories and Major Product Lines. 
Section VIII describes the proposed categories and standards for 
determining when a bank's retail lending product lines are evaluated 
under the Retail Lending Test. The agencies propose the following 
retail lending product line categories: A

[[Page 33890]]

closed-end home mortgage, open-end home mortgage, multifamily, small 
business, and small farm lending. The agencies also propose including 
automobile lending as an eligible retail lending product line. In 
addition, the agencies propose a major product line standard to 
determine when a retail lending product line is evaluated.
    The NPR proposes to define the terms ``small business'' and ``small 
farm'' consistent with the Consumer Financial Protection Bureau's 
(CFPB) proposal under section 1071 (Section 1071 Rulemaking) \51\ of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act \52\). The CFPB has proposed to define a ``small business'' 
as having gross annual revenues of $5 million or less in the preceding 
fiscal year. The agencies are in the process of seeking approval from 
the SBA to use the standard proposed by the CFPB in its Section 1071 
Rulemaking rather than the SBA's size standards.\53\
---------------------------------------------------------------------------

    \51\ See 15 U.S.C. 1691c-2. The CFPB's Section 1071 Rulemaking 
would amend Regulation B to implement changes to ECOA made by 
section 1071 of the Dodd-Frank Act. This rulemaking would require 
covered financial institutions to collect and report to the CFPB 
data on applications for credit for small businesses, including 
businesses that are owned by women or minorities. See 86 FR 56356 
(Oct. 8, 2021), as corrected by 86 FR 70771 (Dec. 13, 2021).
    \52\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010).
    \53\ This assumes the CFPB's section 1071 rulemaking is 
finalized as proposed with a ``small business'' defined as having 
gross annual revenues of $5 million or less.
---------------------------------------------------------------------------

    Retail Lending Test Evaluation Framework for Facility-Based 
Assessment Areas and Retail Lending Assessment Areas. Section IX 
discusses the proposed Retail Lending Test for standardizing 
evaluations of retail lending performance in facility-based assessment 
areas and retail lending assessment areas for large and intermediate 
banks. The agencies propose using a retail lending volume screen to 
evaluate a bank's retail lending volumes. The agencies also propose to 
evaluate a bank's major product lines using two distribution metrics 
that measure the bank's record of lending in low- and moderate-income 
census tracts and to borrowers of different income or revenue levels. 
Further, the agencies propose to establish a standardized methodology 
for setting performance expectations for specific product lines. The 
methodology defines performance ranges for each conclusion category for 
each product, and this performance is then averaged together. Under the 
methodology, the amount of lending needed to achieve a given conclusion 
would differ across assessment areas according to local credit demand 
and would calibrate across business cycles.
    Retail Lending Test Evaluation Framework for Retail Lending Test 
Conclusions in State, Multistate MSAs, and at the Institution Level. 
Section X describes the agencies' proposal to assign conclusions on the 
Retail Lending Test for large and intermediate banks at the state and 
multistate MSA levels based on the conclusions reached at individual 
facility-based and retail lending assessment areas, as applicable. The 
agencies also propose to assign conclusions on the Retail Lending Test 
at the institution level by similarly combining conclusions from all of 
a bank's facility-based and retail lending assessment areas, as 
applicable, as well as the bank's retail lending performance outside of 
its assessment areas. The consideration of outside lending recognizes 
that some bank lending may be geographically diffuse, without 
concentrations in particular local markets that would be captured by 
the proposed retail lending assessment areas.
    Retail Services and Products Test. Section XI describes the 
agencies' proposal to evaluate large banks under the Retail Services 
and Products Test. This test would use a predominantly qualitative 
approach, incorporating quantitative measures as guidelines, as 
applicable. First, the delivery systems part of the proposed test seeks 
to achieve a balanced evaluation framework that considers a bank's 
branch availability and services, remote service facility availability, 
and its digital and other delivery systems. The agencies propose that 
the evaluation of digital and other delivery systems and deposit 
products would be required for large banks with assets of over $10 
billion, and not required for large banks with assets of $10 billion or 
less.
    Second, the credit and deposit products part of the proposed test 
aims to evaluate a bank's efforts to offer products that are responsive 
to the needs of low- and moderate-income communities. The agencies 
propose that the evaluation of deposit products responsive to the needs 
of low- or moderate-income individuals would be required for large 
banks with assets of over $10 billion, and not required for large banks 
with assets of $10 billion or less.
    Community Development Financing Test. Section XII describes the 
agencies proposals for the Community Development Financing Test, which 
would apply to large banks as well as intermediate banks that choose to 
opt into this test. The Community Development Financing Test would 
consist of a community development financing metric, benchmarks, and an 
impact review. These components would be assessed at the facility-based 
assessment area, state, multistate MSA and institution levels, and 
would inform conclusions at each of those levels.
    Community Development Services Test. Section XIII describes the 
agencies' proposal to assess a large bank's community development 
services, underscoring the importance of these activities for fostering 
partnerships among different stakeholders, building capacity, and 
creating the conditions for effective community development. The 
agencies propose that in nonmetropolitan areas, banks may receive 
community development services consideration for volunteer activities 
that meet an identified community development need, even if unrelated 
to the provision of financial services. The proposed test would consist 
of a primarily qualitative assessment of the bank's community 
development service activities. For large banks with assets of over $10 
billion, the agencies propose also using a metric to measure the hours 
of community development services activity per full time employee of a 
bank.
    Wholesale and Limited Purpose Banks. Section XIV describes the 
agencies' proposed Community Development Financing Test for Wholesale 
and Limited Purpose Banks, which would include a qualitative review of 
a bank's community development lending and investments in each 
assessment area and an institution level-metric measuring a bank's 
volume of activities relative to its capacity. The agencies also 
propose giving wholesale and limited purpose banks the option to have 
examiners consider community development service activities that would 
qualify under the Community Development Services Test.
    Strategic Plans. Section XV describes the agencies' proposal to 
maintain a strategic plan option as an alternative method for 
evaluation. Banks that elect to be evaluated under a CRA strategic plan 
would continue to request approval for the plan from their appropriate 
Federal banking agency. The agencies propose more specific criteria to 
ensure that all banks are meeting their CRA obligation to serve low- 
and moderate-income individuals and communities. Banks approved to be 
evaluated under a CRA strategic plan option would have the same 
assessment area requirements as other banks and would submit plans that 
include the same performance tests and standards that would otherwise 
apply unless the

[[Page 33891]]

bank is substantially engaged in activities outside the scope of these 
tests. In seeking approval for a plan that does not adhere to 
requirements and standards that are applied to other banks, the plan 
would be required to include an explanation of why the bank's view is 
that different standards would be more appropriate in meeting the 
credit needs of its communities.
    Assigned Conclusions and Ratings. Section XVI describes the 
agencies' proposal to provide greater transparency and consistency on 
assigning ratings for a bank's overall performance. The proposed 
approach would produce performance scores for each applicable test, at 
the state, multistate MSA, and institution levels based on a weighted 
average of assessment area conclusions, as well as consideration of 
additional test-specific factors at the state, multistate MSA, or 
institution level. These performance scores are mapped to conclusion 
categories to provide test-specific conclusions for the state, 
multistate MSA, and at the institution level. The agencies propose to 
combine these performance scores across tests to produce ratings at the 
state, multistate MSA, and the institution level.
    The agencies propose to determine a bank's overall state, 
multistate MSA, or institution rating by taking a weighted average of 
the applicable performance test scores. For large banks the agencies 
propose the following weights: 45 percent for Retail Lending Test 
performance score; 15 percent for Retail Services and Products Test 
performance score; 30 percent for Community Development Financing Test 
performance score; and 10 percent for Community Development Services 
Test performance score. For intermediate banks, the agencies propose to 
weight the Retail Lending test at 50 percent and the community 
development test, or if the bank chooses to opt into the Community 
Development Financing Test, at 50 percent.
    The agencies also propose updating the criteria to determine how 
discriminatory and other illegal practices would adversely affect a 
rating, as well as what rating level (state, multistate MSA, and 
institution) would be affected.
    Performance Standards for Small and Intermediate Banks. Section 
XVII describes the agencies' proposal to continue evaluating small 
banks under the small bank performance standards in the current CRA 
framework and to apply the proposed metrics-based Retail Lending Test 
to intermediate banks. Under the proposal, small banks could opt into 
the Retail Lending Test and could continue to request additional 
consideration for other qualifying CRA activities. For intermediate 
banks, in addition to the proposed Retail Lending Test, the agencies 
propose to also evaluate an intermediate bank's community development 
activity pursuant to the criteria under the current intermediate small 
bank community development test. Intermediate banks could also opt to 
be evaluated under the proposed Community Development Financing Test.
    Effect of CRA Performance on Applications. In Section XVIII, the 
agencies propose to maintain the current regulatory provisions for 
considering CRA performance on bank applications, such as those for 
mergers and acquisitions, deposit insurance, and branch openings and 
relocations.
    Data Collection, Reporting, and Disclosure. In Section XIX, the 
agencies propose to revise data collection and reporting requirements 
to increase the clarity, consistency, and transparency of the 
evaluation process through the use of standard metrics and benchmarks. 
The proposal recognizes the importance of using existing data sources 
where possible, and tailoring data requirements, where appropriate.
    In addition to leveraging existing data, the proposal would require 
large banks to collect, maintain, and report additional data. All large 
banks would have the same requirements for certain categories of data, 
including community development financing data, branch location data, 
and remote service facility location data. Some new data requirements 
would only apply to large banks with assets of over $10 billion. Large 
banks with assets of over $10 billion would have data requirements for 
deposits data, automobile lending data, retail services data on digital 
delivery systems, retail services data on responsive deposit products, 
and community development services data. The proposal also provides 
updated standards for all large banks to report the delineation of 
their assessment areas. Data requirements for intermediate banks and 
small banks would remain the same as the current requirements.
    Content and Availability of Public File, Public Notice by Banks, 
Publication of Planned Examination Schedule, and Public Engagement. 
Section XX describes the agencies' proposal to provide more transparent 
information to the public on CRA examinations and encourage 
communication between members of the public and banks. The agencies 
propose to make a bank's CRA public file more accessible to the public 
by allowing any bank with a public website to include its CRA public 
file on its website. The agencies also propose publishing a list of 
banks scheduled for CRA examinations for the next two quarters at least 
60 days in advance in order to provide additional notice to the public. 
Finally, the agencies propose to establish a way for the public to 
provide feedback on community needs and opportunities in specific 
geographies.
    Transition. Section XXI discusses the agencies' proposed timeline 
for the transition from the current regulatory and supervisory 
framework to the proposed rule's CRA regulatory and supervisory 
framework.
    Regulatory Analysis. Section XXII discusses the required regulatory 
analyses for the proposed rule. This includes a description of the 
Board's and the FDIC's Initial Regulatory Flexibility Analyses, which 
conclude that the proposed rule will not have a significant economic 
impact on a substantial number of small entities, and the OCC's 
certification that the proposed rule will not have a significant 
economic impact on a substantial number of small entities.
    Text of Common Proposed Rule. Section XXIII sets forth the common 
regulatory text for the proposed CRA regulation.

III. Community Development Definitions

    Under the current and proposed CRA rule, a bank may, depending on 
its size, be evaluated for its community development lending, 
investments, and/or services under various tests. These activities must 
have community development as their primary purpose. Community 
development activities currently fall into four broad categories: 
Affordable housing; community services; economic development; and 
revitalization and stabilization. The agencies propose to revise the 
community development definitions in order to clarify eligibility 
criteria for different community development activities by including 
eleven categories that establish specific eligibility standards for a 
broad range of community development activities. The new definitions 
incorporate some aspects of guidance that are currently provided in the 
Interagency Questions and Answers. The proposed definitions reflect an 
emphasis on activities that are responsive to community needs, 
especially the needs of low- and moderate-income individuals and 
communities and small businesses and small farms.

[[Page 33892]]

A. Primary Purpose of Community Development

    In Sec.  _.13, the agencies propose to define in the CRA 
regulations standards for determining whether a community development 
activity has a ``primary purpose'' of community development. Currently, 
the approach to demonstrating that an activity has a primary purpose of 
community development is explained in the Interagency Questions and 
Answers.\54\ Under the proposal, a loan, investment, or service meets 
the primary purpose standard when it is designed for the express 
purpose of community development as set forth in proposed Sec.  
_.13(a)(1). In general, activities with a primary purpose of community 
development, as proposed, would receive full CRA credit for the 
Community Development Financing Test and Community Development Services 
Test, as described below.
---------------------------------------------------------------------------

    \54\ As discussed in the Interagency Questions and Answers, a 
loan, investment, or service has as its primary purpose community 
development when it is designed for the express purpose of 
revitalizing or stabilizing low- or moderate-income areas, 
designated disaster areas, or underserved or distressed 
nonmetropolitan middle-income areas, providing affordable housing 
for, or community services targeted to, low- or moderate-income 
persons, or promoting economic development by financing small 
businesses or small farms that meet the requirements set forth in 12 
CFR _.12(g). See Q&A Sec.  _.12(h)-8.
---------------------------------------------------------------------------

    To determine whether an activity is designed for an express 
community development purpose, the agencies propose applying several 
approaches. First, if a majority of the dollars, applicable 
beneficiaries, or housing units of the activity are identifiable to one 
or more of the community development activities defined in Sec.  
_.13(a)(2), then the activity meets the requisite primary purpose and 
would receive full CRA credit.
    Second, and alternatively, where the measurable portion of any 
benefit bestowed or dollars applied to the community development 
purpose is less than a majority of the entire activity's benefits or 
dollar value, then the activity may still be considered to possess the 
requisite primary purpose, and the bank may receive CRA credit for the 
entire activity, if: (i) The express, bona fide intent of the activity, 
as stated, for example, in a prospectus, loan proposal, or community 
action plan, is primarily one or more of the enumerated community 
development purposes; (ii) the activity is specifically structured to 
achieve the expressed community development purpose; and (iii) the 
activity accomplishes, or is reasonably certain to accomplish, the 
community development purpose involved.
    Pro Rata Credit for Qualified Affordable Housing. The agencies 
propose that affordable housing that is developed in conjunction with 
Federal, state, local, or tribal government programs that have a stated 
purpose or bona fide intent to promote affordable housing would be 
considered even if fewer than the majority of the beneficiaries of the 
housing are low- or moderate-income individuals. In such cases, the 
activity would be considered to have a primary purpose of affordable 
housing only for the percentage of total housing units in the 
development that are affordable. For example, if a bank makes a $10 
million loan to finance a mixed-income housing development in which 10 
percent of the units will be set aside as affordable housing for low- 
or moderate-income individuals, the bank may treat $1 million of such 
loan as a community development loan. In other words, the pro-rata 
dollar amount of the total activity would be based on the percentage of 
units set aside for affordable housing for low- or moderate-income 
individuals.
    The agencies propose a different approach for an activity that 
involves low-income housing tax credits (LIHTCs). Specifically, a bank 
would receive consideration for the full amount of the loan or 
investment for a LIHTC-financed project, regardless of the share of 
units that are considered affordable. This proposal is consistent with 
current guidance adopted in 2010 that clarified that projects developed 
with LIHTCs had a bona fide intent of providing affordable housing.\55\
---------------------------------------------------------------------------

    \55\ See 75 FR 11642 (Mar. 11, 2010).
---------------------------------------------------------------------------

    Pro Rata Consideration for Other Community Development Activities. 
The proposal does not specify any other application of partial credit 
for activities, but the agencies seek feedback on whether such 
consideration is appropriate for this rulemaking in other specific 
cases. For example, an essential infrastructure project may serve a 
broad area where low- and moderate-income census tracts comprise a 
minority of total census tracts. In such cases, the activity could 
provide benefit to some low- or moderate-income individuals, although 
the overall project did not focus on low- or moderate-income census 
tracts or individuals. The agencies have considered whether banks 
should receive partial consideration more generally for these 
activities based on the share of low- or moderate-income census tracts 
or low- or moderate-income individuals that benefit from the project 
compared to the number of census tracts or total population that 
benefited from the project overall. However, partial consideration of 
activities could result in a significant expansion of the activities 
that could qualify, and thereby serve to divert limited resources from 
projects specifically targeted to benefit low- or moderate-income 
people or communities. In addition, the agencies believe that the 
proposed primary purpose standard retains appropriate flexibility to 
provide consideration for activities where less than the majority of 
the entire activity benefits low- or moderate-income individuals or 
communities, if those activities have the express, bona fide intent of 
community development.
Request for Feedback
    Question 1. Should the agencies consider partial consideration for 
any other community development activities (for example, financing 
broadband infrastructure, health care facilities, or other essential 
infrastructure and community facilities), or should partial 
consideration be limited to only affordable housing?
    Question 2. If partial consideration is extended to other types of 
community development activities with a primary purpose of community 
development, should there be a minimum percentage of the activity that 
serves low- or moderate-income individuals or geographies or small 
businesses and small farms, such as 25 percent? If partial 
consideration is provided for certain types of activities considered to 
have a primary purpose of community development, should the agencies 
require a minimum percentage standard greater than 51 percent to 
receive full consideration, such as a threshold between 60 percent and 
90 percent?

B. Affordable Housing

    The agencies are proposing a definition for affordable housing that 
includes four components: (i) Affordable rental housing developed in 
conjunction with Federal, state, and local government programs; (ii) 
multifamily rental housing with affordable rents; (iii) activities 
supporting affordable low- or moderate-income homeownership; and (iv) 
purchases of mortgage-backed securities that finance affordable 
housing. The proposed definition is intended to clarify the eligibility 
of affordable housing as well as to recognize the importance of 
promoting affordable housing for low- or moderate-income individuals.

[[Page 33893]]

1. Background
a. Current Approach to Affordable Housing
    The current CRA regulations define ``community development'' to 
include ``affordable housing (including multifamily rental housing) for 
low- or moderate-income individuals.'' \56\ The agencies have stated in 
the Interagency Questions and Answers that low- or moderate-income 
individuals must benefit or be likely to benefit from the housing in 
order to qualify and meet the existing primary purpose standard.\57\ 
Currently, the agencies consider activities that support both single-
family (1-4 family units) and multifamily (more than 4-family units) 
affordable housing. Single-family home mortgage loans are generally 
considered as part of the lending test, and other activities that are 
not home mortgage loans and that support single-family affordable 
housing may be considered as community development.\58\ Multifamily 
loans are considered separately and may qualify for both retail lending 
and community development consideration if they meet the definition of 
affordable housing.\59\ Purchases of mortgage-backed securities that 
primarily consist of single-family mortgage loans to low- or moderate-
income individuals, or of multifamily affordable housing, are also 
considered as qualifying community development activities.\60\
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    \56\ 12 CFR _.12(g)(1).
    \57\ See Q&A Sec.  _.12(g)(1)-1.
    \58\ Single-family home mortgage loans may be included as 
community development under the intermediate small bank methodology. 
See Q&A Sec.  _.12(h)-3.
    \59\ See Q&A Sec.  _.42(b)(2)-2.
    \60\ See Q&A Sec.  _.12(t)-2.
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    Multifamily Housing. Multifamily housing qualifies under two 
different categories of affordable housing: Subsidized or unsubsidized 
housing. Housing that is financed or supported by a government 
affordable housing program or a government subsidy is considered 
subsidized affordable housing. Subsidized affordable housing is 
generally viewed as qualifying under affordable housing criteria if the 
government program or subsidy has a stated purpose of providing 
affordable housing to low- or moderate-income individuals, thereby 
satisfying Interagency Questions and Answers guidance that low- or 
moderate-income individuals benefit, or are likely to benefit, from the 
housing.\61\ Examples of subsidized affordable housing include housing 
financed with LIHTCs, the HOME Investment Partnerships Program, or 
Project-Based Section 8 Rental Assistance.
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    \61\ See Q&A Sec.  _.12(g)(1)-2.
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    Multifamily housing with affordable rents, but that is not financed 
or supported by a government affordable housing program or a government 
subsidy, is generally considered unsubsidized affordable housing, and 
is also referred to in this SUPPLEMENTARY INFORMATION as ``naturally 
occurring affordable housing.'' This housing can qualify as affordable 
housing if the rents are affordable to low- or moderate-income 
individuals, and if it is clear that low- or moderate-income 
individuals benefit, or are likely to benefit, from this housing. 
However, there are no standards currently in place for determining that 
low- or moderate-income individuals will benefit, or are likely to 
benefit, from the housing. Guidance indicates that it is not sufficient 
to determine that low- or moderate-income individuals are likely to 
benefit from the housing solely because the rents or housing prices are 
set according to a particular formula.\62\ To assess whether the 
housing will benefit low- or moderate-income individuals, examiners may 
consider a range of demographic, economic or market factors, such as 
the median rents of the assessment area and the project based on 
project rent rolls; the low- or moderate-income population in the area 
of the project; or the past performance record of the organization(s) 
undertaking the project.\63\
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    \62\ See Q&A Sec.  _.12(g)(1)-1.
    \63\ See Q&A Sec.  _.12(g)(1)-1.
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    Under the current framework, there is not a specified standard for 
determining when a property or unit is considered affordable to low- or 
moderate-income individuals. One approach used by banks and examiners 
is to calculate an affordable rent based on what is affordable to a 
moderate-income renter, assuming that 30 percent of the renter's income 
is spent on rent. Alternatively, some use the U.S. Department of 
Housing and Urban Development's (HUD) Fair Market Rents as a standard 
for measuring affordability.\64\ Stakeholders note that lack of a 
consistent standard for affordability, combined with unclear methods 
for determining whether low- or moderate-income individuals are likely 
to benefit, leads to inconsistent consideration of unsubsidized 
affordable housing.
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    \64\ See HUD, Fair Market Rents, https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/landlord/fmr.
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    Single-Family Housing. Certain activities related to single-family 
housing can also qualify as affordable housing provided that the 
housing is affordable and low- or moderate-income individuals benefit, 
or are likely to benefit, from the housing. While single-family 
mortgages qualify under the lending test,\65\ activities that support 
the construction of affordable housing or other activities to promote 
affordable homeownership for low- or moderate-income individuals are 
considered as affordable housing under the community development 
definition. Similar to the issues noted above with unsubsidized rental 
housing, there are no consistent standards in place to demonstrate that 
single-family for-sale housing is affordable and likely to benefit low- 
or moderate-income individuals. Therefore, under the current framework, 
stakeholders note that it is difficult for certain single-family 
projects to qualify, unless it is a project developed in partnership 
with a government program or non-profit organization that has a mission 
of providing affordable housing to low- or moderate-income individuals.
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    \65\ See Q&A Sec.  _.12(h)-3.
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    Mortgage-Backed Securities. Mortgage-backed securities qualify as 
an affordable housing activity provided they demonstrate a primary 
purpose of community development. Specifically, the security must 
primarily address affordable housing (including multifamily housing) of 
low- or moderate-income individuals.\66\ Thus, a mortgage-backed 
security that contains a majority of mortgages to low- or moderate-
income borrowers can qualify as an investment with a primary purpose of 
affordable housing.
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    \66\ See Q&A Sec.  _.12(t)-2.
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b. Stakeholder Feedback on Affordable Housing
    Stakeholders have expressed support for a definition of affordable 
housing that includes both subsidized and unsubsidized housing, and 
that is informed by more clear and specific eligibility standards. 
Stakeholders generally support the current approach of qualifying 
housing developed, purchased, rehabilitated, or preserved in 
conjunction with a Federal, state, local, or tribal government program. 
Many stakeholders also indicate support for including naturally 
occurring affordable housing in the definition of affordable housing, 
but note that more consistent and practically feasible qualification 
standards are needed. They also raise concerns about the types of 
requirements or restrictions--if any--that should be put in place to 
ensure that these properties remain affordable. For example, some 
stakeholders have noted that a bank financing a naturally

[[Page 33894]]

occurring affordable housing activity would often not be able to verify 
and document the income of tenants at time of rental and on an ongoing 
basis.
    Regarding the current treatment of mortgage-backed securities, some 
stakeholders have expressed concern that some banks rely on purchases 
of mortgage-backed securities for CRA purposes in lieu of pursuing 
other activities that would have a more direct impact on the community 
or that would be more responsive to specific needs. Some stakeholders 
have also noted concerns that some banks may purchase high volumes of 
mortgage-backed securities shortly before their CRA examinations and 
sell them shortly afterwards, reducing any potential benefits to 
liquidity for lenders and credit availability for communities. 
Stakeholders generally have not opposed the consideration of mortgage-
backed securities as a qualified investment, although some suggested 
additional requirements, such as preventing banks from receiving CRA 
credit for mortgage-backed securities that are purchased and then 
quickly resold.
2. Rental Housing in Conjunction With Government Programs
    First, the agencies propose that a rental housing unit would be 
considered affordable housing if it is purchased, developed, financed, 
rehabilitated, improved, or preserved in conjunction with a Federal, 
state, local, or tribal government affordable housing plan, program, 
initiative, tax credit, or subsidy with a stated purpose or the bona 
fide intent of providing affordable housing for low- or moderate-income 
individuals. Examples below demonstrate how this component of the 
definition intends to add greater clarity around the many types of 
subsidized activities that currently qualify for consideration.
    The proposal covers a broad range of government-related affordable 
rental housing activities for low- and moderate-income individuals, 
including affordable housing plans, programs, initiatives, tax credits, 
and subsidies pertaining to both multifamily and single-family 
properties. This would cover government subsidy programs that provide 
affordable rental housing for low- or moderate-income individuals, such 
as Project-Based Section 8 Rental Assistance and the HOME Investment 
Partnerships Program. The proposal also includes activities with rental 
properties receiving LIHTCs. Although LIHTCs are sometimes described as 
a ``program,'' the agencies propose including the term ``tax credits'' 
to provide clarity about the eligibility of tax credit programs focused 
on affordable housing for low- or moderate-income individuals.
    The proposed language encompasses affordable housing activities 
tied to every level of government, not just Federal Government 
programs. In addition to affordable housing programs at the Federal 
level, the agencies also propose to include state and local affordable 
housing plans, programs, initiatives, tax credits, or subsidies that 
support affordable housing for low- or moderate-income individuals. 
This would include affordable rental units for low- or moderate-income 
individuals created as a result of local government inclusionary zoning 
programs. Inclusionary zoning provisions in many local jurisdictions 
provide requirements or incentives for developers to set aside a 
portion of housing units within a property that meet an affordability 
standard and are occupied by low- or moderate-income individuals. In 
addition, affordable multifamily housing programs offered by state 
housing finance agencies and affordable housing trust funds managed by 
a local government to support the development of affordable housing for 
low- or moderate-income individuals would be included in this 
component. The proposal also specifies that affordable housing 
activities related to tribal governments would be included under the 
scope of the definition.
    To qualify under the proposed definition, a government-related 
affordable housing plan, program, initiative, tax credit, or subsidy 
would need to have a stated purpose or bona fide intent of supporting 
affordable rental housing for low- or moderate-income individuals. The 
agencies propose this requirement to emphasize affordable housing 
activities benefitting low- or moderate-income individuals. The 
agencies are not proposing a separate affordability standard for this 
prong of the definition and would rely upon the affordability standards 
set in each respective government affordable housing plan, program, 
initiative, tax credit, or subsidy, provided that the program has a 
stated purpose or bona fide intent of providing rental housing that is 
affordable to low- or moderate-income individuals.
    The agencies seek feedback on whether additional requirements 
should be included to ensure that activities qualifying under this 
definition support housing that is both affordable to and occupied by 
low- or moderate-income individuals. For example, the agencies are 
considering whether to include a specific affordability standard of 30 
percent of 80 percent of area median income for the cost of rents of 
housing that receives consideration under this definition, or a 
requirement that any programs verify that occupants of the affordable 
units are low- or moderate-income individuals.
    The agencies seek feedback on whether activities involving 
government programs that have a stated purpose or bona fide intent to 
provide affordable housing serving low-, moderate-, and middle-income 
individuals should qualify under this definition in certain 
circumstances. For example, the agencies seek feedback on this 
alternative when the housing is located in a nonmetropolitan county, or 
in High Opportunity Areas. The agencies recognize that nonmetropolitan 
counties may have limited opportunities for affordable housing, and 
that it may be appropriate to consider affordable housing activities in 
these areas that include middle-income renters. Broadening this 
category to include activities that support housing that is affordable 
to middle-income individuals in nonmetropolitan counties could include 
developing affordable housing in conjunction with programs such as the 
U.S. Department of Agriculture Section 515 Rural Rental Housing or 
Multifamily Guaranteed Rural Rental Housing programs.\67\
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    \67\ See Rural Rental Housing Loans (Section 515) (Sept. 2002), 
https://www.hud.gov/sites/documents/19565_515_RURALRENTAL.pdf, and 
U.S. Department of Agriculture, Multifamily Guaranteed Rural Rental 
Housing (Dec. 2021), https://www.rd.usda.gov/sites/default/files/fact-sheet/508_RD_FS_RHS_MFGuarantee.pdf.
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    Under a second alternative, the agencies would consider these 
activities in high opportunity areas. One option would be to define 
high opportunity areas to align with the definition of these areas by 
the Federal Housing Finance Agency (FHFA), as discussed in Section 
V.\68\ These areas include census tracts with high costs of development 
and low poverty rates, and the agencies consider affordable housing 
activities in these areas to be especially responsive. For example, 
these activities may include financing for a multifamily rental housing 
development that serves middle-income residents in a high opportunity 
area that is supported by tax-exempt bonds that are issued by state or 
local agencies to support affordable housing. Consideration of

[[Page 33895]]

activities supporting housing that is affordable to middle-income 
families in these geographies would reflect the limited supply of 
affordable housing in these markets and would provide additional 
flexibility for banks to identify opportunities to address community 
needs. However, the agencies have also considered that broadening the 
definition could reduce the emphasis on activities that serve low-and 
moderate-income individuals more directly and where the need is more 
acute.
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    \68\ See, e.g., Federal Housing Financing Agency, ``Overview of 
the 2020 High Opportunity Areas File'' (2020), https://www.fhfa.gov/DataTools/Downloads/Documents/Enterprise-PUDB/DTS_Residential-Economic-Diversity-Areas/DTS_High%20Opportunity_Areas_2020_README.pdf, and HUD's Office of 
Policy Development and Research (PD&R), Qualified Census Tracts and 
Difficult Development Areas, https://www.huduser.gov/portal/datasets/qct.html.
---------------------------------------------------------------------------

3. Multifamily Rental Housing With Affordable Rents
    For the second prong of the affordable housing definition in 
proposed Sec.  _.13(b), the agencies propose to provide clear and 
consistent criteria in order to qualify affordable low- or moderate-
income multifamily rental housing that does not involve a government 
program, initiative, tax credit, or subsidy, also referred to as 
``naturally occurring affordable housing'' in this SUPPLEMENTARY 
INFORMATION, for purposes of CRA affordable housing consideration.
    The agencies recognize that naturally occurring affordable housing 
is an important source of affordable housing for many low- and 
moderate-income individuals. In addition, the agencies also recognize 
that this category of housing poses unique challenges in terms of 
ensuring that its benefits extend to low- or moderate-income 
individuals, since there is often no consistent way to confirm renter 
income for these properties, in contrast to properties receiving 
government subsidies. The proposed definition seeks to address this by 
clarifying that this category of affordable housing can receive CRA 
credit if it meets a specified set of applicable standards.
    First, in order to qualify under this prong of the proposed 
definition, the agencies propose that the rent for the majority of the 
units in a multifamily property could not exceed 30 percent of 60 
percent of the area median income for the metropolitan area or 
nonmetropolitan county. These rental amounts would need to reflect the 
rents used by the bank to underwrite the property, including post-
construction or post-renovation monthly rents. Second, naturally 
occurring affordable housing would also need to meet at least one of 
the following criteria in order to increase the likelihood that units 
benefit low- or moderate-income individuals: (i) The housing is located 
in a low- or moderate-income census tract; (ii) the housing is 
purchased, developed, financed, rehabilitated, improved, or preserved 
by a non-profit organization with a stated mission of, or that 
otherwise directly supports, providing affordable housing; (iii) there 
is an explicit written pledge by the property owner to maintain rents 
affordable to low- or moderate-income individuals for at least five 
years or the length of the financing, whichever is shorter; or (iv) the 
bank provides documentation that a majority of the residents of the 
housing units are low- or moderate-income individuals or families, for 
example documentation that a majority of residents have Housing Choice 
Vouchers.
a. Affordability Standard for Naturally Occurring Affordable Housing
    The proposed rental affordability standard for naturally occurring 
affordable housing--30 percent of 60 percent of the area median 
income--is intended to target the definition for units affordable to 
low- or moderate-income households. This would establish a higher bar 
than what is often used today to determine whether rents are affordable 
for low- or moderate-income individuals, which is 30 percent of 80 
percent of area median income. The agencies considered using the 
standard of 30 percent of 80 percent of area median income but believe 
it would be preferable to use a more targeted definition to ensure that 
rents are affordable to low-income households and to increase the 
likelihood that low- or moderate-income households will occupy the 
units. For example, in 2019, approximately 46 percent of occupied 
rental units with affordability levels between 61-80 percent of area 
median income were occupied by middle- or upper-income households.\69\ 
This is compared to 24 percent of occupied rental units with 
affordability levels under 60 percent of area median income being 
occupied by middle- or upper-income households. Limiting eligibility to 
those units with affordability levels under 60 percent of area median 
income may therefore help to ensure that the households served by this 
housing are in fact low- or moderate-income households.
---------------------------------------------------------------------------

    \69\ Thyria Alvarez and Barry L. Steffen, HUD, Office of Policy 
Development and Research, ``Worst Case Housing Needs 2021 Report to 
Congress'' (July 2020) (agencies' calculations using Exhibit A-12 at 
74), https://www.huduser.gov/portal/publications/Worst-Case-Housing-Needs-2021.html.
---------------------------------------------------------------------------

    However, a potential drawback to using an affordability standard 
anchored to 60 percent of area median income is that it could restrict 
eligibility for properties with affordability levels at 80 percent of 
area median income where many, but not all, of the units are occupied 
by low- or moderate-income households. The agencies seek feedback on 
the alternative approach of using 80 percent area median income as the 
affordability standard under proposed Sec.  _.13(b)(2).
    In calculating whether rents meet the affordability standard, the 
agencies propose using the monthly rental amounts as underwritten by 
the bank. The definition further specifies that this rent would need to 
reflect any post-construction or post-renovation rents considered as 
part of the bank's financing. Consider, for example, a multifamily 
property that meets the proposed affordability standard before bank 
financing, but where the property owner plans to renovate the building 
after receiving the loan and subsequently increases the rents above the 
affordability standard. In this example, if the bank relied on the 
post-renovation rents as part of its underwriting, then the loan would 
not count for CRA purposes under the proposed affordable housing 
definition. The agencies' objective in including this provision is to 
target CRA credit to properties that are likely to remain affordable 
and to avoid providing credit for activities that may result in 
displacement of low- or moderate-income individuals.
    The agencies seek feedback on whether there are alternative ways to 
ensure that CRA credit for naturally occurring affordable housing is 
targeted to properties where rents remain affordable for low- or 
moderate-income individuals.
    The proposed definition would require the majority of units in a 
naturally occurring affordable housing property to meet the 
affordability standard. Properties in which fewer than 50 percent of 
units are affordable would not qualify under the proposed definition. 
This requirement is intended to ensure that activities qualifying as 
naturally occurring affordable housing support housing that remains 
affordable to and occupied by low- or moderate-income individuals.
    The agencies seek feedback on whether single-family rental housing 
should also be considered under the naturally occurring affordable 
housing category, provided it meets the same combination of criteria 
proposed for multifamily rental housing. The agencies also seek 
feedback on whether such an alternative should be limited to rural 
areas. The agencies recognize that the composition of the housing stock 
varies across geographies, and that some areas, such as rural 
communities, may lack affordable multifamily rental housing that is 
either in conjunction

[[Page 33896]]

with a government program or naturally occurring affordable housing. In 
these communities, single-family rental housing may be an important 
source of affordable housing for low- and moderate-income individuals. 
In considering how and whether to incorporate affordable single-family 
rental housing into the naturally occurring affordable housing 
definition, the agencies are mindful of the fact that home mortgage 
loans for single-family rental housing would count in the geographic 
distribution metrics of the proposed Retail Lending Test.
b. Additional Eligibility Standards for Naturally Occurring Affordable 
Housing
    The agencies are proposing four additional criteria under proposed 
Sec.  _.13(b) for qualifying multifamily housing with affordable rents 
as naturally occurring affordable housing. These criteria are intended 
to focus the definition on housing that is more likely to benefit low- 
or moderate-income individuals or increase the likelihood that rents 
will remain affordable for low- or moderate-income individuals. In 
addition to the underwriting requirement (rents not exceeding 30 
percent of 60 percent of area median income), the proposal requires a 
property to meet at least one of the following criteria: (i) The 
location of the housing is in a low- or moderate-income census tract; 
(ii) the housing is developed in association with a non-profit 
organization with a mission of, or that otherwise directly supports, 
affordable housing; (iii) the financing is provided in conjunction with 
a written affordability pledge by the developer of at least 5 years, or 
the length of the financing, whichever is shorter; or (iv) the bank 
provides documentation that the majority of the housing units are 
occupied by low- or moderate-income households.
    Low- or Moderate-Income Census Tract. The first proposed criterion 
is the location of eligible properties in a low- or moderate-income 
census tract, because the majority low- or moderate-income status of a 
census tract indicates that affordable rental housing in that census 
tract is likely to benefit low- or moderate-income individuals. Using 
geography as a proxy for tenant income is generally consistent with 
current guidance.\70\ In addition, census tract income data is readily 
available and verifiable information, in contrast to verifying tenant 
income, which may prove infeasible for many property owners or 
developers.
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    \70\ See Q&A Sec.  _.12(g)(1)-1.
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    An additional approach that the agencies seek feedback on is 
whether to expand this criterion to also encompass middle- and upper-
income census tracts in which at least 50 percent of renters are low- 
or moderate-income. Following the same logic as the proposed low- and 
moderate-income census tract criteria, the agencies have considered 
that affordable rental housing in a neighborhood in which the majority 
of renters are low- or moderate-income would also be likely to benefit 
low- or moderate-income individuals. In addition, applying this 
standard would qualify affordable housing in more middle-and upper-
income census tracts, thereby expanding this criterion beyond only low- 
and moderate-income census tracts. While 33 percent of census tracts 
are designated as low- or moderate-income, a total of 72 percent of 
census tracts meet either the low- and moderate-income census tract 
standard or the low- and moderate-income median renter census tract 
standard.\71\ The agencies seek feedback on whether these additional 
census tracts should be added to the proposed definition.
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    \71\ The sample used for this analysis includes all census 
tracts for which there was non-missing renter median income data 
(2019 5-year American Community Survey) plus census tracts that were 
known to be low- or moderate-income but had missing data. The 
agencies' analysis found that there are 69,161 census tracts with 
non-missing renter median income data. Of those census tracts, 
22,521 (33 percent) are designated low- or moderate-income; 27,070 
(39 percent) are designated as renter low- or moderate-income; and 
the remaining 19,570 (28 percent) are neither low- or moderate-
income nor renter low- or moderate-income. Seventy-three percent of 
all census tracts could be a geography where affordable housing is 
located under that alternative proposal.
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    Additionally, the agencies seek feedback on an alternative in which 
no geographic criteria are included. Under this option, activities 
qualifying as supporting naturally occurring affordable housing would 
instead be required to meet one of the other criteria described below 
(mission-driven non-profit organization, written affordability pledge, 
or tenant income documentation), in addition to the standard of rents 
not exceeding 30 percent of 60 percent of area median income. By 
removing the geographic criteria, this alternative approach would be 
intended to equally apply the other criteria across census tracts of 
all income levels. However, the agencies are mindful that this 
alternative would require banks to provide documentation required under 
the other proposed criterion in order to receive consideration for 
naturally occurring affordable housing.
    Mission-Driven Non-Profit Organization. A second proposed criterion 
for determining whether multifamily housing with affordable rents is 
eligible is if the housing is purchased, developed, financed, 
rehabilitated, improved, or preserved by any non-profit organization 
with a stated mission of, or that otherwise directly supports, 
providing affordable housing. The agencies intend this provision to 
encompass organizations that target services to low- or moderate-income 
individuals and communities, and may also have a mission to serve 
individuals and communities that are especially vulnerable to housing 
instability. In addition, affordable properties in any census tract, 
including middle- and upper-income census tracts, could qualify under 
this option. This criterion does not include government programs or 
entities, as such activities would be considered under the affordable 
housing category in proposed Sec.  _.13(b)(1).
    Written Affordability Pledge. A third proposed criterion for 
determining if multifamily housing with affordable rents is eligible 
under the definition is the presence of an explicit written pledge on 
the part of the property owner to maintain rents that are affordable 
for at least five years or for the length of the financing, whichever 
is shorter.\72\ This prong would address concerns about the likelihood 
of rents in an eligible property increasing in the future and 
potentially displacing low- or moderate-income households. In addition, 
affordable properties in any census tract, including middle- and upper-
income census tracts, could qualify under this option. Some 
stakeholders have urged the requirement of a written pledge in order 
for any naturally occurring affordable housing to qualify for CRA 
purposes. However, the agencies are mindful that such a requirement 
would necessitate additional documentation to receive consideration for 
naturally occurring affordable housing. For this reason, the agencies 
believe that it is preferable to include this criterion as one of 
several options for meeting the eligibility standard.
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    \72\ The agencies expect that the length of financing would 
often go beyond the five-year written affordability pledge. The 
agencies would scrutinize short-term financing (less than five 
years) to ensure such financing is not a way to avoid the 
affordability commitment.
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    Tenant Income Documentation. A fourth proposed criterion for 
determining if multifamily housing with affordable rents is eligible 
under the definition is documentation provided by the bank 
demonstrating that the majority of the housing units are occupied by 
low- or moderate-income

[[Page 33897]]

individuals or households. Such documentation would be direct evidence 
that the activity benefits low- or moderate-income individuals. In 
addition, this criterion could apply to affordable properties in any 
census tract, including middle- or upper-income census tracts. For 
example, a multifamily rental property with a majority of rents set at 
30 percent of 60 percent of area median income that is located in a 
middle-income census tract, and where the bank can document that the 
majority of occupants receive Housing Choice Vouchers,\73\ would 
receive consideration under this criterion. The agencies recognize that 
it may be challenging for banks to obtain this documentation. 
Accordingly, the agencies are proposing to include this factor as one 
of several options for meeting the eligibility standard.
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    \73\ The housing choice voucher program is the Federal 
government's major program for assisting very low-income families, 
the elderly, and the disabled to afford decent, safe, and sanitary 
housing in the private market. See 24 CFR part 982 (program 
requirements for the tenant-based housing assistance program under 
Section 8 of the United States Housing Act of 1937 (42 U.S.C. 
1437f); the tenant-based program is the housing choice voucher 
program). See also ``U.S. Department of Housing and Urban 
Development, Housing. Choice Vouchers Fact Sheet,'' https://www.hud.gov/topics/housing_choice_voucher_program_section_8.
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4. Activities That Support Affordable Homeownership for Low- or 
Moderate-Income Individuals
    The agencies propose a third prong for the affordable housing 
definition to include: (i) Activities that directly assist low- or 
moderate-income individuals to obtain, maintain, rehabilitate, or 
improve affordable owner-occupied housing; or (ii) activities that 
support programs, projects, or initiatives that assist low- or 
moderate-income individuals to obtain, maintain, rehabilitate, or 
improve affordable owner-occupied housing. This category could include 
owner-occupied housing in single-family or multifamily properties.
    While these activities could be conducted in conjunction with a 
variety of financing types, such as conventional mortgages, shared 
equity models, or community land trusts, any reported mortgage loan 
that is evaluated under the Retail Lending Test would not count under 
this definition. Instead, this category would include activities such 
as construction loan financing for a non-profit housing developer 
building single-family owner-occupied homes affordable to low- or 
moderate-income individuals; financing or a grant to a non-profit 
community land trust focused on providing affordable housing to low- or 
moderate-income individuals; a loan to a resident-owned manufactured 
housing community with homes that are affordable to low- or moderate-
income individuals; a shared-equity program operated by a non-profit 
organization to provide long-term affordable homeownership; and 
financing or grants for organizations that provide down payment 
assistance to low- or moderate-income homebuyers.
    Activities eligible under this criterion may include activities 
with a governmental or non-profit organization with a stated purpose 
of, or that otherwise directly supports, providing affordable housing. 
Additionally, this category may include activities conducted by the 
bank itself, or with other for-profit partners, provided that the 
activity supports affordable homeownership for low- or moderate-income 
individuals. For example, a bank providing direct down payment 
assistance or supporting free home repairs or maintenance for low- or 
moderate-income homeowners could be considered under this prong of the 
definition.
    The agencies seek feedback on what conditions or terms, if any, 
should be added to this criterion to ensure that activities that 
support affordable low- and moderate-income homeownership are 
sustainable and beneficial to low- or moderate-income individuals and 
communities.
5. Mortgage-Backed Securities
    The agencies propose to define standards for investments in 
mortgage-backed securities related to affordable housing that qualify 
for community development consideration. Consistent with current 
practice, the agencies are proposing that mortgage-backed securities 
would qualify as affordable housing when the security contains a 
majority of either single-family home mortgage loans for low- and 
moderate-income individuals or loans financing multifamily affordable 
housing that otherwise qualifies under the proposed affordable housing 
definition in proposed Sec.  _.13(b).
    This definition recognizes that purchases of qualifying mortgage-
backed securities that contain home mortgage loans to low- or moderate-
income borrowers or that contain qualifying affordable housing loans 
are investments in affordable housing. The issuance and purchase of 
these securities may improve liquidity for affordable housing 
development and for lenders that make home mortgage loans to low- or 
moderate-income borrowers, which in turn allows them to make more loans 
to low- or moderate-income borrowers than would otherwise be possible. 
However, some stakeholders have noted that qualifying purchases of 
mortgage-backed securities are lower in impact and responsiveness to 
community credit needs than other qualifying affordable housing 
activities that more directly support housing for low- or moderate-
income individuals.
    The agencies seek feedback on alternative approaches that would 
create a more targeted definition of qualifying mortgage-backed 
securities. One alternative the agencies are considering is to consider 
mortgage-backed securities for only the portion of loans in the 
security that are affordable. For example, if 60 percent of a 
qualifying mortgage-backed security consists of single-family home 
mortgage loans to low- or moderate-income borrowers, and 40 percent of 
the security consists of loans to middle- or upper-income borrowers, 
the mortgage-backed security would receive consideration only for the 
dollar value of the loans to low- or moderate-income borrowers. This 
treatment would reflect that a qualifying mortgage-backed security 
represents a purchase of multiple home mortgage loans, some of which 
may not meet the definition of affordable housing or have a primary 
purpose of community development. However, the agencies are mindful of 
the added complexity that this approach could create.
    The agencies are also considering whether to limit consideration of 
mortgage-backed securities to the initial purchase of a mortgage-backed 
security from the issuer, and not considering subsequent purchases of 
the security. This change would be intended to emphasize activities 
that more directly serve low- or moderate-income individuals and 
communities and to reduce the possibility of multiple banks receiving 
CRA credit for purchasing the same security.
    The agencies seek feedback on these alternatives and on other ways 
of appropriately considering qualifying mortgage-backed security 
investments so as to emphasize community development financing 
activities that are most responsive to low- or moderate-income 
community needs.
Request for Feedback
    Question 3. Is the proposed standard of government programs having 
a ``stated purpose or bona fide intent'' of providing affordable 
housing for low- or moderate-income (or, under the alternative 
discussed above, for low-, moderate- or middle-income) individuals 
appropriate, or is a different standard more appropriate for 
considering government programs that

[[Page 33898]]

provide affordable housing? Should these activities be required to meet 
a specific affordability standard, such as rents not exceeding 30 
percent of 80 percent of median income? Should these activities be 
required to include verification that at least a majority of occupants 
of affordable units are low- or moderate-income individuals?
    Question 4. In qualifying affordable rental housing activities in 
conjunction with a government program, should the agencies consider 
activities that provide affordable housing to middle-income individuals 
in high opportunity areas, in nonmetropolitan counties, or in other 
geographies?
    Question 5. Are there alternative ways to ensure that naturally 
occurring affordable housing activities are targeted to properties 
where rents remain affordable for low- and moderate-income individuals, 
including properties where a renovation is occurring?
    Question 6. What approach would appropriately consider activities 
that support naturally occurring affordable housing that is most 
beneficial for low- or moderate-income individuals and communities? 
Should the proposed geographic criterion be expanded to include census 
tracts in which the median renter is low- or moderate-income, or in 
distressed and underserved census tracts, in order to encourage 
affordable housing in a wider range of communities, or would this 
expanded option risk crediting activities that do not benefit low- or 
moderate-income renters?
    Question 7. Should the proposed approach to considering naturally 
occurring affordable housing be broadened to include single-family 
rental housing that meets the eligibility criteria proposed for 
multifamily rental housing? If so, should consideration of single-
family rental housing be limited to rural geographies, or eligible in 
all geographies, provided the eligibility criteria to ensure 
affordability are met?
    Question 8. How should the agencies consider activities that 
support affordable low- or moderate-income homeownership in order to 
ensure that qualifying activities are affordable, sustainable, and 
beneficial for low- or moderate-income individuals and communities?
    Question 9. Should the proposed approach to considering mortgage-
backed securities that finance affordable housing be modified to ensure 
that the activity is aligned with CRA's purpose of strengthening credit 
access for low- or moderate-income individuals? For example, should the 
agencies consider only the value of affordable loans in a qualifying 
mortgage-backed security, rather than the full value of the security? 
Should only the initial purchase of a mortgage-backed security be 
considered for affordable housing?
    Question 10. What changes, if any, should the agencies consider to 
ensure that the proposed affordable housing definition is clearly and 
appropriately inclusive of activities that support affordable housing 
for low- or moderate-income individuals, including activities that 
involve complex or novel solutions such as community land trusts, 
shared equity models, and manufactured housing?

C. Economic Development

    The agencies propose several revisions to what constitutes economic 
development activities that are intended to encourage activities 
supportive of small businesses and small farms. The proposal in Sec.  
_.13(c) is also intended to improve the overall transparency of the 
definition by including certain activities that are currently addressed 
in guidance. In addition, the agencies seek to simplify the way that 
small business and small farm lending is considered under CRA 
evaluations.
    A significant change compared to the current CRA regulations' 
criteria for economic development is that all reported lending to small 
businesses and small farms would be considered under the proposed 
Retail Lending Test, described in Section IX, and not under the 
proposed economic development definition. This change is related to the 
agencies' proposal to leverage the CFPB's proposed small business 
standard under section 1071 to define ``small business'' and ``small 
farm'' as those with $5 million in gross annual revenues and below, as 
discussed above.
    In some ways, the proposed Retail Lending Test approach would 
afford broader consideration of loans to small businesses and small 
farms than the current CRA approach taken as a whole across the status 
quo lending and community development tests. There are also some 
differences that would narrow consideration of some loans that 
currently are considered under the economic development criteria.
1. Background
a. Current Approach to Economic Development
    Under the current regulation, community development is defined to 
include ``activities that promote economic development by financing 
businesses or farms that meet the size eligibility standards of the 
SBA's Development Company (SBDC) or Small Business Investment Company 
(SBIC) programs (13 CFR 121.301) or have gross annual revenues of $1 
million or less'' \74\ (the ``current economic development 
definition''). Under current guidance, activities qualify as economic 
development if they meet both a ``size test'' and a ``purpose test.'' 
\75\ An institution's loan, investment, or service meets the size test 
if it finances, either directly, or through an intermediary, businesses 
or farms that either meet the size eligibility standards of the SBDC or 
SBIC programs, or have gross annual revenues of $1 million or less. For 
consideration under the size test, the term ``financing'' is considered 
broadly and includes technical assistance that readies a business that 
meets the size eligibility standards to obtain financing. To meet the 
purpose test, current guidance states that a bank's loan, investment, 
or service must promote economic development by creating, retaining, 
and/or improving jobs for low- or moderate-income persons, low- or 
moderate-income geographies, areas targeted for redevelopment, or by 
financing certain intermediaries. Activities that support job training 
or workforce development are also considered to meet the purpose 
test.\76\
---------------------------------------------------------------------------

    \74\ 12 CFR _.12(g)(3).
    \75\ See Q&A Sec.  _.12(g)(3)-1.
    \76\ Id.
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b. Stakeholder Feedback on Economic Development
    Stakeholders note various challenges with the current economic 
development definition. Some observe that while guidance includes a 
variety of economic development activities, the smallest businesses and 
farms may still face specific unmet financing needs. Industry 
stakeholders indicate that it can be difficult to demonstrate that an 
activity meets both the size test and purpose test. Specifically, these 
stakeholders point to difficulty in demonstrating that the primary 
purpose of a loan or investment with a small business or small farm was 
to create, retain, and/or improve low- or moderate-income employment 
and note that this requirement eliminates consideration of some other 
loans to small businesses that are also high impact, such as loans that 
help small businesses purchase new equipment in order to improve 
efficiency of operations.
    Stakeholders generally indicate that more clarity is needed in the 
types of activities that will be considered to strengthen small 
business and small farms, though some stakeholders note

[[Page 33899]]

that the agencies should take a more flexible approach to defining the 
types of activities that qualify. Stakeholders also support qualifying 
workforce development for low- or moderate-income individuals 
regardless of the size of the business, as larger industries are a 
source of jobs for low- or moderate-income individuals.
2. Covering Small Business and Small Farm Loans Under the Evaluation of 
a Bank's Retail Lending Performance
    Under the proposal, a bank's loans to small businesses and small 
farms would be evaluated in the Retail Lending Test portion of the CRA 
examination. As discussed further in Section VIII regarding proposed 
Sec.  _.22 for the Retail Lending Test, the agencies are considering 
alternative size standards for defining small businesses and small 
farms that would differ from the SBA's size standards.\77\ 
Specifically, once CFPB section 1071 data is available, the agencies 
would transition from the current CRA definitions of small business and 
small farm loans to loans to small businesses and small farms with 
gross annual revenues of $5 million or less.\78\ In the interim, for 
purposes of evaluation under the Retail Lending Test, the agencies 
propose to use the current approach that evaluates small business and 
small farm loans using the Reports of Condition and Income (Call 
Report) definitions. This current approach captures loans of $1 million 
or less to businesses, and loans of $500,000 or less to farms, as 
reported in the Call Report.\79\
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    \77\ SBA regulations define ``small entities'' for banking 
purposes as entities with total assets of $600 million or less. See 
13 CFR 121.201 (Sector 52, Subsector 522). The agencies have 
requested permission from the SBA to use size standards for defining 
small businesses and small farms that differ from the SBA's size 
standards, as provided in 15 U.S.C. 632(a)(2)(C).
    \78\ This assumes the CFPB's section 1071 rulemaking is 
finalized as proposed with a ``small business'' defined as having 
gross annual revenues of $5 million or less.
    \79\ See 12 CFR _.12(v) (defining a small business loan as a 
loan included in ``loans to small businesses'' as defined in the 
instructions for preparation of the Call Report). See also 12 CFR 
_.12(w) (defining a small farm loan as a loan included in ``loans to 
small farms'' as defined in the instructions for preparation of the 
Call Report).
---------------------------------------------------------------------------

    Accordingly, the proposed economic development definition would not 
include a component to qualify a bank's loans to small businesses or 
small farms--apart from activities undertaken consistent with Federal, 
state, local, or tribal government plans, programs, or initiatives that 
support small businesses or small farms as those entities are defined 
in the plans, programs, or initiatives. With regard to economic 
development, the agencies currently evaluate businesses or farms that 
meet the size eligibility standards of the SBDC or SBIC programs (13 
CFR 121.301) or have gross annual revenues of $1 million or less, only 
if not reported as a small business loan or a small farm loan under the 
CRA.\80\ This would no longer be the case under the agencies' proposed 
economic development definition, since all reported lending for small 
businesses and small farms would be considered under the proposed 
Retail Lending Test.
---------------------------------------------------------------------------

    \80\ 12 CFR _.12(g)(3). Activities that promote economic 
development finance businesses and farms that meet the size 
eligibility standards of the SBDC or SBIC programs (13 CFR 121.301) 
or have gross annual revenues of $1 million or less.
---------------------------------------------------------------------------

    The proposal to include small business loans and small farm loans 
in the Retail Lending Test, instead of under the economic development 
definition, is intended to recognize that loans to small businesses and 
small farms are primarily retail loan products, and more appropriately 
considered under the Retail Lending Test, while emphasizing other 
activities to promote access to financing for small businesses and 
small farms under the economic development definition. As discussed in 
Section XVII, the agencies are proposing that intermediate banks retain 
flexibility to have certain retail loans--small business, small farm, 
and home mortgage loans--be considered as community development loans. 
This option would be available to an intermediate bank if those loans 
have a primary purpose of community development and are not required to 
be reported by the bank.
    Small business and small farm lending evaluated under the proposed 
Retail Lending Test would not have the accompanying requirement that 
these loans demonstrate job creation, retention, or improvement for 
low- or moderate-income areas or individuals, as is currently required 
for loans considered under the current criterion for economic 
development. As noted above, some stakeholders have reported having 
challenges demonstrating that activities satisfied this criterion, 
including demonstrating that jobs created or retained meaningfully 
benefit low- or moderate-income individuals and families. The agencies 
believe that this would appropriately broaden consideration of small 
business and small farm lending relative to the status quo, although it 
would involve a change of the test under which these loans would be 
considered.
    The agencies recognize that these changes would have a number of 
intersecting impacts on the activities considered under the economic 
development definition and evaluated in the Retail Lending Test. For 
example, loans to certain businesses that meet SBIC and SBDC size 
standards and are now covered community development loans might not 
qualify for CRA consideration under the proposal. For some types of 
businesses, the SBIC and SBDC size standards exceed gross annual 
revenues of $5 million; accordingly, loans to businesses that meet SBIC 
and SBDC size standards and have gross annual revenues exceeding $5 
million would no longer be covered community development loans. Under 
this scenario, these loans would also not be considered under the 
proposed Retail Lending Test.
    Another example of the impact from this change involves the 
existing job creation, retention, or improvement for low- or moderate-
income individuals standard. Compared to the volume of loans considered 
under the current economic development criteria, a greater volume of 
loans may be considered under the proposed Retail Lending Test as there 
would no longer be a requirement that loans to small businesses and 
small farms demonstrate job creation, retention, or improvement for 
low- or moderate-income individuals. The agencies recognize the 
critical importance of job creation as part of supporting local 
economies, and therefore seek feedback on the related proposals in both 
the Retail Lending Test and economic development definition sections.
    The agencies also seek feedback on whether to continue considering 
bank loans to small businesses and small farms that currently qualify 
under the economic development criteria as community development 
activities during the transition period before solely considering these 
loans under the Retail Lending Test.
3. Activities Aligned With Federal, State, Local, or Tribal Efforts
    The first prong of the proposed economic development definition 
includes activities undertaken consistent with Federal, state, local, 
or tribal government plans, programs, or initiatives that support small 
businesses or small farms as defined by these plans, programs, or 
initiatives. The current community development definitions do not 
include stand-alone criteria for economic development activities 
aligned with Federal, state, local, or tribal efforts. These activities 
are, however, referenced in the Interagency

[[Page 33900]]

Questions and Answers.\81\ Aligning economic development activities 
with government programs that address identified needs for small 
businesses and small farms can encourage coordination between banks, 
government agencies, and other program participants for activities that 
can be highly responsive to the unmet needs of communities.
---------------------------------------------------------------------------

    \81\ See, e.g., Q&A Sec.  _.12(g)(4)(i)-1 and Q&A Sec.  
_.12(g)(3)-1.
---------------------------------------------------------------------------

    In addition, this prong of the proposed definition specifies that 
lending to, investing in, or providing services to SBDCs, SBICs, New 
Markets Venture Capital Companies, qualified Community Development 
Entities, or U.S. Department of Agriculture Rural Business Investment 
Companies would qualify as economic development. The current regulation 
does not specifically address activities with these entities, but the 
Interagency Questions and Answers state that the agencies will presume 
that activities with these entities promote economic development.\82\ 
As a result, the proposal is intended to provide greater clarity and 
encourage the continued participation in, and support of, programs 
offered through these providers of small business and small farm 
financing.
---------------------------------------------------------------------------

    \82\ See Q&A Sec.  _.12(g)(3)-1.
---------------------------------------------------------------------------

    This prong of the proposed definition would not specify a gross 
annual revenue threshold of $5 million or under for the businesses or 
farms supported through these government plans, programs, or 
initiatives, or through the specified entities. Instead, this prong of 
the definition would leverage the size standards used by the respective 
government plans, programs, or initiatives. This would include using 
the standards established by SBDCs and SBICs for loans, investments, or 
services to these entities.
4. Support for Financing Intermediaries
    The second prong of the proposed economic development definition 
includes activities with financial intermediaries that increase access 
to capital for businesses or farms with gross annual revenues of $5 
million or less. The agencies propose using this same gross annual 
revenue standard to simplify the approach and to be consistent 
throughout the definition. The current regulation does not specifically 
address financing intermediaries that increase access to capital for 
small businesses and small farms, although both industry and community 
group stakeholders have stressed the importance of financial 
intermediaries, such as non-profit revolving loans funds, in providing 
access to financing for small businesses and small farms that are not 
ready for traditional bank financing. Examples of financial 
intermediaries include a Community Development Corporation that 
provides technical assistance to recently formed small businesses, or a 
CDFI that provides lending to support sustainability of small farms. 
The agencies propose to recognize the role of these financial 
intermediaries--which could include organizations, programs, and 
services--by including in the definition of economic development a 
component for activities that support financial intermediaries that 
lend to, invest in, or provide technical assistance to businesses or 
farms with gross annual revenues of $5 million or less.
5. Technical Assistance and Support Services for Small Businesses
    The third prong of the proposed economic development definition 
includes technical assistance activities to support businesses or farms 
with gross annual revenues of $5 million or less. This prong would also 
include providing services such as shared space, technology, or 
administrative assistance to businesses or farms with gross annual 
revenues of $5 million or less, or to organizations that have a primary 
purpose of supporting such businesses or farms. While these activities 
are not included in the current regulation, they are addressed in the 
Interagency Questions and Answers.\83\ In addition to reflecting 
current guidance, the agencies recognize that some small businesses and 
small farms may not be prepared to obtain traditional bank financing 
and may need technical assistance and other services in order to obtain 
credit in the future. Supporting these activities fills a gap in needed 
services for small businesses and small farms and plays a critical role 
in helping a small business and small farms grow and thrive.
---------------------------------------------------------------------------

    \83\ See Q&A Sec.  _.12(g)(3)-1.
---------------------------------------------------------------------------

6. Considering Workforce Development and Job Training Under Community 
Supportive Services
    The agencies are proposing that workforce development and job 
training programs, which are currently qualified as a component of 
economic development, would instead be considered under the proposed 
definition of community supportive services. The current regulations do 
not address workforce development and training programs, but the 
Interagency Questions and Answers provide that these activities should 
be considered under the economic development definition. Stakeholders 
have affirmed the critical importance of workforce development and job 
training programs for low- and moderate-income individuals or 
unemployed persons. However, stakeholders have also noted the 
limitations of current guidance, which requires economic development 
activities to be tied to a financing activity for a small business. To 
address this concern, the agencies propose to recognize workforce 
development activities under the new community supportive services 
definition. The agencies believe that while the economic development 
definition could include workforce development and job training 
activities, such activities are better aligned with the focus of the 
proposed community supportive services definition, which does not 
restrict the size of the business involved. The proposal for community 
supportive services is discussed in greater detail in Section III.D.
Request for Feedback
    Question 11. Would lending to small businesses and small farms that 
may also support job creation, retention, and improvement for low- or 
moderate-income individuals and communities be sufficiently recognized 
through the analysis of small business and small farm loans and the 
qualitative review in the Retail Lending Test?
    Question 12. During a transition period, should the agencies 
continue to evaluate bank loans to small businesses and small farms as 
community development activities until these loans are assessed as 
reported loans under the proposed Retail Lending Test?
    Question 13. Should the agencies retain a separate component for 
job creation, retention, and improvement for low- and moderate-income 
individuals under the economic development definition? If so, should 
activities conducted with businesses or farms of any size and that 
create or retain jobs for low- or moderate-income individuals be 
considered? Are there criteria that can be included to demonstrate that 
the primary purpose of an activity is job creation, retention, or 
improvement for low- or moderate-income individuals and that ensure 
activities are not qualified simply because they offer low wage jobs?

D. Community Supportive Services

    The agencies propose to replace ``community services,'' which is a 
type of activity that has a community development purpose under the 
current regulation, with a new definition of

[[Page 33901]]

``community supportive services.'' Proposed Sec.  __.13(d) defines 
community supportive services as general welfare activities that serve 
or assist low- or moderate-income individuals, such as childcare, 
education, workforce development and job training programs, health 
services, and housing services programs. In specifying these 
categories, the agencies' goal is to provide clearer standards in the 
regulation for identifying the kind of activities that qualify under 
the definition. The change in terminology from ``community services'' 
to ``community supportive services'' is intended to more clearly 
distinguish these activities from ``community development services,'' 
which the proposal generally defines in Sec.  __.25(d) as volunteer 
service hours that meet any one of the community development purposes.
1. Background
a. Current Approach to Community Services
    The CRA regulations currently define community development to 
include ``community services targeted to low- or moderate-income 
individuals,'' but the regulations do not further define community 
services.\84\ The Interagency Questions and Answers include examples of 
activities that qualify for consideration as community services, such 
as programs for low- or moderate-income youth, homeless centers, soup 
kitchens, healthcare facilities, domestic violence shelters, and 
alcohol and drug recovery programs serving low- or moderate-income 
individuals.\85\
---------------------------------------------------------------------------

    \84\ See 12 CFR _.12(g)(2).
    \85\ See Q&A Sec.  _&.12(t)-4; and Q&A Sec.  _.12(g)(2)-1.
---------------------------------------------------------------------------

b. Stakeholder Feedback on Community Services
    Stakeholders generally support continuing to target services to 
low- or moderate-income individuals, and various stakeholders have 
expressed support for including clear criteria in the regulation for 
determining whether a community service is targeted to low- or 
moderate-income individuals. In addition, some stakeholders have 
indicated that using a geographic proxy, such as an activity taking 
place in a low- or moderate-income census tract, should be sufficient 
to determine whether an activity is qualifying.
2. Defining Community Supportive Services
    As discussed above, and in order to increase clarity and 
consistency, the agencies propose to define community supportive 
services as general welfare activities that serve or assist low- or 
moderate-income individuals such as, but not limited to, childcare, 
education, workforce development and job training programs, health 
services and housing services programs. The agencies also propose to 
incorporate standards in the regulation to demonstrate that a community 
supportive services activity has a primary purpose of serving low- or 
moderate-income individuals.
    Specifically, the agencies propose building on current guidance by 
both clarifying and expanding upon a non-exclusive list of standards 
that banks can use to demonstrate that a program or organization 
primarily serves low- or moderate-income individuals. Examples in the 
proposal include services provided to students or their families at a 
school where the majority of students qualify for free or reduced-price 
meals under the U.S. Department of Agriculture's National School Lunch 
Program,\86\ and services that are targeted to individuals who receive 
or are eligible to receive Medicaid.\87\
---------------------------------------------------------------------------

    \86\ See USDA Food and Nutrition Service, National School Lunch 
Program, https://www.fns.usda.gov/nslp.
    \87\ See Medicaid.gov, Medicaid program, https://www.medicaid.gov/medicaid/index.html.
---------------------------------------------------------------------------

    Additionally, the agencies propose that an activity performed in 
conjunction with a qualified community development organization located 
in a low- or moderate-income census tract is a community supportive 
service given that these community-based organizations often serve the 
community where they are located. This change builds on an example 
currently included in the Interagency Questions and Answers to clarify 
within the definition the use of a geographic proxy to determine 
eligibility for activities.\88\
---------------------------------------------------------------------------

    \88\ See Q&A Sec.  _.12(g)(2)-1.
---------------------------------------------------------------------------

    In addition, as noted previously, the agencies propose to consider 
workforce development and job training program activities under the 
definition of community supportive services and not as a component of 
economic development. The inclusion of workforce development activities 
within the community supportive services definition helps clarify that 
activities that support workforce development programs would receive 
consideration if the program's participants are low- or moderate-income 
individuals, and would not consider the size of the business.

E. Redefining Revitalization and Stabilization Activities

    The agencies propose to replace the current revitalization and 
stabilization activities component of the community development 
definitions with six new categories of activities. The agencies intend 
for this new category of definitions to provide more clarity on the 
types of activities that qualify, and to better tailor the types of 
activities that qualify in different targeted geographies. Each of the 
categories focuses on place-based activities that benefit residents of 
targeted geographic areas: (i) Revitalization; (ii) essential community 
facilities; (iii) essential community infrastructure; (iv) recovery 
activities in designated disaster areas; (v) disaster preparedness and 
climate resiliency activities; and (vi) qualifying activities in Native 
Land Areas. These definitions are referred to collectively in this 
SUPPLEMENTARY INFORMATION as the place-based definitions.
    The proposed definitions for the first four of these categories--
revitalization activities undertaken with government plans, programs or 
initiatives; essential community facilities; essential community 
infrastructure; and recovery activities in designated disaster areas--
build upon the current regulation's revitalization and stabilization 
component of the community development definitions and related 
guidance. Each of the new categories would provide additional clarity 
by capturing a specific set of activities, rather than falling under 
one broad category, as is currently the case under the current 
regulation. In addition, the agencies propose adding two new categories 
to the place-based definitions that may qualify for CRA consideration: 
(i) Disaster preparedness and climate resiliency activities and (ii) 
activities in Native Land Areas. While disaster preparedness and 
climate resiliency activities, and activities in Native Land Areas are 
not specified under the current approach, some activities that would 
qualify under these new categories would also qualify under the current 
approach, either as revitalization and stabilization, or under other 
prongs.
    The six proposed place-based definitions share four common 
elements. First, each definition has a geographic focus (e.g., low- or 
moderate-income census tracts) where the activities must occur. Second, 
each definition has standardized eligibility criteria that require the 
activity to benefit local residents, including low- or moderate-income 
residents, of the targeted geographies. Third, each definition has the 
eligibility requirement that the activity must not displace or exclude 
low- or moderate-income residents in the targeted geography. Finally, 
each definition provides that the activity must be

[[Page 33902]]

conducted in conjunction with a government plan, program, or initiative 
that includes an explicit focus on benefitting the targeted geography. 
Together, these four common elements are intended to provide necessary 
clarity regarding the activities that may qualify for CRA credit, while 
maintaining sufficient flexibility. In addition, these four common 
elements are intended to ensure a strong connection between the 
activities and community needs.
1. Background
a. Current Approach to Revitalization and Stabilization
    Under the current regulation, the revitalization and stabilization 
activities component of the community development definitions is 
intended to encourage banks to direct additional resources toward 
comprehensive efforts to rebuild entire communities, rather than solely 
focusing on the needs of low- and moderate-income individuals in these 
communities. The current regulations define four types of eligible 
geographies where activities that revitalize or stabilize qualify: Low- 
or moderate-income geographies; distressed nonmetropolitan middle-
income geographies; underserved nonmetropolitan middle-income 
geographies; and designated disaster areas.\89\
---------------------------------------------------------------------------

    \89\ See 12 CFR __.12(g)(4).
---------------------------------------------------------------------------

    Current guidance states that revitalization and stabilization 
activities are those that help to ``attract new, or retain existing, 
businesses or residents'' in an eligible geography and qualifying 
activities are generally similar in eligible low- and moderate-income 
geographies, distressed nonmetropolitan middle-income geographies and 
designated disaster areas.\90\ In all targeted geographies, community 
facilities and infrastructure can be considered to the extent that 
these activities help to attract or retain residents or businesses. 
However, these activities are only explicitly noted in the guidance for 
underserved nonmetropolitan middle-income areas.\91\
---------------------------------------------------------------------------

    \90\ See Q&A Sec.  __.12(g)(4)(i)-1; Q&A Sec.  __.12(g)(4)(ii)-
2; and Q&A Sec.  __.12(g)(4)(iii) -3.
    \91\ See Q&A Sec.  __.12(g)(4)(iii)-4.
---------------------------------------------------------------------------

    Current guidance also states that an activity will be presumed to 
revitalize or stabilize a geography if the activity is consistent with 
a government plan for the revitalization or stabilization of the 
area.\92\ However, the standards in the guidance for the types of plans 
that can be used to determine eligibility are inconsistent.
---------------------------------------------------------------------------

    \92\ See Q&A Sec.  __.12(g)(4)(i)-1; Q&A Sec.  __.12(g)(4)(ii)-
2; and Q&A Sec.  __.12(g)(4)(iii)-3.
---------------------------------------------------------------------------

    The current guidance also varies for the different targeted 
geographies. For instance, in both distressed and undeserved 
nonmetropolitan middle-income geographies and designated disaster 
areas, the guidance specifies that examiners will consider all 
activities that revitalize or stabilize a geography but give greater 
weight to those activities that are most responsive to community needs, 
including needs of low- or moderate-income individuals or 
neighborhoods.\93\ However, in determining whether an activity 
revitalizes or stabilizes a low- or moderate-income geography, in 
absence of a Federal, state, local, or tribal government plan, guidance 
instructs examiners to evaluate activities based on the actual impact 
on the geography, if that information is available.\94\ The Interagency 
Questions and Answers do not further specify how to measure an 
activity's actual impact for a targeted geography, which may create 
varying interpretations. As a result, considering activities under the 
existing revitalization and stabilization definition can prove 
challenging to banks, community groups, and examiners alike due to 
these inconsistent criteria.
---------------------------------------------------------------------------

    \93\ See Q&A Sec.  __.12(g)(4)(ii)-2 and Q&A Sec.  
__.12(g)(4)(iii)-3.
    \94\ See Q&A Sec.  __.12(g)(4)(i)-1.
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b. Stakeholder Feedback on Revitalization and Stabilization
    Stakeholders have provided feedback on a number of issues related 
to the current revitalization and stabilization component of the 
community development definition. First, stakeholders have noted that 
current guidance does not provide sufficient upfront clarity about the 
range of activities that will be eligible for consideration or where 
the activities must occur to be considered. Various stakeholders also 
note the need for additional clarity in defining eligible 
revitalization and stabilization activities, while also maintaining 
flexibility to meet local needs and/or changing circumstances. Some 
stakeholders have also indicated that an illustrative list of 
qualifying revitalization and stabilization activity examples could 
help provide needed clarity.
    Second, some community group stakeholders have noted that not all 
qualifying activities with a revitalization and stabilization purpose 
benefit low- or moderate-income individuals or underserved communities. 
Various community stakeholders indicate that the agencies should update 
the revitalization and stabilization activities component so that 
qualifying activities primarily benefit low- or moderate-income 
residents of targeted, underserved geographies, noting that activities 
currently considered under revitalization and stabilization do not 
always provide direct benefit for low- or moderate-income individuals.
    Third, stakeholders have indicated varying levels of support for 
greater consistency regarding government plans to revitalize or 
stabilize a geography. Some stakeholders have stated that activities 
should not be required to align with a government plan, but that 
activities that do align with a government plan should receive 
automatic CRA consideration. Other stakeholders have stated opposition 
to placing great emphasis on a government plan as leading to more-or-
less automatic qualification of an activity, noting government plans 
vary widely, including in scope, purpose, level of community 
engagement, and the rigor of included criteria.
    Lastly, many stakeholders have supported providing consideration 
for activities related to disaster preparedness and climate resiliency. 
Some stakeholders supported evaluating these activities as essential 
infrastructure or within the broader category of revitalization 
activities. Community group stakeholders noted that low- and moderate-
income communities are particularly vulnerable to weather-related 
disasters and expressed that consideration for disaster preparedness 
and climate resiliency activities should be limited to activities that 
benefit low- or moderate-income individuals or census tracts. Other 
stakeholders expressed concerns that the qualifying definitions should 
not be broadened to include activities whose purpose is to mitigate 
climate change, such as carbon capture facilities.
2. Common Elements for Proposed Place-Based Definitions
    The agencies propose four common elements which would be required 
eligibility standards for each of the six place-based definitions. 
First, across all place-based definitions, the agencies propose 
targeted census tracts where activities would be eligible for 
consideration. Under this proposal, revitalization activities, 
essential infrastructure activities, essential community facilities 
activities, and disaster preparedness and climate resiliency activities 
would be eligible if they benefit residents of targeted census tracts. 
As set forth in proposed Sec.  __.12,

[[Page 33903]]

targeted census tracts include low- and moderate-income census tracts, 
as well as distressed or underserved nonmetropolitan middle-income 
census tracts. The proposed approach in Sec.  __.13 provides 
consistency on activities eligible across these targeted census tracts.
    Consistent with current guidance, the agencies are also proposing 
that recovery activities in designated disaster areas qualify in census 
tracts of all income levels, provided that the activities benefit 
residents in an area subject to a Federal Major Disaster Declaration, 
excluding Major Disaster Categories A and B. Qualified activities in 
Native Land Areas would be eligible in those geographies, as separately 
defined in proposed Sec.  __.12. The agencies' approach of defining 
geographic eligibility under this framework is intended to tailor the 
requirements for each definition, while maintaining the flexibility 
needed for diverse, local redevelopment needs.
    Second, the agencies propose that all place-based activities 
benefit or serve residents of the targeted census tract(s), including 
low- and moderate-income residents. Adding this specific eligibility 
requirement establishes the expectation that residents in targeted 
census tracts must benefit from the activity and is intended to provide 
greater certainty that an activity is responsive to community needs 
compared to the current approach that relies upon examiner judgment 
``to give greater weight to those activities that are most responsive 
to community needs'' in targeted geographies.\95\ For example, 
financing to support development of a new industrial park in 
conjunction with a city-sponsored revitalization plan would be eligible 
for CRA credit if it benefitted residents of the targeted census tracts 
by providing new employment opportunities, including for low- and 
moderate-income residents.
---------------------------------------------------------------------------

    \95\ See Q&A Sec.  __.12(g)(4)(i)-1; Q&A Sec.  __.12(g)(4)(ii)-
2; and Q&A Sec.  __.12(g)(4)(iii)-3.
---------------------------------------------------------------------------

    The agencies are not proposing that all place-based activities 
solely benefit or serve low- or moderate-income residents. Rather, the 
proposal seeks to maintain flexibility for activities to meet a range 
of community needs while also requiring the inclusion of low- or 
moderate-income residents as beneficiaries of an activity. Such 
flexibility is particularly important in distressed and underserved 
nonmetropolitan middle-income census tracts, which can have fewer low- 
or moderate-income residents.
    Third, the agencies propose that eligible place-based activities 
cannot lead to the displacement or exclusion of low- or moderate-income 
residents in targeted geographies. For example, if low- or moderate-
income individuals were not able to have access to or benefit from an 
activity, then the activity would not meet this part of the definition 
and would be ineligible for CRA credit. Likewise, as another example, 
if a project to build commercial development to revitalize an area 
involved demolishing housing occupied by low- or moderate-income 
individuals, then the activity would not meet this part of the 
definition and would be ineligible for CRA credit. In proposing these 
requirements, the agencies seek to ensure that qualifying activities do 
not have a detrimental effect on low- or moderate-income individuals or 
communities or on other underserved communities.
    Lastly, under the proposal, activities eligible under the place-
based community development definitions would need to be in conjunction 
with a government plan, program, or initiative that includes an 
explicit focus on benefitting the targeted census tracts. The current 
standard in Interagency Questions and Answers states that activities 
may qualify if consistent with the community's formal or informal plans 
for the revitalization and stabilization of a low- or moderate-income 
geography.\96\ In addition, under current guidance, activities are 
presumed to revitalize or stabilize a distressed nonmetropolitan 
middle-income area if the activity is consistent with a ``bona fide'' 
government revitalization or stabilization plan.\97\
---------------------------------------------------------------------------

    \96\ See Q&A Sec.  __.12(g)(4)(i)-1.
    \97\ See Q&A Sec.  __.12(g)(4)(iii)-3.
---------------------------------------------------------------------------

    The agencies' proposal to require activities eligible under the 
place-based community development definitions to be in conjunction with 
a government plan, program, or initiative is intended to achieve 
several objectives. First, this standard helps to ensure that the 
activity is responsive to identified community needs. Second, the 
proposed standard is intended to increase clarity, because all 
activities eligible under the place-based community development 
definitions would need to meet this criterion. Currently, standards 
vary across the targeted geographies and the reliance on a plan to 
demonstrate that an activity helps to attract or retain residents is 
used inconsistently.
    Third, the agencies' proposal is intended to provide flexibility, 
because it would allow consideration of an activity to be in 
conjunction with a government plan, program, or initiative. By 
including consideration for activities in conjunction with a program or 
initiative, in addition to a government plan, banks would have the 
flexibility to pursue responsive place-based activities that are in 
conjunction with a program or initiative even if not part of a plan. 
For example, a grant to support a park in a low-income census tract 
could qualify if it was in conjunction with a citywide initiative, or 
program, to expand greenspace in low- or moderate-income areas. 
Additionally, the standard of ``in conjunction with'' would provide 
greater clarity than provided under current guidance by expressly 
stating that an eligible activity must be included as part of a 
government plan, program, or initiative.
3. Revitalization Activities Undertaken With a Government Plan, 
Program, or Initiative
    The agencies are proposing a new place-based definition for 
activities undertaken in conjunction with a Federal, state, local, or 
tribal government plan, program, or initiative that includes an 
explicit focus on revitalizing or stabilizing targeted census tracts. 
While the goals of a plan, program or initiative could include 
stabilization or revitalization of other geographies, the plan, 
program, or initiative would also need to specifically include the 
targeted census tracts. Activities meeting this definition would need 
to meet the four common elements for place-based criteria described 
above. This definition incorporates some aspects of existing guidance 
for revitalization and stabilization but would no longer focus 
eligibility of activities on the extent that an activity helps to 
attract or retain residents or businesses in targeted geographies. 
Instead, activities would be eligible for consideration under this 
proposal if they are in conjunction with a plan, program, or initiative 
for the targeted geography, allowing for more comprehensive 
redevelopment goals. Additionally, conducting activities in conjunction 
with a government plan, program, or initiative provides a mechanism to 
ensure that activities are intentional and support articulated 
community revitalization goals.
    The agencies provide several examples in the proposed regulation 
that are drawn from current guidance to provide some clarity on the 
type of activities that could be considered under this definition. 
These examples include adaptive reuse of vacant or blighted buildings, 
brownfield redevelopment, or activities consistent with a plan for a 
business improvement district or main street program.

[[Page 33904]]

However, this list is not exhaustive, and the agencies' intent is to 
allow flexibility for qualifying activities to help meet a range of 
identified community needs.
    The agencies propose that housing-related activities would not be 
covered by the definition of revitalization activities. Under current 
guidance, activities that provide housing for middle-income and upper-
income individuals can qualify if the activities meet certain criteria 
and help to revitalize or stabilize a distressed or underserved 
nonmetropolitan middle-income geography or designated disaster 
area.\98\ However, some stakeholders have noted concerns that housing 
that benefits middle- or upper-income individuals, particularly in a 
low- or moderate-income census tract, can lead to displacement of 
existing residents. In addition, the agencies note that additional 
clarity would come from qualifying most housing-related community 
development activities in the affordable housing definition. The 
agencies recognize that housing activities are often components of 
government plans, programs, and initiatives to revitalize communities, 
and therefore seek feedback on whether housing-related revitalization 
activities should be considered under either the affordable housing 
definition or the revitalization activities definition and under what 
circumstances.
---------------------------------------------------------------------------

    \98\ See Q&A Sec.  __.12(g)(4)-2.
---------------------------------------------------------------------------

4. Essential Community Infrastructure and Essential Community 
Facilities
    The agencies propose creating separate definitions for essential 
community infrastructure and for essential community facilities that 
benefit or serve residents in one or more of the eligible targeted 
census tracts. Under proposed Sec.  __.13(f), activities that qualify 
as essential community infrastructure are those that provide financing 
or other support for such items as broadband, telecommunications, mass 
transit, water supply and distribution, and sewage treatment and 
collection systems. Activities that qualify as essential community 
facilities include those that finance or provide other support for 
public amenities in targeted areas. Illustrative examples of essential 
community facility activities include, but are not limited to, 
financing activities to support the development of schools, libraries, 
childcare facilities, parks, hospitals, healthcare facilities, and 
community centers. Similar to the other place-based definitions, the 
agencies specify that activities would need to be in conjunction with a 
Federal, state, local, or tribal government plan, program, or 
initiative with an explicit focus on benefitting a geographic area that 
includes the targeted census tracts. This proposal is intended to 
ensure that the activities have a clear objective of meeting needs in 
targeted communities.
    The proposal builds on the current Interagency Questions and 
Answers guidance to clarify that both essential community 
infrastructure activities and essential community facilities activities 
would be considered if they are conducted in and benefit or serve 
residents of low- or moderate-income census tracts, as well as 
distressed or underserved nonmetropolitan middle-income census tracts. 
Current guidance explicitly notes that these activities are eligible in 
underserved middle-income nonmetropolitan geographies, but these 
activities are only qualified in low- or moderate-income census tracts, 
distressed nonmetropolitan middle-income census tracts or designated 
disaster areas if they help attract or retain businesses or residents. 
Consequently, the current treatment of these activities in targeted 
geographies is inconsistent, and the agencies' proposal aims to provide 
more clarity and certainty for when these activities can be considered 
and to do so consistently across the different categories of targeted 
census tracts.
    The agencies' proposed requirements for all place-based 
definitions, described previously, is intended to ensure that any 
qualifying activity related to essential community infrastructure or 
essential community facilities benefits or serves residents of the 
eligible targeted census tracts, including low- or moderate-income 
residents. Several community stakeholders have raised concern that 
larger scale infrastructure projects can often provide limited benefits 
for targeted census tracts, especially for low- and moderate-income 
residents in these geographies. Under the agencies' proposal, such 
activities are eligible for consideration if there is a demonstrated 
benefit for the residents of the targeted census tracts and it is 
evident that low- or moderate-income residents would be beneficiaries 
of the activity and not be excluded from the larger-scale improvements. 
For example, a bank could purchase a bond to fund improvements for a 
city-wide water treatment project that is consistent with a city's 
capital improvement plan. This project would qualify if it benefits or 
serves residents in the eligible census tracts to a degree sufficient 
to meet the primary purpose standard and does not exclude low- or 
moderate-income residents. The agencies seek feedback on whether any 
additional criteria for infrastructure and essential community 
facilities would further ensure that activities include a benefit to 
low- or moderate-income residents in the communities served by these 
projects.
5. Recovery Activities in Designated Disaster Areas
    The agencies propose a definition for activities targeted to the 
recovery of designated disaster areas. The needs of these areas often 
differ from other targeted geographic areas, and the proposed 
definition is intended to more accurately and specifically describe 
eligible disaster recovery activities. The proposed definition includes 
activities that revitalize or stabilize geographic areas subject to a 
Major Disaster Declaration administered by the Federal Emergency 
Management Agency (FEMA). Consistent with current guidance, activities 
in designated disaster areas that meet this eligibility standard would 
be considered, regardless of the income level of the designated census 
tracts. The agencies believe activities that promote the recovery of 
designated disaster areas benefit the entire community, including, but 
not limited to, low- or moderate-income individuals and low- or 
moderate-income communities.
    To qualify under the proposed definition, a disaster recovery 
activity would need to be in conjunction with a Federal, state, local, 
or tribal government disaster plan that includes an explicit focus on 
the recovery of the geographic area. The proposed definition 
incorporates existing guidance that states an activity will be presumed 
to revitalize or stabilize a designated disaster area if the activity 
is consistent with a bona fide government revitalization or 
stabilization plan or disaster recovery plan.\99\ Examples of 
activities eligible under this definition include, but are not limited 
to, assistance with rebuilding infrastructure and other community 
services, financing to retain businesses that employ local residents, 
and recovery-related housing or financial assistance to individuals in 
the designated disaster areas. Additionally, although activities in all 
census tract income-levels would be considered, these activities would 
need to be responsive to community needs, including low- or moderate-
income community needs, and could not displace or exclude low- or

[[Page 33905]]

moderate-income residents of designated disaster areas.
---------------------------------------------------------------------------

    \99\ See Q&A Sec.  __.12(g)(4)(ii)-2.
---------------------------------------------------------------------------

    The agencies considered whether the definition of a designated 
disaster area should include any FEMA disaster declaration, including 
areas receiving Categories A and B assistance. However, the agencies 
believe that activities covered under Categories A and B are generally 
short-term recovery activities that would significantly expand the 
number of designated disaster areas where activities could be 
considered without providing long-term benefits to impacted 
communities. Therefore, the agencies propose to retain the definition 
of designated disaster areas included in the Interagency Questions and 
Answers and propose that exceptions be considered, such as the disaster 
declarations for the COVID-19 pandemic, on a case-by-case basis.
6. Disaster Preparedness and Climate Resiliency Activities
    The agencies propose a definition for disaster preparedness and 
climate resiliency activities that is separate from the recovery 
activities in the designated disaster areas category that exists under 
the current CRA framework. The proposed definition focuses on 
activities that assist individuals and communities to prepare for, 
adapt to, and withstand natural disasters, weather-related disasters, 
or climate-related risks. The proposal would encompass activities in 
low- or moderate-income census tracts, as well as distressed and 
underserved nonmetropolitan middle-income census tracts. To be 
eligible, the proposed disaster preparedness and climate resiliency 
definition would require these activities to be conducted in 
conjunction with a government plan, program, or initiative that is 
focused on disaster preparedness or climate resiliency that includes an 
explicit focus on benefitting a geographic area that includes the 
targeted census tracts.
a. Background
    There is growing evidence that highlights the ways in which lower-
income households and communities are especially vulnerable to the 
impact of natural disasters and weather-related disasters, as well as 
climate-related risks.\100\ Low- and moderate-income communities are 
more likely to be located in areas or buildings that are particularly 
vulnerable to disasters or climate-related risks, such as storm shocks 
or drought.\101\ Since residents of affordable housing are more likely 
to be low-income, and affordable housing tends to be older and of 
poorer quality, low- and moderate-income households are more likely to 
have housing that is susceptible to disaster-related damage.\102\ 
Additionally, lower-income households tend to have fewer financial 
resources, making them less resilient to the temporary loss of income, 
property damage, displacement costs, and health challenges they face 
from disasters.\103\ Finally, low- and moderate-income communities are 
often disproportionately affected by the health impacts associated with 
natural disasters and climate-related events.\104\
---------------------------------------------------------------------------

    \100\ Federal Reserve Bank of New York, ``Reducing Climate Risk 
for Low-Income Communities,'' news release, (Nov. 19, 2020), https://www.newyorkfed.org/newsevents/events/regional_outreach/2020/1119-2020; Jesse M. Keenan and Elizabeth Mattiuzzi, ``Climate Adaptation 
Investment and the Community Reinvestment Act,'' Community 
Development Research Briefs (June 16, 2019), https://www.frbsf.org/community-development/publications/community-development-research-briefs/2019/june/climate-adaptation-investment-and-the-community-reinvestment-act/.
    \101\ Eleanor Kruse and Richard V. Reeves, Brookings 
Institution, ``Hurricanes hit the poor the hardest,'', (Sept. 18, 
2017), https://www.brookings.edu/blog/social-mobility-memos/2017/09/18/hurricanes-hit-the-poor-the-hardest/; U.S. Global Research 
Program, Fourth National Climate Assessment, Volume II: Impacts, 
Risks, and Adaptation in the United States (Washington, DC: U.S. 
Global Change Research Program, 2018), https://nca2018.globalchange.gov/; Bev Wilson, Journal of the American 
Planning Association, Volume 86, 2020--Issue 4, ``Urban Heat 
Management and the Legacy of Redlining'' (2020), https://www.tandfonline.com/doi/full/10.1080/01944363.2020.1759127.
    \102\ Maya K. Buchanan et al., Environ. Res. Lett. 15 124020 
(2020), ``Sea level rise and coastal flooding threaten affordable 
housing,'' https://iopscience.iop.org/article/10.1088/1748-9326/abb266.
    \103\ U.S. Global Research Program, Fourth National Climate 
Assessment, Volume II: Impacts, Risks, and Adaptation in the United 
States (Washington, DC: U.S. Global Change Research Program, 2018), 
https://nca2018.globalchange.gov/; Patrick Sisson, Bloomberg, ``In 
Many Cities, Climate Change Will Flood Affordable Housing'' (Dec. 1, 
2020), https://www.bloomberg.com/news/articles/2020-12-01/how-climate-change-is-targeting-affordable-housing; and Eleanor Kruse 
and Richard V. Reeves, Brookings Institution, ``Hurricanes hit the 
poor the hardest,'' (Sept. 18, 2017), https://www.brookings.edu/blog/social-mobility-memos/2017/09/18/hurricanes-hit-the-poor-the-hardest/.
    \104\ Eleanor Kruse and Richard V. Reeves, ``Hurricanes hit the 
poor the hardest,'' Brookings Institution (Sept. 18, 2017), https://www.brookings.edu/blog/social-mobility-memos/2017/09/18/hurricanes-hit-the-poor-the-hardest/; U.S. Global Research Program, Fourth 
National Climate Assessment, Volume II: Impacts, Risks, and 
Adaptation in the United States (Washington, DC: U.S. Global Change 
Research Program, 2018), https://nca2018.globalchange.gov/.
---------------------------------------------------------------------------

    To date, the agencies' CRA regulations have allowed CRA credit for 
certain activities that help communities, including low- or moderate-
income communities, recover from natural disasters. Under the current 
CRA framework, banks can receive consideration for activities that help 
to revitalize and stabilize designated disaster areas, such as 
financial assistance for services to individuals who have been 
displaced from designated disaster areas, and financial assistance for 
rebuilding needs.\105\ On a limited basis, activities that help 
designated disaster areas mitigate the impact of future disasters may 
be considered under CRA if Hazard Mitigation Assistance is included in 
the FEMA disaster declaration.\106\ Outside of activities related to 
disaster recovery, current CRA guidance provides that consideration 
will be given for loans financing renewable energy facilities or 
energy-efficient improvements in either affordable housing or community 
facilities that otherwise meet the existing definition of community 
development.\107\ Current guidance does not explicitly include 
activities related to helping low- or moderate-income individuals, low- 
or moderate-income communities, small businesses, or small farms 
prepare for disasters or build resilience to future climate-related 
events.
---------------------------------------------------------------------------

    \105\ See Q&A Sec.  __.12(g)(4)(ii)-2.
    \106\ See FEMA, How A Disaster Gets Declared, https://www.fema.gov/disaster/how-declared.
    \107\ See Q&A Sec.  __.12(h)-1.
---------------------------------------------------------------------------

b. Defining Disaster Preparedness and Climate Resiliency Activities
    Under the proposed definition, disaster preparedness and climate 
resiliency activities are defined as activities that assist individuals 
and communities to prepare for, adapt to, and withstand natural 
disasters, weather-related disasters, or climate-related risks. The 
proposed definition would encompass activities that help low- or 
moderate-income individuals and communities proactively prepare for or 
mitigate the effect of disasters and climate-related risks, for 
example, earthquakes, severe storms, droughts, flooding, and forest 
fires.
    Examples of eligible activities could include, but would not be 
limited to, developing financial products and services that help 
residents, small businesses, and small farms in targeted geographies 
prepare for and withstand the impact of future disasters; supporting 
the establishment of flood control systems in a flood prone low- or 
moderate-income or underserved or distressed nonmetropolitan middle-
income census tract; and retrofitting affordable housing to withstand 
future disasters or climate-related events. Additional examples of 
qualifying activities could include, but would not be limited to: 
Promoting green space in low- or moderate-income census tracts

[[Page 33906]]

in order to mitigate the effects of extreme heat, particularly in urban 
areas; energy efficiency improvements to community facilities that 
lower energy costs; financing community centers that serve as cooling 
or warming centers in low- or moderate-income census tracts that are 
more vulnerable to extreme temperatures; infrastructure to protect 
targeted geographies from the impact of rising sea levels; and 
assistance to small farms to adapt to drought challenges.
    Similar to the other place-based definitions, disaster preparedness 
and climate resiliency activities would need to meet the required 
common elements specified in proposed Sec.  _.13(e). To ensure that a 
range of activities qualify for consideration, the agencies have 
proposed a comprehensive definition of disaster preparedness and 
climate resiliency activities; however, the agencies recognize that 
there may be overlap between the various components of the definition. 
For example, a loan to help develop a levee to prevent flooding in a 
moderate-income community could qualify as either a preparation to 
withstand a natural disaster or to adapt to climate-related risks.
    The agencies intend that some energy efficiency activities would be 
eligible under the proposed definition for activities that help low- or 
moderate-income individuals and communities proactively prepare for, 
adapt to, or withstand natural disasters, weather-related disasters, or 
climate-related risks. As noted earlier, under current guidance, 
consideration could be given for loans that finance energy-efficient 
improvements in either affordable housing or community facilities that 
otherwise meet the existing definition of community development. Such 
activities may help lower utility costs, therefore making housing more 
affordable to low- and moderate-income individuals and lowering 
operating expenses for needed community facilities. Examples include, 
but are not limited to, weatherization upgrades to affordable housing 
in a targeted census tract, new and more efficient heating and air-
cooling systems, or new energy efficient appliances. The agencies seek 
feedback on whether certain activities that support energy efficiency 
should be included as an explicit component of the proposed disaster 
preparedness and climate resiliency definition. Alternatively, the 
agencies seek feedback on whether these activities should be included 
when appropriate in other definitions, such as affordable housing and 
community facilities. Additionally, the agencies seek feedback on 
whether there should be energy efficiency standards for determining 
whether an activity provides a sufficient benefit to targeted census 
tracts, including low- or moderate-income residents.\108\
---------------------------------------------------------------------------

    \108\ See 12 CFR 1282.34(d)(2) and (d)(3). For example, under 
its Duty to Serve regulation, the FHFA sets a standard that energy 
or water efficiency improvements must reduce energy or water 
consumption by at least 15 percent and that these energy 
efficiencies generated over an improvement's expected life will 
exceed the cost of installation.
---------------------------------------------------------------------------

    The agencies also seek feedback on the extent to which energy-
related activities that would benefit residents in targeted census 
tracts should be considered as part of a disaster preparedness and 
climate resiliency definition. Although distinct from projects that 
focus on energy-efficiency improvements to housing or other buildings, 
some stakeholders suggest that focusing on access to renewable energy 
could also provide important benefits to targeted communities. Under 
the proposed definition an example of such a qualifying project could 
include, but would not be limited to, battery storage projects in low- 
and moderate-income areas with high flood or wind risk, thereby 
reducing risks of power loss due to flooding and high winds. However, 
the agencies do not intend that the proposed definition would include 
utility-scale projects.
    The agencies seek feedback on whether the discussion above captures 
the range of activities that promote disaster preparedness and climate 
resiliency, and are appropriately tailored to meet the needs in low- 
and moderate-income communities and distressed or underserved 
nonmetropolitan middle-income areas.
    In order for an activity to be eligible under this definition, the 
agencies propose that an activity must benefit or serve residents of 
targeted census tracts--specifically, low- or moderate-income census 
tracts, as well as distressed and underserved nonmetropolitan middle-
income census tracts. The agencies considered whether eligibility for 
disaster preparedness and climate resiliency activities should extend 
to designated disaster areas. Activities related to disaster recovery, 
which can also include some activities to mitigate the impact of future 
disasters, would still be considered in all designated disaster areas. 
However, the agencies intend to provide eligibility for disaster 
preparedness and climate resiliency activities in geographic areas with 
more limited resources to prepare for, adapt to, and withstand natural 
disasters, weather-related disasters, or climate-related risks. 
Therefore, the agencies propose to limit consideration to activities 
conducted in low- or moderate-income census tracts and distressed or 
underserved nonmetropolitan middle-income census tracts.
    The agencies also seek feedback on whether the disaster 
preparedness and climate resiliency definition should include a 
separate prong that specifically focuses on activities that benefit 
low- or moderate-income individuals. Incorporating a separate prong of 
the definition for low- or moderate-income individuals would allow 
consideration in all communities for certain activities that are tied 
specifically to assisting low- or moderate-income individuals, and not 
just those in targeted geographies. For example, this could include 
activities that help low- or moderate-income individuals in any 
community with weatherization improvements or to establish savings 
accounts to mitigate the impact from future disasters. The agencies 
seek feedback on this option, as well as the types of activities that 
would be appropriate to consider under this prong.
    Similar to the other place-based definitions, the agencies propose 
that disaster preparedness and climate resiliency activities must be in 
conjunction with a Federal, state, local, or tribal government plan, 
program, or initiative that includes an explicit focus on benefitting a 
geographic area that includes the targeted census tracts. This proposal 
is intended to ensure that the activities have a clear objective of 
meeting needs in targeted communities. However, the agencies recognize 
that disaster preparedness or climate resiliency plans or programs may 
not be in place for some targeted communities. Additionally, some 
government plans may not be specifically focused on disaster 
preparation or climate resiliency. Therefore, the agencies seek 
feedback on whether a plan, program, or initiative provides sufficient 
standards around what kinds of activities benefit targeted census 
tracts and should qualify for CRA purposes. The agencies also seek 
feedback on whether there are other options to determine whether 
disaster preparedness and climate resiliency activities are 
appropriately targeted.
Request for Feedback
    Question 14. Should any or all place-based definition activities be 
required to be conducted in conjunction with a government plan, 
program, or initiative and include an explicit focus of benefitting the 
targeted census tract(s)?

[[Page 33907]]

If so, are there appropriate standards for plans, programs, or 
initiatives? Are there alternative options for determining whether 
place-based definition activities meet identified community needs?
    Question 15. How should the proposals for place-based definitions 
focus on benefitting residents in targeted census tracts and also 
ensure that the activities benefit low- or moderate-income residents? 
How should considerations about whether an activity would displace or 
exclude low- or moderate-income residents be reflected in the proposed 
definitions?
    Question 16. Should the agencies include certain housing activities 
as eligible revitalization activities? If so, should housing activities 
be considered in all, or only certain, targeted geographies, and should 
there be additional eligibility requirements for these activities?
    Question 17. Should the agencies consider additional requirements 
for essential community infrastructure projects and essential community 
facilities to ensure that activities include a benefit to low- or 
moderate-income residents in the communities served by these projects?
    Question 18. Should the agencies consider any additional criteria 
to ensure that recovery of disaster areas benefits low- or moderate-
income individuals and communities?
    Question 19. Does the disaster preparedness and climate resiliency 
definition appropriately define qualifying activities as those that 
assist individuals and communities to prepare for, adapt to, and 
withstand natural disasters, weather-related disasters, or climate-
related risks? How should these activities be tailored to directly 
benefit low- or moderate-income communities and distressed or 
underserved nonmetropolitan middle-income areas? Are other criteria 
needed to ensure these activities benefit low- or moderate-income 
individuals and communities?
    Question 20. Should the agencies include activities that promote 
energy efficiency as a component of the disaster preparedness and 
climate resiliency definition? Or should these activities be considered 
under other definitions, such as affordable housing and community 
facilities?
    Question 21. Should the agencies include other energy-related 
activities that are distinct from energy-efficiency improvements in the 
disaster preparedness and climate resiliency definition? If so, what 
would this category of activities include and what criteria is needed 
to ensure a direct benefit to the targeted geographies?
    Question 22. Should the agencies consider utility-scale projects, 
such as certain solar projects, that would benefit residents in 
targeted census tracts as part of a disaster preparedness and climate 
resiliency definition?
    Question 23. Should the agencies include a prong of the disaster 
preparedness and climate resiliency definition for activities that 
benefit low- or moderate-income individuals, regardless of whether they 
reside in one of the targeted geographies? If so, what types of 
activities should be included under this prong?
    Question 24. Should the agencies qualify activities related to 
disaster preparedness and climate resiliency in designated disaster 
areas? If so, are there additional criteria needed to ensure that these 
activities benefit communities with the fewest resources to address the 
impacts of future disasters and climate-related risks?

F. Activities With MDIs, WDIs, LICUs, and CDFIs

    The agencies are seeking ways to strengthen CRA provisions to 
support MDIs, WDIs, LICUs, and Treasury Department-certified CDFIs. To 
emphasize such activity, the agencies propose several provisions 
related to activities with these entities.
1. Background
a. Current Treatment of MDIs, WDIs, LICUs, and CDFIs
    Under the CRA statute, nonminority- or nonwomen-owned financial 
institutions can receive CRA credit for capital investment, loan 
participation, and other ventures in cooperation with MDIs, WDIs,\109\ 
and LICUs, provided that these activities help meet the credit needs of 
local communities in which such institutions and credit unions are 
chartered. These activities need not also benefit a bank's assessment 
areas or the broader statewide or regional area that includes the 
bank's assessment areas.
---------------------------------------------------------------------------

    \109\ The terms minority-owned financial institution and women-
owned financial institution are not defined in the CRA statute. See 
12 U.S.C. 2903(b). The CRA statute does define similar terms for 
minority depository institution (MDI) and women's depository 
institution (WDI) for purposes of the branch-related activities 
referenced in 12 U.S.C. 2907(a). This SUPPLEMENTARY INFORMATION uses 
MDI and WDI unless it is necessary to use the terms minority-owned 
financial institution or women-owned financial institution for 
clarity.
---------------------------------------------------------------------------

b. Stakeholder Feedback on MDIs, WDIs, LICUs, and CDFIs
    Stakeholders have noted that CRA activities through bank 
partnerships with MDIs, WDIs, LICUs, and CDFIs are key in helping to 
meet the credit needs of low- or moderate-income individuals and 
communities. Stakeholders have supported a stronger emphasis on 
community development financing and services that support these 
institutions, including equity investments, long-term debt financing, 
technical assistance, and contributions to non-profit affiliates. Some 
stakeholders have suggested the need to increase certainty surrounding 
the treatment of activities in partnership with MDIs, WDIs, LICUs, and 
CDFIs. For example, stakeholders have noted that examiners may require 
extensive documentation that a CDFI assists low-income populations, 
even though CDFI certification by the Treasury Department is an 
indication of having a mission of community development.\110\ To 
provide a stronger incentive and reduce burden, most stakeholders 
support conferring automatic CRA community development consideration 
for community development activities with Treasury Department-certified 
CDFIs.
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    \110\ See Treasury Department, Community Financial Institutions 
Fund, CDFI Certification, https://www.cdfifund.gov/programs-training/certification/cdfi.
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2. Activities Related to MDIs, WDIs, LICUs, and Treasury Department-
Certified CDFIs
    The agencies propose a definition in Sec.  _.13 specific to MDIs, 
WDIs, LICUs, and Treasury Department-certified CDFIs. In addition, in 
Sec.  _.12, the proposal defines the term MDI in two ways. For purposes 
of a bank engaging in an activity described in 12 U.S.C. 2907(a) (i.e., 
a bank that donates, sells on favorable terms, or makes certain 
branches available on a rent-free basis to an MDI), the proposal 
defines MDI by cross-reference to the definition of the term in 12 
U.S.C. 2907(b)(1). Section 2907(b)(1) states that an MDI is a 
depository institution (as defined in 12 U.S.C. 1813(c)) in which (i) 
more than 50 percent of the ownership or control is held by one or more 
minority individuals and (ii) more than 50 percent of the net profit or 
loss of which accrues to one or more minority individuals).\111\ For 
all other purposes, the proposal defines an MDI as a bank that (i) 
meets the 12 U.S.C. 2907(b)(1) definition; (ii) is an MDI as defined in 
section 308 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (FIRREA) (12 U.S.C. 1463 note);

[[Page 33908]]

or (iii) is considered to be a MDI by the appropriate Federal banking 
agency. The agencies based the second part of the definition on 12 
U.S.C. 4703a(a)(6).\112\
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    \111\ Two sections of the CRA statute reference minority- and 
women-owned institutions: 12 U.S.C. 2903(b) and 12 U.S.C. 2907. 
However, these sections use different terms for these institutions 
(e.g., 12 U.S.C. 2903(b) uses the term ``minority- and women-owned 
financial institutions'' and 12 U.S.C. 2907 uses the terms 
``minority depository institution'' and ``women's depository 
institution''). Note that the definitions in the CRA statute apply 
only to the activities referenced in 12 U.S.C. 2907.
    \112\ Under 12 U.S.C. 4703a(a)(6), the term ``minority 
depository institution'' means an entity that is (1) an MDI, as 
defined in section 308 of the FIRREA (12 U.S.C. 1463 note); (2) 
considered to be an MDI by (i) the appropriate Federal banking 
agency or (ii) the National Credit Union Administration, in the case 
of an insured credit union; or (3) listed in the FDIC's Minority 
Depository Institutions List published for the Third Quarter 2020. 
In this proposal, the agencies did not include insured credit unions 
designated by the National Credit Union Administration as MDIs but 
are seeking feedback on whether they should be included. In 
addition, the proposal does not include the FDIC's Minority 
Depository Institutions List published for the third quarter of 2020 
because it reflects a point in time and the list is updated 
regularly.
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    By recognizing these two contexts, the proposal both ensures 
consistency with the CRA statute and provides flexibility for each 
agency to define MDI as it determines appropriate. Specifically, the 
proposal limits the definition of MDI to the definition in 12 U.S.C. 
2907 where required by the CRA statute and includes a broader 
definition where legally permissible, namely for other activities 
conducted in cooperation with ``minority- and women-owned financial 
institutions'' (as described in 12 U.S.C. 2903(b)). By including both 
parts of the definition, the proposal would ensure that activities 
conducted in cooperation with banks owned by minority individuals 
receive consideration and provide consideration for activities 
conducted in cooperation with banks that the agencies have long 
considered to be MDIs.\113\ Although 12 U.S.C. 2903(b) only references 
banks owned by minority individuals, the agencies believe including 
other banks designated by the agencies as MDIs in the definition is 
appropriate in light of the characteristics of these banks and the 
communities they serve. In addition, including all banks designated by 
the agencies as MDIs in the proposed definition would provide 
consistency between the CRA regulatory framework and the agencies' 
other policies and initiatives.
---------------------------------------------------------------------------

    \113\ See OCC, News Release 2013-94, ``Comptroller Curry Tells 
Minority Depository Institutions OCC Rules Make It Easier for 
Minority Institutions to Raise Capital,'' Policy Statement on 
Minority National Banks and Federal Savings Associations (June 13, 
2013), https://www.occ.gov/news-issuances/news-releases/2013/nr-occ-2013-94.html (permits banks that no longer meet the minority 
ownership requirement to continue to be considered minority 
depository institutions if they serve a predominantly minority 
community); Board, SR 21-6/CA 21-4: ``Highlighting the Federal 
Reserve System's Partnership for Progress Program for Minority 
Depository Institutions and Women's Depository Institutions'' (Mar, 
5, 2021), https://www.federalreserve.gov/supervisionreg/srletters/SR2106.htm (permits designation as a minority depository institution 
if the majority of a bank's board of directors consists of minority 
individuals and the community that the bank serves is predominantly 
minority); and FDIC, Statement of Policy Regarding Minority 
Depository Institutions (June 15, 2021), https://www.fdic.gov/regulations/laws/rules/5000-2600.html#fdic5000policyso (permits 
designation as a minority depository institution if a majority of 
the bank's board of directors consists of minority individuals and 
the community that the bank serves is predominantly minority).
---------------------------------------------------------------------------

    The proposal defines WDI by cross-reference to the definition of 
the term in 12 U.S.C. 2907(b)(2) (a depository institution (as defined 
in 12 U.S.C. 1813(c)) in which (i) more than 50 percent of the 
ownership or control is held by one or more women; (ii) more than 50 
percent of the net profit or loss of which accrues to one or more 
women; and (iii) a significant percentage of senior management 
positions are held by women). An alternative definition option is 
unnecessary because none of the agencies define the WDI in a way that 
differs from the 12 U.S.C. 2907(b)(2) definition. For example, in SR 
21-6 (Highlighting the Federal Reserve System's Partnership for 
Progress Program for Minority Depository Institutions and Women's 
Depository Institutions), the Board defines WDI by cross-reference to 
the 12 U.S.C. 2907(b)(2) definition.\114\
---------------------------------------------------------------------------

    \114\ SR 21-6/CA 21-4 (Mar. 5, 2021), https://www.federalreserve.gov/supervisionreg/srletters/SR2106.htm. See also 
FDIC (June 15, 2021), https://www.fdic.gov/regulations/laws/rules/5000-2600.html#fdic5000policyso; OCC, News Release 2013-94 (June 11, 
2013), https://www.occ.treas.gov/static/licensing/form-minority-owned-policy.pdf (including depository institutions that are owned 
by women in the OCC's definition of MDI but not specifically 
defining WDI in its Policy Statement on Minority National Banks and 
Federal Savings Associations).
---------------------------------------------------------------------------

    The agencies propose two other changes to the regulation involving 
MDIs, WDIs, LICUs, and CDFIs. First, investments, loan participations, 
and other ventures undertaken by any bank, including by MDIs and WDIs, 
in cooperation with other MDIs, other WDIs, or LICUs, would be 
considered.
    The agencies also seek feedback on whether activities undertaken by 
an MDI or WDI to promote its own sustainability and profitability 
should qualify for consideration. Under this approach, eligibility 
could be limited to activities that demonstrate meaningful investment 
in the MDI or WDI's business, such as improving internal technology and 
systems, hiring new staff, opening a new branch, or expanding product 
offerings. Allowing these activities to qualify could encourage new 
investments to bolster the financial positions of these banks, allowing 
them to deploy additional resources to help meet the credit needs of 
their communities. Under this alternative, the agencies also seek 
feedback on specific eligibility criteria to ensure investments by MDIs 
or WDIs in themselves would ultimately benefit low- or moderate-income 
and other underserved communities.
    Second, regarding CDFIs, the agencies propose that all activities 
with Treasury Department-certified CDFIs would be eligible CRA 
activities. Specifically, lending, investment, and service activities 
by any bank undertaken in connection with a Treasury Department-
certified CDFI, at the time of the activity, would be presumed to 
qualify for CRA credit given these organizations would need to meet 
specific criteria to prove that they have a mission of promoting 
community development and provide financial products and services to 
low- or moderate-income individuals and communities. The agencies 
propose that activities undertaken by any bank in connection with a 
non-Treasury Department-certified CDFI could also qualify for CRA 
consideration if the activity separately met the defined eligibility 
criteria of a different prong of the community development definition. 
For example, a bank activity with a non-Treasury Department-certified 
CDFI to finance a rental housing project that serves low- or moderate-
income individuals using a state subsidy program would qualify by 
meeting a prong of the affordable housing definition.
Request for Feedback
    Question 25. Should the agencies also include in the MDI definition 
insured credit unions considered to be MDIs by the National Credit 
Union Administration?
    Question 26. Should the agencies consider activities undertaken by 
an MDI or WDI to promote its own sustainability and profitability? If 
so, should additional eligibility criteria be considered to ensure 
investments will more directly benefit low- and moderate-income and 
other underserved communities?

G. Financial Literacy

    The agencies propose a separate definition for activities that 
assist individuals and families, including low- and moderate-income 
individuals and families, to make informed financial decisions 
regarding managing income, savings, credit, and expenses, including 
with respect to homeownership. Under the proposed rule, a bank would 
receive consideration for these activities without regard to the income 
level of the beneficiaries.

[[Page 33909]]

1. Background
    Current Approach. Under current guidance, eligible financial 
services, education, and housing counseling activities are included as 
examples of community development services.\115\ These activities must 
be targeted to low- or moderate-income individuals, such as financial 
education in a school where the majority of students receive free or 
reduced-price lunch or a housing counseling program in a low-income 
neighborhood.\116\
---------------------------------------------------------------------------

    \115\ See Q&A Sec.  _.12(i)-3.
    \116\ See Q&A Sec.  _.12(h)-8.
---------------------------------------------------------------------------

    Stakeholder Feedback. Many industry stakeholders have expressed 
support for expanding consideration of financial education and housing 
counseling to include activities that benefit all income levels, as 
these activities can provide benefit to the financial well-being of an 
entire community. These stakeholders have noted that the need for 
financial education also exists for seniors, veterans, rural 
communities, and other groups of people of all income levels, including 
low- or moderate-income individuals. In addition, because financial 
literacy and housing counseling are, in practice, primarily delivered 
to low- or moderate-income individuals, some stakeholders have stated 
that the need to obtain income documentation may be less important.
    Alternatively, many community group stakeholders have opposed 
expanding consideration of financial education and housing counseling 
to include activities that benefit all income levels. Some of these 
stakeholders have expressed concern that expanding financial education 
and housing counseling activities to recipients of all income levels 
will result in a reduction in programs directly benefiting low- or 
moderate-income individuals and communities.
2. Activities Related to Financial Literacy
    The agencies propose to recognize financial literacy activities 
that assist individuals and families, including low- or moderate-income 
individuals and families, to make informed financial decisions 
regarding managing income, savings, credit, and expenses, including 
with respect to homeownership.\117\ This expansion would limit the need 
to track income levels of participants taking part in financial 
literacy activities, which is sometimes difficult to obtain for persons 
who are not already loan customers of banks.
---------------------------------------------------------------------------

    \117\ See Marina L. Myhre and Nicole Elsasser Watson, ``Housing 
Counseling Works,'' HUD, Office of Policy Development and Research 
(Sept. 2017), https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Counseling-Works.pdf.
---------------------------------------------------------------------------

    Under this proposal, for example, a financial planning seminar with 
senior citizens or a financial education program for children in a 
middle-income school district would qualify for consideration. However, 
qualifying activities could not be targeted to, or solely benefit, 
middle- and upper-income individuals or families in order to be 
consistent with the intent of CRA to serve the credit needs of all 
communities, including low- and moderate-income communities. Therefore, 
these activities would need to benefit and provide needed services to 
the entire community, including low- or moderate-income individuals and 
families.
Request for Feedback
    Question 27. Should consideration of financial literacy activities 
expand to include activities that benefit individuals and families of 
all income levels, including low- and moderate-income, or should 
consideration be limited to activities that have a primary purpose of 
benefiting low- or moderate-income individuals or families?

H. Activities in Native Land Areas

    The agencies propose a new definition of qualifying activities in 
Native Land Areas in Sec.  _.13(l) for community development activities 
related to revitalization, essential community facilities, essential 
community infrastructure, and disaster preparedness and climate 
resiliency that are specifically targeted to and conducted in Native 
Land Areas (which is separately defined in proposed Sec.  _.12). The 
Native Land Areas proposed definition in Sec.  _.12 leverages other 
Federal and state designations of Native and tribal lands.
1. Background
    Available data indicate that Native and tribal communities face 
significant and unique community development challenges. For example, 
the poverty rate among Native individuals on reservations is 36 
percent, and exceeds 50 percent in some communities.\118\ Basic 
infrastructure in tribal communities significantly lags the rest of the 
country, with over one-third of Native households in tribal areas 
affected by significant physical problems with their housing, including 
deficiencies with plumbing, heating, or electric--a share nearly five 
times greater than for the United States population as a whole.\119\ In 
addition, there are low rates of broadband and cellular access in many 
tribal communities, with 28 percent of all tribal lands and 47 percent 
of rural tribal lands lacking broadband and cellular access.\120\
---------------------------------------------------------------------------

    \118\ The Federal Reserve Bank of Minneapolis's Center for 
Indian Country Development calculated poverty rates for the American 
Indian and Alaska Native population living on federally recognized 
reservations and off-reservation trust lands using the U.S. Census 
Bureau's American Community Survey 5-Year 2015-2019 data. Thirty of 
these land units had American Indian and Alaska Native poverty rates 
above 50 percent. Under the more expansive U.S. Census Bureau 
definition of Native lands, this number grows to 56.
    \119\ HUD, ``Housing Needs of American Indians and Alaska 
Natives in Tribal Areas: A Report From the Assessment of American 
Indian, Alaska Native, and Native Hawaiian Housing Needs'' (2017), 
https://www.huduser.gov/portal/publications/HNAIHousingNeeds.html.
    \120\ Federal Communications Commission, 2020 Broadband 
Deployment Report, p. 29 (2020), https://www.fcc.gov/reports-research/reports/broadband-progress-reports/2020-broadband-deployment-report.
---------------------------------------------------------------------------

    Current Approach. The current CRA regulations do not include a 
specific definition for certain community development activities in 
Native Land Areas, although current guidance encompasses activities 
consistent with a tribal government plan if the activities are located 
in low- or moderate-income census tracts.\121\ The rescinded OCC 2020 
CRA final rule adopted definitions of both ``Indian country'' and 
``other tribal and Native lands,'' and designated certain activities as 
being eligible in these geographic areas.\122\
---------------------------------------------------------------------------

    \121\ See Q&A Sec.  _.12(g)(4)(i)-2 and Q&A Sec.  
_.12(g)(4)(iii)-3.
    \122\ See 85 FR 34734 (June 5, 2020).
---------------------------------------------------------------------------

    Stakeholder Feedback. Some community group stakeholders have 
supported establishing a clear geographic definition of tribal areas 
where banks may receive CRA consideration for certain qualifying 
activities under the agencies' CRA regulations. Several stakeholders 
have indicated support for a geographic definition that is broader than 
the statutory definition for Indian country under 18 U.S.C. 1151. These 
stakeholders note that only using this statutory definition of Indian 
country would exclude lands that are also typically thought of as 
Native and tribal lands. Additional geographic options suggested by 
stakeholders include Hawaiian Home Lands,\123\ state-recognized and 
tribally-defined U.S. Census Bureau Tribal Statistical Areas, and 
certain other U.S. Census Bureau statistical areas.
---------------------------------------------------------------------------

    \123\ ``Hawaiian home lands'' are areas held in trust for Native 
Hawaiians by the State of Hawaii under the Hawaiian Homes Commission 
Act of 1920. See Hawaiian Homes Commission Act, 1920, ch. 42, 42 
Stat. 108 (July 9, 1921).

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[[Page 33910]]

2. Native Land Areas Definition
    Under Sec.  __.12, the agencies propose to define ``Native Land 
Areas'' to include the following geographic areas: Indian country, land 
held in trust by the United States for Native Americans, state American 
Indian reservations, Alaska Native villages, Hawaiian Home Lands, 
Alaska Native Village Statistical Areas, Oklahoma Tribal Statistical 
Areas, Tribal Designated Statistical Areas, American Indian Joint-Use 
Areas, and state-designated Tribal Statistical Areas. More 
specifically, the following components are reflected in the proposed 
definition:
    <bullet> Indian country means, as defined in 18 U.S.C. 1151: (i) 
All land within the limits of any Indian reservation under the 
jurisdiction of the U.S. Government; (ii) all dependent Indian 
communities within the borders of the United States whether within the 
original or subsequently acquired territory thereof, and whether within 
or without the limits of a state; and (iii) all Indian allotments, the 
Indian titles to which have not been extinguished, including rights-of-
way running through the same.
    <bullet> Land held in trust by the United States for Native 
Americans, as described in 38 U.S.C. 3765(1)(A).
    <bullet> State American Indian reservations means those 
reservations established by a state government for tribes recognized by 
the state.\124\
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    \124\ See U.S. Census Bureau, State American Indian 
Reservations, https://www.census.gov/programs-surveys/geography/about/glossary/aian-definitions.html.
---------------------------------------------------------------------------

    <bullet> Alaska Native village means, as defined in 43 U.S.C. 
1602(c), any tribe, band, clan, group, village, community, or 
association in Alaska that is recognized pursuant to the Alaska Native 
Claims Settlement Act of 1972.
    <bullet> Hawaiian Home Lands means lands that have the status of 
Hawaiian Home Lands as defined in section 204 of the state of Hawaii's 
Hawaiian Homes Commission Act.\125\
---------------------------------------------------------------------------

    \125\ See U.S. Census Bureau, TIGERweb: Hawaiian Home Lands, 
https://tigerweb.geo.census.gov/tigerwebmain/TIGERweb_geography_details.html#HHL.
---------------------------------------------------------------------------

    <bullet> Alaska Native Village Statistical Area means the more 
densely settled portion of Alaska Native villages, as presented in 
statistical data by the Census Bureau.\126\
---------------------------------------------------------------------------

    \126\ See U.S. Census Bureau, TIGERweb: Alaska Native Village 
Statistical Areas, https://tigerweb.geo.census.gov/tigerwebmain/TIGERweb_geography_details.html#ANVSA.
---------------------------------------------------------------------------

    <bullet> Oklahoma Tribal Statistical Area means statistical areas 
identified and delineated by the U.S. Census Bureau in consultation 
with federally recognized American Indian tribes based in 
Oklahoma.\127\
---------------------------------------------------------------------------

    \127\ See U.S. Census Bureau, TIGERweb: Oklahoma Tribal 
Statistical Area, https://tigerweb.geo.census.gov/tigerwebmain/TIGERweb_geography_details.html#OTSA.
---------------------------------------------------------------------------

    <bullet> Tribal-Designated Statistical Areas means areas identified 
and delineated for the U.S. Census Bureau by American Indian tribes 
that do not currently have a reservation or off-reservation trust 
land.\128\
---------------------------------------------------------------------------

    \128\ See U.S. Census Bureau, Tribal Designated Statistical 
Areas, https://tigerweb.geo.census.gov/tigerwebmain/TIGERweb_geography_details.html#TDSA.
---------------------------------------------------------------------------

    <bullet> American Indian Joint Use Areas means a statistical area 
defined by the U.S. Census Bureau that is administered jointly and/or 
claimed by two or more American Indian tribes.\129\
---------------------------------------------------------------------------

    \129\ See U.S. Census Bureau, TIGERweb: American Indian Joint 
Use Areas, https://tigerweb.geo.census.gov/tigerwebmain/
TIGERweb_geography_details.html#:~:text=Joint%2DUse%20Areas%2C%20as%2
0applied,purpose%20of%20presenting%20statistical%20data.
---------------------------------------------------------------------------

    <bullet> State-designated Tribal Statistical Areas means the land 
areas of Indian tribes and heritage groups that are recognized by 
individual states as defined and identified by the U.S. Census Bureau's 
annual Boundary and Annexation Survey.\130\
---------------------------------------------------------------------------

    \130\ See U.S. Census Bureau, State-designated Tribal 
Statistical Areas, https://tigerweb.geo.census.gov/tigerwebmain/TIGERweb_geography_details.html#SDTSA.
---------------------------------------------------------------------------

    Under the agencies' proposal, Native Land Areas would be comprised 
of a very similar list of categories to those included in the rescinded 
OCC 2020 CRA final rule. This reflects stakeholder feedback supporting 
comprehensive incorporation of Native geographies. The proposal would 
include the definition of Indian country under 18 U.S.C. 1151, which 
includes all land within the limits of any Indian reservation under the 
jurisdiction of the U.S. Government, whether created by statute or 
executive order.
    The proposed definition of Native Land Areas also includes areas 
typically considered by the Bureau of Indian Affairs (BIA) and the U.S. 
Census Bureau as Native geographies. Accordingly, Native Land Areas 
would include all geographic areas delineated as U.S. Census Bureau 
American Indian/Alaska Native/Native Hawaiian (AIANNH) Areas and/or BIA 
Land Area Representations. Robust, publicly available data files 
(``shapefiles''), defining the boundaries of these geographies are 
actively maintained by the U.S. Census Bureau and BIA, 
respectively.\131\
---------------------------------------------------------------------------

    \131\ See U.S. Census Bureau, AIANNH shapefile, https://www2.census.gov/geo/tiger/TIGER2021/AIANNH/, and Bureau of Indian 
Affairs, U.S. Department of the Interior, Land Area Representation 
shapefile, https://biamaps.doi.gov/bogs/datadownload.html.
---------------------------------------------------------------------------

3. Qualifying Activities in Native Land Areas
    To help address the challenges specific to Native Land Areas, the 
agencies propose creating a definition for qualifying community 
development activities targeted to and conducted in these geographic 
areas to include:
    <bullet> Revitalization activities in Native Land Areas;
    <bullet> Essential community facilities in Native Land Areas;
    <bullet> Essential community infrastructure in Native Land Areas; 
and
    <bullet> Disaster preparedness and climate resiliency activities in 
Native Land Areas.\132\
---------------------------------------------------------------------------

    \132\ The agencies note that in addition to the place-based 
community development activities described in this section, other 
community development activities (i.e., affordable housing or 
economic development) could also qualify for consideration in Native 
Land Areas provided that they otherwise meet the eligibility 
standards for that particular activity.
---------------------------------------------------------------------------

    The agencies propose that essential community facilities, eligible 
community infrastructure, and disaster preparedness and climate 
resiliency activities in Native Land Areas must benefit or serve 
residents, including low- or moderate-income residents of Native Land 
Areas, without displacing or excluding low- or moderate-income 
residents. In addition, these activities would need to be conducted in 
conjunction with a Federal, state, local, or tribal government plan, 
program, or initiative that benefits or serves residents of Native Land 
Areas, without displacing or excluding low- or moderate-income 
residents of such geographic areas.
    Separately, the agencies are proposing that revitalization 
activities in Native Land Areas have a more specific focus on low- and 
moderate-income individuals. Specifically, the agencies are proposing 
that under this definition revitalization activities must benefit or 
serve residents of Native Land Areas and must include substantial 
benefits for low- or moderate-income residents. For example, a bank's 
purchase of a bond to fund an industrial revitalization project in a 
Native Land Area would qualify for consideration if a majority of the 
employment opportunities created by the project benefitted low- or 
moderate-income residents, and the activity met other required 
criteria. Revitalization activities in Native Land Areas also would 
need to be undertaken in conjunction with a Federal, state, local, or 
tribal government plan,

[[Page 33911]]

program, or initiative with explicit focus on revitalizing or 
stabilizing Native Land Areas and a particular focus on low- or 
moderate-income households. The agencies propose this more targeted 
standard because these areas include some middle- and upper-income 
census tracts. The agencies believe that it is therefore important to 
establish a stronger nexus between these activities and the low- and 
moderate-income residents who reside in these areas to ensure that 
activities provide community benefit.
    The agencies seek feedback on whether to consider activities in 
Native Land Areas undertaken in conjunction with plans, programs, or 
initiatives through designees of tribal governments in addition to 
those with Federal, state, local, or tribal governments. Tribal 
government designees such as tribal housing authorities, tribal 
associations and intertribal consortiums are central to economic 
development and community planning efforts in many Native Land Areas. 
For example, in Alaska and California, tribal associations or 
consortiums play a significant role in the delivery of government 
services to tribal communities. The Federal Government sometimes also 
contracts directly with these types of intertribal associations to 
deliver public health and other services to meet its trust obligations 
to these tribes.\133\ Stakeholders also note that some tribal 
governments have limited administrative capacity to develop or execute 
formal plans. Expanding this criterion to include other types of tribal 
designees would therefore serve to expand place-based community 
development activity eligibility for Native communities where tribal 
governments are not the primary or only entities that deliver 
government services.
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    \133\ Federal programs such as the Indian Community Development 
Block Grant define eligible applicants using 25 U.S.C. 5304, a 
portion of the Indian Self Determination and Education Act. Under 
this definition, eligible applicants or recipients for programs 
serving Native Americans are not strictly limited to tribal 
governments. Other examples of this practice include a 2021 
expansion of eligible Native American groups related to the Public 
Works and Economic Development Act of 1965 (86 FR 52957 (Sept. 24, 
2021)), and the Indian Energy Tribal Development and Self-
determination Act Amendments of 2017, which expanded the groups 
eligible to apply for the Indian Tribal Energy Development and Self 
Determination Act to include intertribal organizations and tribal 
energy development organizations. See Public Law 115-325, 132 Stat. 
4445 (Dec. 18, 2018).
---------------------------------------------------------------------------

    As part of the proposal, the agencies considered adding a 
requirement that tribal governments be consulted for an activity to be 
eligible under this definition. However, the agencies believe that such 
a requirement could be overly restrictive and impractical to implement. 
Instead of focusing only on tribal governments, the proposed definition 
would allow an activity to qualify if it is undertaken in conjunction 
with a Federal, state, local, or tribal government plan, program, or 
initiative. The agencies were concerned that limiting eligibility to 
only those activities where tribal governments had been consulted could 
diminish the scope of the activities eligible under the definition due 
to the time and resource constraints of tribal governments.\134\ The 
agencies seek comment on appropriate criteria to tailor the proposed 
definition to activities benefiting residents of Native Land Areas, 
including low- or moderate-income individuals, and meeting 
revitalization, essential community facility, essential community 
infrastructure, or climate resiliency needs.
---------------------------------------------------------------------------

    \134\ See Board, ``Growing Economies in Indian Country: Taking 
Stock of Progress and Partnerships: A Summary of Challenges, 
Recommendations, and Promising Efforts,'' (May 1, 2012), https://www.federalreserve.gov/newsevents/conferences/indian-country-publication.htm.
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Request for Feedback
    Question 28. To what extent is the proposed definition of Native 
Land Areas inclusive of geographic areas with Native and tribal 
community development needs?
    Question 29. In addition to the proposed criteria, should the 
agencies consider additional eligibility requirements for activities in 
Native Land Areas to ensure a community development activity benefits 
low- or moderate-income residents who reside in Native Land Areas?
    Question 30. Should the agencies also consider activities in Native 
Land Areas undertaken in conjunction with tribal association or tribal 
designee plans, programs, or initiatives, in addition to the proposed 
criteria to consider activities in conjunction with Federal, state, 
local, or tribal government plans, programs, or initiatives?

IV. Qualifying Activities Confirmation and Illustrative List of 
Activities

    To provide stakeholders with additional certainty in determining 
what community development activities qualify, the agencies propose 
maintaining a publicly available illustrative, non-exhaustive list of 
activities eligible for CRA consideration. The agencies also propose 
including a process for modifying the illustrative list of activities 
periodically. In addition, the agencies are proposing a process, open 
to banks, for confirming eligibility of qualifying community 
development activities.

A. Current Approaches To Confirming Eligibility of Qualifying Community 
Development Activities

    Currently, as part of their CRA examinations, banks submit 
community development activities that were undertaken without an 
assurance these activities are eligible. Knowing that an activity 
previously qualified can frequently provide banks with some confidence 
that the same types of activities are likely to receive consideration 
in the future. However, new, less common, more complex, or innovative 
activities might require examiner judgment and the use of performance 
context to determine whether an activity qualifies for CRA purposes. 
For these activities, stakeholders might know only at the end of an 
examination--and after a loan or investment has been made or a service 
provided--whether an activity will receive CRA credit. Stakeholders 
strongly support incorporating additional methods into CRA for 
improving upfront certainty related to what community development 
activities qualify for consideration.\135\
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    \135\ The OCC maintains a confirmation process that is not 
codified in the CRA regulations in which national banks, savings 
associations, and other interested parties may request confirmation 
that a loan, investment, or service is consistent with existing CRA 
regulations. The OCC also maintains an illustrative list on its 
website as a reference for national banks, savings associations, and 
other interested parties to determine whether activities that they 
conducted while the OCC 2020 CRA final rule was in effect were 
eligible for CRA consideration; however, activities included on that 
illustrative list may not receive consideration if conducted after 
January 1, 2022, when the rescission of the OCC 2020 CRA final rule 
became effective. See OCC, CRA Qualifying Activities and 
Confirmation Request, https://www.occ.gov/topics/consumers-and-communities/cra/qualifying-activity-confirmation-request/index-cra-qualifying-activities-confirmation-request.html.
---------------------------------------------------------------------------

B. Stakeholder Feedback on Confirmation and Illustrative List

    Stakeholders have indicated broad support for a non-exhaustive, 
illustrative list of qualifying activities similar to the list required 
by and implemented in accordance with the rescinded OCC 2020 CRA final 
rule. Some stakeholders have expressed that the illustrative list 
ensured more flexibility in engaging in new and innovative activity. 
Stakeholders noted that the list should be specific and include the 
examples of qualified activities from the current Interagency Questions 
and Answers. Some stakeholders suggested a searchable list,

[[Page 33912]]

and others suggested that the list identify activities that do not 
qualify.
    Stakeholders also expressed support for a confirmation process for 
determining, in a timely manner, if an activity qualifies as a 
community development activity in order to provide greater certainty.

C. Qualifying Activities Confirmation and Illustrative List of 
Activities

    To provide additional upfront certainty, in Sec.  __.14, the 
agencies propose the maintenance of an illustrative list of qualifying 
activities and a method to confirm eligibility of activities.
    First, the agencies propose to establish a publicly available 
illustrative, non-exhaustive list of activities eligible for CRA 
community development consideration. Stakeholders have supported this 
approach as a way to illustrate loans, investments, and services that 
meet the CRA community development criteria while retaining those 
criteria as the determinative factors in eligibility for qualifying 
community development activities. Under this approach, the list would 
provide examples that help clarify the regulatory meaning of key 
community development terms. Although some stakeholders have expressed 
concern that a list may serve to limit innovation by leading banks to 
focus primarily on activities found on the list, the agencies seek 
feedback on whether the benefit of greater certainty outweighs this 
potential concern.
    The agencies are also proposing a formal mechanism for banks to 
receive feedback in advance or after the fact on whether proposed 
community development activities would be considered eligible for CRA. 
This approach would allow a bank evaluated under CRA to request that 
the agencies confirm that an activity is eligible for CRA community 
development consideration. Although some stakeholders wanted the 
confirmation process to be open to all stakeholders, including 
community groups, as is the case for the process implemented by the 
OCC, the agencies believe that the proposal to limit the requestors to 
banks evaluated under CRA would accomplish the desired goal of 
increased certainty of eligibility. While other stakeholders may have 
an interest in ensuring certain activities qualify for community 
development consideration, ultimately, these stakeholders are not 
subject to CRA examinations. Banks evaluated under CRA may request 
confirmation of activities under consideration, including activities 
that may have been presented to them by other stakeholders. When the 
agencies confirm that an activity is or is not eligible for CRA 
community development consideration, the requestor would be notified, 
and the agencies may add the activity to the publicly available list. 
Instead of being static, the periodic update to the list would allow it 
to be flexible and incorporate new activities.
Request for Feedback
    Question 31. Should the agencies also maintain a non-exhaustive 
list of activities that do not qualify for CRA consideration as a 
community development activity?
    Question 32. What procedures should the agencies develop for 
accepting submissions and establishing a timeline for review?
    Question 33. Various processes and actions under the proposed rule, 
such as the process for confirming qualifying community development 
activities in Sec.  __.14, the designation of census tracts in Sec.  
__.12, and, with respect to recovery activities in designated disaster 
areas, the determination of temporary exception or an extension of the 
period of eligibility of activities under Sec.  __.13(h)(1), would 
involve joint action by the agencies. The agencies invite comment on 
these proposed joint processes and actions, as well as alternative 
processes and actions, such as consultation among the agencies, that 
would be consistent with the purposes of the Community Reinvestment 
Act.

V. Impact Review of Community Development Activities

    The agencies propose to conduct an impact review of community 
development activities under the Community Development Financing Test, 
the Community Development Financing Test for Wholesale or Limited 
Purpose Banks, and the Community Development Services Test. The impact 
review would qualitatively evaluate the impact and responsiveness of 
qualifying activities with respect to community credit needs and 
opportunities.
    In Sec.  __.15, the agencies propose specific impact review factors 
that would inform the evaluation. A greater volume of activities 
aligning with the impact review factors would positively impact 
conclusions for each test. The approach of incorporating specific 
impact review factors into the qualitative evaluation is intended to 
promote clear and consistent procedures, which would result in a more 
standardized application of qualitative factors compared with current 
practices. In addition, this approach encourages banks to pursue 
activities with a high degree of impact on and responsiveness to the 
needs of low- or moderate-income communities.
    The evaluation of impact and responsiveness would include, but 
would not be limited to, a set of specific factors provided in the 
regulation. In addition, the agencies may consider information that 
demonstrates an activity's significant impact on and responsiveness to 
local community development needs, such as detailed information about a 
bank's activities, local data regarding community needs, and input from 
community stakeholders.

A. Background

1. Current Approach to Qualitative Review
    Currently, the agencies' qualitative assessment of a bank's 
community development performance takes into account the extent to 
which a bank's community development activities are innovative and 
complex. In addition, the agencies consider whether a bank's activities 
reflect leadership and are responsive to community needs.\136\ These 
terms are generally defined in the Interagency Questions and Answers, 
and guidance explains that an examiner will consider both quantitative 
and qualitative aspects of a bank's community development 
activities.\137\ Certain activities may be considered more responsive 
than others if those activities effectively meet an identified 
community development need.\138\ Innovativeness takes into account 
whether a bank implements meaningful improvements to products, 
services, or delivery systems to respond to community needs.\139\ The 
qualitative aspects of the bank's community development activities are 
assessed based on information provided by the bank and in light of 
performance context and other information about credit and community 
development needs in the local community.
---------------------------------------------------------------------------

    \136\ See Q&A Sec.  __.21(a)-2.
    \137\ See Q&A Sec.  __.21(a)-3.
    \138\ Id.
    \139\ See Q&A Sec.  __.21(a)-4.
---------------------------------------------------------------------------

    While current guidance emphasizes the importance of a qualitative 
review of a bank's community development activities and recognizes that 
certain activities are more responsive than others, there are no clear 
standards for how these factors are measured. As a result, the 
evaluation relies heavily on examiner judgment.
2. Stakeholder Feedback
    Stakeholders have suggested that the current approach for the 
qualitative evaluation of community development

[[Page 33913]]

activities could be more transparent and consistent. For example, 
determining whether an activity is innovative is reliant on examiner 
judgment. In addition, stakeholders have expressed that the qualitative 
assessment could have a stronger focus on the impact and responsiveness 
of a bank's community development activities and, relatedly, that it 
could be more clearly linked to CRA's core purpose of serving low- and 
moderate-income individuals and communities. For example, stakeholders 
have noted that the criteria of ``innovative'' and ``complex'' are not 
necessarily targeted toward the ultimate impact of the activity; an 
activity might be highly complex without being highly impactful or 
responsive to low- and moderate-income communities. Lastly, 
stakeholders have noted that more clarity is needed to better 
understand which activities have been deemed more responsive or 
innovative by examiners as this information is not consistently 
presented in performance evaluations.

B. Impact Review Factors

    In Sec.  __.15, the agencies propose the following impact review 
factors for the qualitative evaluation of community development 
activities under the Community Development Financing Test, the 
Community Development Financing Test for Wholesale or Limited Purpose 
Banks, and the Community Development Services Test.
1. Activities Serving Persistent Poverty Counties and Geographies With 
Low Levels of Community Development Financing
    The agencies propose several impact review factors for activities 
in specific geographic areas with significant community development 
needs. Serving these geographies would reflect a high level of 
responsiveness because the activities could increase economic 
opportunity where it is needed most and may involve a high degree of 
complexity and effort on the part of the bank. First, the agencies are 
proposing activities serving persistent poverty counties as one impact 
review factor. The agencies are seeking feedback on whether activities 
serving high poverty census tracts should be included in this impact 
review factor. Second, the agencies are also proposing to include 
activities serving areas with low levels of community development 
financing as an impact review factor.
    Persistent Poverty Counties. The agencies are proposing to identify 
activities in persistent poverty counties, defined as counties with a 
poverty rate of at least 20 percent over each of the past three 
decades, as an impact review factor.\140\ The agencies estimate that 
5.3 percent of the U.S. population lives in persistent poverty 
counties, using population estimates from the 2015-2019 American 
Community Survey.\141\ A focus on persistent poverty counties would 
highlight activities serving areas with longstanding economic 
challenges where community development needs are significant. For 
example, the agencies analyzed economic data to estimate which counties 
would be identified under this approach and found a large concentration 
of counties located in the Mississippi Delta, Appalachia, and Colonias 
regions, and in Native Land Areas. Congress has directed other 
agencies, including the Treasury Department's Community Development 
Financial Institutions Fund, the U.S. Economic Development 
Administration, the U.S. Department of Agriculture, and the U.S. 
Environmental Protection Agency, to allocate program funding 
specifically to regions meeting the definition of persistent 
poverty.\142\ In addition, designating geographic areas at the county 
level offers a high degree of clarity and simplicity regarding which 
qualifying activities would meet the criterion. Banks that seek out 
qualifying activities that serve an entire county, as well as 
qualifying activities that serve only a specific portion of the county, 
would have certainty that the activities meet the impact review factor.
---------------------------------------------------------------------------

    \140\ The Congressional Research Service identifies 407 counties 
that meet the criteria for persistent poverty using poverty rate 
estimates from the 1990 Census, the 2000 Census, and the 2019 Small 
Area Income and Poverty Estimates (See ``The 10-20-30 Provision: 
Defining Persistent Poverty Counties'' https://sgp.fas.org/crs/misc/R45100.pdf.).
    \141\ The agencies apply population estimates from the 2015-2019 
American Community Survey to estimate population of persistent 
poverty counties. See U.S. Census Bureau, American Community Survey 
2015-2019 5-Year Data Release (Dec. 10, 2020), https://www.census.gov/newsroom/press-kits/2020/acs-5-year.html.
    \142\ For a description of statutory requirements related to the 
allocation of funds to persistent-poverty counties, see Government 
Accountability Office, ``Areas with High Poverty: Changing How the 
10-20-30 Funding Formula Is Applied Could Increase Impact in 
Persistent Poverty Counties,'' https://www.gao.gov/assets/gao-21-470.pdf.
---------------------------------------------------------------------------

    The agencies are also seeking feedback on including activities in 
census tracts with a current poverty rate of at least 40 percent as an 
impact review factor. The agencies estimate that 3.5 percent of the 
U.S. population lives in census tracts where the poverty rate exceeds 
40 percent, according to the 2015-2019 American Community Survey. 
Accounting for overlap between persistent poverty counties and census 
tracts that meet this threshold, approximately 8.1 percent of the U.S. 
population lives in either a persistent poverty county or a high 
poverty census tract, according to the 2015-2019 American Community 
Survey. This approach would draw attention to economically distressed 
geographies that are smaller than an entire county, such as a high 
poverty neighborhood in a densely populated urban area. A census tract 
approach would offer the advantage of emphasizing activities that 
specifically serve communities, including individual neighborhoods, 
with significant community development needs, and where barriers to 
credit access and opportunity are often the greatest. In addition, the 
designation of census tracts, as opposed to counties, emphasizes 
activities serving communities in urban areas, including communities 
that are located in a county that is not a persistent poverty county.
    Areas with Low Levels of Community Development Financing. The 
agencies propose an impact factor for activities serving areas with low 
levels of community development financing, based on data collected and 
reported under a revised CRA regulation. By incorporating local 
community development financing data into the designation, this 
approach would highlight areas where CRA capital is most limited. 
Because comprehensive CRA community development financing data is not 
currently available at local levels, the agencies would first collect 
and analyze data under a revised CRA regulation and would then 
determine the appropriate approach for identifying areas with low 
levels of qualified community development activities.
    The agencies seek feedback on the different options for impact 
review factors for activities that serve geographies with significant 
community development needs, and whether to include high poverty census 
tracts along with persistent poverty counties and areas with low levels 
of community development financing. The agencies have considered that 
expressly highlighting both persistent poverty counties and high 
poverty census tracts may be appropriate to capture a balance of high 
needs areas in both metropolitan and nonmetropolitan areas.

2. Activities Supporting MDIs, WDIs, LICUs, and Treasury Department-
Certified CDFIs

    The agencies propose an impact review factor for activities that 
support or are conducted in partnership with MDIs, WDIs, LICUs, and 
Treasury

[[Page 33914]]

Department-certified CDFIs.\143\ In general, these organizations have a 
mission of meeting the credit needs of low- and moderate-income and 
other underserved individuals, communities, and small businesses, which 
is highly aligned with CRA's core purpose.\144\ In addition, these 
organizations often have intimate knowledge of local community 
development needs and opportunities, allowing them to conduct highly 
responsive activities. Furthermore, emphasizing partnership with these 
organizations is aligned with current practices and with the CRA 
statute, reflecting the impact and responsiveness of these activities.
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    \143\ This is consistent with 12 U.S.C. 2903(b).
    \144\ See, e.g., Brett Theodos and Eric Hangen, Urban Institute, 
``Expanding Community Development Financial Institutions'' (2017), 
https://www.urban.org/research/publication/expanding-community-development-financial-institutions.
---------------------------------------------------------------------------

    The agencies are considering whether this impact review factor 
should cover only certain types of activities conducted in support of 
these organizations. One option would be for this impact review factor 
to include equity investments, long-term debt financing, donations, and 
services, and not to include short term deposits placed in an MDI. The 
goal of this alternative approach would be to encourage activities that 
stakeholders have noted are most effective in helping to advance the 
mission of these organizations.

3. Activities Serving Low-Income Individuals

    The agencies propose an impact review factor for activities that 
serve low-income individuals and families, defined as those with an 
income of less than 50 percent of the area median income. This factor 
is intended to be consistent with the proposed Retail Lending Test 
approach, which includes separate metrics to assess lending to low-
income and to moderate-income individuals. Low-income individuals have 
high community development needs and experience challenges with 
obtaining basic financial products and services, securing stable 
employment opportunities, finding affordable housing, and accessing 
digital infrastructure.\145\ For these reasons, the agencies consider 
activities serving low-income individuals and families to have a high 
degree of impact and responsiveness and recognize that they often 
entail a high level of effort and complexity on the part of the bank 
and community partners.
---------------------------------------------------------------------------

    \145\ See FDIC, ``How America Banks: Household Use of Banking 
and Financial Services, 2019 FDIC Survey'' (Oct. 2020) (hereinafter 
``How America Banks''), https://www.fdic.gov/analysis/household-survey/2019report.pdf; Federal Reserve Bank of Dallas, ``Closing the 
Digital Divide: A Framework for Meeting CRA Obligations'' (July 
2016, revised Dec. 2016), https://www.dallasfed.org/~/media/
documents/cd/pubs/digitaldivide.pdf; and Joint Center for Housing 
Studies of Harvard University, ``America's Rental Housing 2022'' 
(2022), https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_Americas_Rental_Housing_2022.pdf.
---------------------------------------------------------------------------

    The agencies are considering an alternative approach of defining 
this factor to include only those activities that serve individuals 
with an income of less than 30 percent of the area median income. This 
would ensure that the focus of this factor is on activities that serve 
the individuals that are most vulnerable to the challenges described 
above, such as housing instability and unemployment. However, there may 
be comparatively fewer community development opportunities for banks to 
take part in that would primarily serve individuals in this income 
category.

4. Activities that Support Small Businesses or Farms With Gross Annual 
Revenues of $250,000 or Less

    The agencies propose an impact review factor for activities that 
support small businesses or farms with gross annual revenues of 
$250,000 or less. This factor is intended to align treatment of these 
activities with the proposed retail lending approach, which separately 
evaluates a bank's distribution of loans to small businesses and small 
farms with gross annual revenues of $250,000 or less, as well as the 
bank's loans to small businesses and small farms with gross annual 
revenue of greater than $250,000. The Retail Lending Test approach, as 
well as a discussion of the proposed gross annual revenue threshold of 
$250,000, is described further in Section IX.
    The agencies seek feedback on whether this impact review factor 
should instead be set at a higher threshold of gross annual revenue, 
for example at $500,000. The agencies also seek feedback on whether 
this threshold should instead be set lower, for example at $100,000. 
These alternatives are also discussed in Section IX. In seeking 
feedback on these alternatives, the agencies also seek feedback on how 
to weigh the importance of using a consistent threshold for identifying 
smaller businesses and smaller farms both for the Retail Lending Test 
and for this impact review factor.
5. Activities That Support Affordable Housing in High Opportunity Areas
    The agencies propose an impact review factor for activities that 
support the acquisition, development, construction, preservation, or 
improvement of affordable housing in high opportunity areas. The 
agencies would define high opportunity areas to align with the FHFA 
definition of High Opportunity Areas, including: (i) Areas designated 
by HUD as a ``Difficult Development Area'' (DDA); or (ii) areas 
designated by a state or local Qualified Allocation Plan as a high 
opportunity area, and where the poverty rate falls below 10 percent 
(for metropolitan areas) or 15 percent (for nonmetropolitan 
areas).\146\
---------------------------------------------------------------------------

    \146\ See Overview of the 2020 High Opportunity Areas File 
(2020), https://www.fhfa.gov/DataTools/Downloads/Documents/Enterprise-PUDB/DTS_Residential-Economic-Diversity-Areas/DTS_High%20Opportunity_Areas_2020_README.pdf.
---------------------------------------------------------------------------

    The agencies consider affordable housing in high opportunity areas 
to have a high level of impact and responsiveness. First, geographic 
areas meeting this definition include areas where the cost of 
residential development is high \147\ and affordable housing 
opportunities can be limited. Efforts to support affordable housing can 
be especially impactful where affordable housing needs are heightened 
in this manner. Second, as defined by FHFA, these areas are intended to 
describe areas that provide strong opportunities for low- and moderate-
income individuals; increasing affordable housing opportunities in 
these areas helps to provide low- and moderate-income individuals with 
more choices of neighborhoods with strong economic opportunities.\148\
---------------------------------------------------------------------------

    \147\ See, e.g., HUD's Office of Policy Development and Research 
(PD&R), ``Qualified Census Tracts and Difficult Development Areas,'' 
https://www.huduser.gov/portal/datasets/qct.html.
    \148\ See FHFA DTS High Opportunity Areas, https://www.fhfa.gov/DataTools/Downloads/Documents/Enterprise-PUDB/DTS_Residential-Economic-Diversity-Areas/DTS_High%20Opportunity_Areas_2020_README.pdf.
---------------------------------------------------------------------------

6. Activities Benefitting Native Communities
    The agencies propose to designate activities benefitting or serving 
Native communities, including but not limited to those qualifying 
activities in Native Land Areas under proposed Sec.  __.13(l) as an 
impact review factor. This factor would recognize the unique status and 
credit and community development needs of Native and tribal communities 
as discussed above, which make bank activities that do serve these 
communities especially responsive.
    The proposal would include all eligible community development 
activities taking place in Native Land Areas under this impact review 
factor. This includes activities as defined under proposed Sec.  
__.13(l). In addition,

[[Page 33915]]

the agencies propose to consider eligible community development 
activities that benefit Native Land Areas and meet other eligibility 
criteria under this impact review factor. For example, an affordable 
housing project that serves a Native Land Area or an activity in a 
Native Land Area undertaken with a CDFI would be included under this 
impact review factor.
    The agencies also seek feedback on whether this proposed impact 
review factor should be defined to include activities benefitting 
Native communities but not located in Native Land Areas. Such an 
approach would recognize that many tribal members reside in areas 
outside of the proposed definition of Native Land Areas, as a result of 
a number of factors, including past Federal policies. Some past Federal 
Government policies, such as the policy of allotment, have had the 
effect of reducing the amount of land recognized as a reservation or as 
trust land. Additionally, some past Federal Government policies have 
relocated individual tribal members from reservation communities to 
cities and, as a result, away from tribal lands.\149\ The Federal 
Government's trust obligation applies to not only tribes but also their 
citizens regardless of residency on tribal lands given their unique 
political status.\150\
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    \149\ See, e.g., The Indian Relocation Act of 1956, https://www.govinfo.gov/content/pkg/STATUTE-70/pdf/STATUTE-70-Pg986.pdf and 
National Archives, ``American Indian Urban Relocation,'' https://www.archives.gov/education/lessons/indian-relocation.html.
    \150\ See, e.g., U.S. Department of the Interior, ORDER NO. 
3335, ``Reaffirmation of the Federal Trust Responsibility to 
Federally Recognized Indian Tribes and Individual Indian 
Beneficiaries,'' https://www.doi.gov/sites/doi.gov/files/migrated/news/pressreleases/upload/Signed-SO-3335.pdf.
---------------------------------------------------------------------------

7. Activities That Are a Qualifying Grant or Contribution
    The agencies propose to include community development financing 
activities that are a qualifying grant or contribution as a separate 
impact review factor. The agencies recognize that the proposed 
community development financing metric provides these activities with 
comparatively little emphasis on its own, because the metric is based 
on the dollar amount of activities relative to deposits, and does not 
account for the fact that a grant has no repayment obligation, unlike a 
typical community development loan or qualifying investment. As a 
result, the agencies propose including these activities as an impact 
review factor so that they receive appropriate emphasis when assessing 
the metrics and impact review together.
8. Activities That Reflect Bank Leadership Through Multi-Faceted or 
Instrumental Support
    The agencies propose an impact review factor for activities that 
involve a high degree of leadership on the part of the bank, as 
demonstrated by multi-faceted or instrumental support. This prong is 
intended to capture the factors of complexity and leadership used under 
the current CRA regulations, but with greater specificity and a more 
direct tie to impact and responsiveness.
    Multi-faceted support includes activities that entail multiple 
forms of support provided by the bank for a particular program or 
initiative, such as a loan to a community-based organization that 
serves low- or moderate-income individuals, coupled with a service 
supporting that organization in the form of technical assistance that 
leverages the bank's financial expertise. Instrumental support may 
include activities that involve a level of support or engagement on the 
part of the bank such that a program or project would not have come to 
fruition, or the intended outcomes would not have occurred, without the 
bank's involvement. The agencies recognize that activities involving 
multifaceted or instrumental support often require significant efforts 
by the bank, reflect a high degree of engagement with community 
partners, and are highly responsive to community needs.
9. Activities That Result in a New Community Development Financing 
Product or Service
    The agencies propose an impact review factor for activities that 
result in a new community development financing product or service that 
addresses community development needs for low- or moderate-income 
individuals and communities as well as small businesses and small 
farms. This factor builds upon the emphasis on innovative activities 
under the current approach and is intended to ensure a strong 
connection to impact and responsiveness. This factor encourages banks 
and community partners to conceive of new strategies for addressing 
community development needs, especially those needs which existing 
products and services do not adequately address. For example, an 
activity that provides financing for the acquisition of land for a 
shared equity housing project that brings permanent affordable housing 
to a community could meet this impact review factor, to the extent that 
it involves a new strategy to meet a community development need. The 
proposed emphasis on activities that support developing new products 
and services helps to ensure that the CRA continually improves the 
landscape of product offerings for low- or moderate-income individuals, 
communities and small businesses and small farms.
Request for Feedback
    Question 34. For the proposed impact review factors for activities 
serving geographic areas with high community development needs, should 
the agencies include persistent poverty counties, high poverty census 
tracts, or areas with low levels of community development financing? 
Should all geographic designations be included or some combination? 
What considerations should the agencies take in defining these 
categories and updating a list of geographies for these categories?
    Question 35. For the proposed factor focused on activities 
supporting MDIs, WDIs, LICUs, and Treasury Department-certified CDFIs, 
should the factor exclude placements of short-term deposits, and should 
any other activities be excluded? Should the criterion specifically 
emphasize equity investments, long-term debt financing, donations, and 
services, and should other activities be emphasized?
    Question 36. Which of the thresholds discussed would be appropriate 
to classify smaller businesses and farms for the impact review factor 
relating to community development activities that support smaller 
businesses and farms: The proposed standard of gross annual revenue of 
$250,000 or less, or an alternative gross annual revenue threshold of 
$100,000 or less, or $500,000 or less?
    Question 37. For the proposed factor of activities that support 
affordable housing in high opportunity areas, is the proposed approach 
to use the FHFA definition of high opportunity areas appropriate? Are 
there other options for defining high opportunity areas?
    Question 38. For the proposed factor to designate activities 
benefitting or serving Native communities, should the factor be defined 
to include activities benefitting Native and tribal communities that 
are not located in Native Land Areas? If so, how should the agencies 
consider defining activities that benefit Native and tribal communities 
outside of Native Land Areas?

VI. Assessment Areas and Areas for Eligible Community Development 
Activity

    The agencies propose to update the CRA assessment area approach to

[[Page 33916]]

evaluate performance in facility-based assessment areas for all banks, 
and in retail lending assessment areas for large banks. These updates 
are intended to comprehensively establish the local communities in 
which a bank is evaluated for its CRA performance and to reflect 
ongoing changes to the banking industry. In addition, the agencies 
propose to consider qualifying community development activities outside 
of a bank's assessment areas at the state, multistate MSA, and 
institution levels to add certainty and to encourage qualifying 
activities in areas with high community development needs. Section X 
also discusses the agencies' proposal to evaluate large banks and 
certain intermediate banks on their retail loans that are outside of 
both retail lending assessment areas and facility-based assessment 
areas, to ensure that retail lending evaluations for these banks are 
comprehensive.
    First, in Sec.  __.16, the agencies propose that facility-based 
assessment areas would remain a cornerstone of the proposed evaluation 
framework. The agencies propose to update how these areas are defined 
and to affirm that assessment areas may not reflect illegal 
discrimination or arbitrarily exclude low- or moderate-income census 
tracts. Recognizing the importance of the local communities served by a 
bank's facilities, the agencies propose to evaluate a bank on all 
applicable performance tests \151\ within each facility-based 
assessment area, and to incorporate these performance conclusions into 
the bank's overall rating.
---------------------------------------------------------------------------

    \151\ Application of the performance tests and standards would 
be determined by bank size, as specified in proposed Sec.  __.21(b).
---------------------------------------------------------------------------

    Second, in Sec.  __.17 for large banks only, the agencies propose 
establishing retail lending assessment areas to provide a means for 
evaluating lending that occurs outside of facility-based assessment 
areas. The agencies propose that a large bank would delineate a retail 
lending assessment area where it has a concentration of retail loan 
originations outside of its facility-based assessment areas, and the 
agencies propose applying only the Retail Lending Test in these areas. 
In proposing this approach, the agencies recognize that changes in 
technology and in bank business models have resulted in banks serving 
local communities that may extend beyond the geographic footprint of 
the bank's main office, branches, and other deposit-taking facilities. 
Consistent with the CRA's focus on a bank's local performance in 
meeting community credit needs, the agencies believe that it is 
appropriate to evaluate a large bank's retail lending under the Retail 
Lending Test as described in Section IX, in a community where it has a 
concentration of loans, even if it does not operate a facility there. 
In addition, as discussed in Sec.  __.22, for large banks and certain 
intermediate banks, the agencies propose evaluating a bank's retail 
lending performance on an aggregate basis outside retail lending areas, 
which include areas outside of facility-based or retail lending 
assessment areas.
    Third, the agencies propose to evaluate any qualifying community 
development financing and services activities that banks elect to 
conduct in broader areas beyond their facility-based assessment areas. 
Banks would receive consideration for qualifying activities anywhere in 
a state or multistate MSA in which they maintain a facility-based 
assessment area, when determining the conclusion for that state or 
multistate MSA. In addition, banks would receive consideration at the 
institution level for any qualifying activities conducted nationwide. 
For purposes of the Community Development Financing Test and Community 
Development Services Test, these areas outside of facility-based 
assessment areas are referred to as areas for eligible community 
development activity as specified in Sec.  __.18.
    The agencies believe this approach is preferable to an alternative 
approach that would require evaluating community development activities 
specifically within retail lending assessment areas. Building on the 
current practice of considering qualifying activities in broader 
statewide and regional areas, the agencies recognize that community 
development activities often benefit broader geographies, such as an 
entire state or region, which may not align with the geography of 
retail lending assessment areas. Furthermore, areas in greatest need of 
community development activities may not align with concentrations of 
bank lending where retail lending assessment areas are delineated. As a 
result, affording some additional flexibility may allow for community 
development activities that are higher in impact and responsiveness.

A. Background

1. Current Approach
    Pursuant to the CRA statute, banks have a continuing and 
affirmative obligation to help meet the credit needs of the local 
communities in which they are chartered. In their current CRA 
regulations, the agencies have interpreted local communities to include 
the areas surrounding a bank's main office, branches, and deposit-
taking ATMs, given the linkage between physical facilities and a bank's 
customer base. Accordingly, one of the CRA regulations' core 
requirements is that each bank delineate areas in which their CRA 
performance will be assessed, referred to in the CRA regulations as 
assessment areas.
    The current CRA regulations require that assessment areas not 
reflect illegal discrimination and not arbitrarily exclude low- or 
moderate-income census tracts. These provisions work congruently with 
ECOA and the FHA, to combat redlining. Consequently, it is crucial that 
banks appropriately delineate their assessment areas.
    The CRA regulations currently define assessment areas for retail 
banks in connection with a bank's main office, branches, and deposit-
taking ATMs and the surrounding areas in which it has originated or 
purchased a substantial portion of its loans. Assessment areas are 
generally composed of one or more counties, and in some cases, smaller 
political subdivisions. While a bank may currently adjust the 
boundaries of an assessment area to include only the portion of a 
political subdivision that it reasonably can be expected to serve, an 
assessment area must be composed of at least whole census tracts. 
Assessment areas for wholesale and limited purpose banks consist 
generally of one or more MSAs or metropolitan divisions or one or more 
contiguous political subdivisions, such as counties, cities, or towns 
in which the bank has its main office, branches, and deposit-taking 
ATMs. Banks whose business models predominantly focus on serving the 
needs of military personnel or their dependents who are not located 
within a defined geographic area may delineate their entire deposit 
customer base as their assessment area.
    Assessment areas are used in different ways for the current 
evaluation of retail lending, community development loans and 
investments, and retail and community development services. Examiners 
evaluate a bank's retail lending and retail services performance within 
assessment areas, and retail lending outside of its assessment areas is 
generally not currently part of a bank's CRA evaluation. Conversely, 
the current evaluation of community development performance--including 
community development loans, investments, and services--considers 
activities within assessment areas as well as broader statewide or 
regional areas that include the assessment areas.

[[Page 33917]]

The agencies recognize that community development organizations and 
programs are efficient and effective ways for banks to promote 
community development. These organizations and programs often operate 
on a statewide or even multistate basis. Therefore, a bank's activity 
is considered a community development loan or service or a qualified 
investment if it supports an organization or activity that covers an 
area that is larger than, but includes, the bank's assessment areas. 
The bank's assessment areas need not receive an immediate or direct 
benefit from the bank's participation in the organization or activity, 
provided that the purpose, mandate, or function of the organization or 
activity includes serving geographies or individuals located within the 
bank's assessment areas. In addition, activities in broader statewide 
or regional areas that do not benefit the assessment area may be 
considered if the bank has first met the needs of its assessment areas.
2. Stakeholder Feedback
    Many stakeholders have expressed that the current CRA regulations 
define assessment areas too narrowly, considering how banking is 
conducted today. Some stakeholders have pointed out that banks now use 
new kinds of facilities to collect deposits, such as remotely staffed 
virtual or interactive teller machines and other staffed physical 
facilities that are not referred to as branches. Stakeholders have 
expressed the importance of appropriately defining assessment areas to 
include locations where banks are collecting deposits to ensure that 
banks are evaluated on serving low- and moderate-income individuals and 
low- and moderate-income communities.
    Stakeholders differ on how much flexibility to give banks in 
delineating the size of a facility-based assessment area. For example, 
some industry stakeholders note that the ability to designate an 
assessment area that contains only part of a county, rather than an 
entire county, may allow a bank to achieve better alignment between its 
business strategy, capacity, and CRA activities. As a result, a number 
of industry stakeholders have supported continuing flexibility for 
small banks to delineate partial county assessment areas, and there is 
some support for also continuing to provide this flexibility to large 
banks. Community group stakeholders generally have not supported 
partial county assessment areas, and some have the view that partial 
county assessment areas may raise redlining risks and reduce incentives 
to lend and invest in low- and moderate-income communities.
    Stakeholders have generally supported the objective of revising the 
assessment area approach to include an evaluation of retail lending 
outside of assessment areas but have offered different recommendations 
on how to address this issue. Some stakeholders have favored approaches 
that would designate local assessment areas, akin to current assessment 
areas, in areas where a bank's level of business activity exceeded a 
certain threshold, such as in lending volume or market share. Others 
have preferred that retail lending performance outside of assessment 
areas be evaluated only on an aggregate basis, while others have 
opposed any changes to the current assessment area framework for retail 
lending. Stakeholders generally agree that any assessment area approach 
should confer a strong CRA obligation for all banks, regardless of 
business model.
    Stakeholders have also noted challenges with the current assessment 
area approach for evaluating community development financing activity. 
Some stakeholders have noted that there is a high degree of uncertainty 
regarding CRA consideration for community development activities 
outside of assessment areas. Stakeholders have stated that this 
uncertainty has contributed to low levels of community development 
financing in areas where few banks maintain an assessment area. In 
addition, stakeholders have expressed that the assessment area 
framework leads to high levels of competition for limited community 
development opportunities in some markets, especially those where banks 
that operate more broadly claim only a single main office assessment 
area. At the same time, stakeholders have also expressed that any 
updates to the approach should maintain a strong emphasis on community 
development financing and services within facility-based assessment 
areas.

B. Facility-Based Assessment Areas

    With certain changes discussed below, the agencies propose to 
maintain assessment areas where a bank has its main office, branches, 
and deposit-taking remote service facilities. As discussed further 
below, the agencies propose replacing the current term ``deposit-taking 
ATM'' with ``deposit-taking remote service facility.'' The agencies 
would refer to assessment areas for a bank's main office, branches, and 
deposit-taking remote service facilities as ``facility-based assessment 
areas'' in order to differentiate them from the new proposal for retail 
lending assessment areas, discussed below under proposed Sec.  __.17. 
The agencies propose retaining the practice that the facility-based 
assessment area delineated by a bank would be used to assess the bank's 
CRA performance, provided that the facility-based assessment area does 
not reflect illegal discrimination or arbitrarily exclude low- or 
moderate-income census tracts.
1. Facility-Based Assessment Area Requirements for a Bank's Main 
Office, Branches, and Deposit-Taking Remote Service Facilities
    Under the proposal, banks would continue to delineate assessment 
areas where they have their main office, branches, and deposit-taking 
remote service facilities. While the number of bank branches has 
declined in recent years,\152\ the agencies believe that branches 
remain an essential way of defining a bank's local communities. The 
definition of branch in proposed Sec.  _.12 would retain the existing 
regulatory language making it clear that staffed physical locations are 
deemed to constitute a branch, regardless of whether the physical 
location is a shared or unshared space.
---------------------------------------------------------------------------

    \152\ See Table 8 and Table 12 of Harris, et al. (2020), ``2020 
Summary of Deposits Highlights.'' FDIC Quarterly, Vol. 15, Issue 1, 
https://www.fdic.gov/analysis/quarterly-banking-profile/fdic-quarterly/2021-vol15-1/article2.pdf.
---------------------------------------------------------------------------

    The agencies are proposing to remove the examples of shared 
physical locations in the definition but do not intend for this removal 
to change or narrow the meaning of the regulation. Although the 
examples are illustrative only, the agencies believe they do not fully 
reflect the breadth of shared space locations that might exist under 
the proposed definition, particularly as new bank business models 
emerge in the future. The agencies intend that the examples provided in 
the current regulation of a mini-branch in a grocery store or a branch 
operated in conjunction with a local business or non-profit 
organization, as well as other staffed physical locations in shared 
spaces, would continue to require delineating a facility-based 
assessment area.
    In addition, the agencies propose adding the language ``open to, 
and accepts deposits from, the general public'' to the definition of 
branch in Sec.  __.12 to underscore that this definition would capture 
new bank business models, with different types of names for staffed 
physical locations, when those locations are open to the public and 
collect deposits from customers. The agencies do not view this as a 
change from current standards, but wish to emphasize that staffed 
physical locations open to the general public and

[[Page 33918]]

that collect deposits from customers constitute a branch under the 
proposed CRA regulations regardless of whether the location is referred 
to as a ``branch'' by the bank. By using the word ``public,'' the 
agencies intend for this proposed definition to also encompass any 
staffed physical location that is open to bank customers by appointment 
only. The proposed language ``open to the general public'' would also 
clarify that certain staffed physical locations that are only open to 
bank employees would not meet the definition of a branch. In addition, 
the agencies seek feedback on the treatment of business models where 
staff assist customers with making deposits on their phones or mobile 
devices while customers are onsite at staffed physical locations.
    As proposed, the updated CRA regulation would require facility-
based assessment areas for deposit-taking ``remote service 
facilities,'' defined in proposed Sec.  __.12. The proposed definition 
of remote service facilities would capture not only deposit-taking 
ATMs, but other deposit-taking facilities as well, such as interactive 
or virtual ATMs where customers can connect with bank staff through a 
terminal. The agencies believe that the term remote service facility, 
as proposed, appropriately captures a range of non-branch facilities, 
and the agencies propose using this term instead of ATM throughout the 
regulation.
    The agencies considered, but are not proposing, that a bank's loan 
production offices (LPOs) should automatically constitute a facility-
based assessment area, given the variety of ways LPOs are used by 
banks.
2. Geographic Standards for Facility-Based Assessment Areas
    The agencies propose that for large banks (including those that 
elect evaluation under an approved strategic plan) and wholesale or 
limited purpose banks, facility-based assessment areas would be 
required to consist of one or more MSAs or metropolitan divisions or 
one or more contiguous counties within an MSA, a metropolitan division, 
or the nonmetropolitan area of a state.\153\
---------------------------------------------------------------------------

    \153\ The agencies propose a definition of county in Sec.  __.12 
that means any county or statistically equivalent entity as defined 
by the U.S. Census Bureau.
---------------------------------------------------------------------------

    Consistent with current regulations and guidance, a facility-based 
assessment area may not extend substantially beyond an MSA or state 
boundary unless the assessment area is located in a multistate MSA 
\154\ or a combined statistical area.\155\ As a result, these banks 
would no longer be allowed to delineate a partial county for facility-
based assessment areas.
---------------------------------------------------------------------------

    \154\ 12 CFR __.41(e)(4); see also Q&A Sec.  __.41(e)(4)-1.
    \155\ Q&A Sec.  __.41(e)(4)-1.
---------------------------------------------------------------------------

    Compared to the current regulations (which allow assessment areas 
composed of partial political subdivisions, provided they include at 
least whole census tracts), the proposed requirement would create a 
more consistent standard for the delineation of assessment areas for 
large banks, wholesale or limited purpose banks, and large banks that 
elect to be evaluated pursuant to an approved strategic plan. This 
change also would encourage these banks to serve low- and moderate-
income individuals and census tracts in counties where their deposit-
taking facilities are located, and would help to safeguard and support 
fair lending. The proposed requirement for these banks to construct 
facility-based assessment areas out of whole counties also would 
support the proposed use of metrics and associated data to evaluate 
bank performance because this allows for data collection and reporting 
at the county level rather than at the census tract level.
    The agencies propose continuing to allow small and intermediate 
banks to delineate facility-based assessment areas that include a 
partial county. However, a facility-based assessment area that includes 
a partial county would continue to be required to consist of whole 
census tracts. The agencies believe this flexibility would be 
appropriate for small and intermediate banks, because it reflects these 
banks' lower asset levels and capacities.
    The agencies propose keeping the flexibility afforded a military 
bank to be able to delineate its customer base as its assessment area 
rather than a geographic delineation, consistent with the current CRA 
statute.\156\
---------------------------------------------------------------------------

    \156\ 12 U.S.C. 2902(4).
---------------------------------------------------------------------------

    In all cases and for all bank categories, the agencies propose 
retaining the prohibition that assessment areas may not reflect illegal 
discrimination or arbitrarily exclude low- or moderate-income census 
tracts. Arbitrarily excluding certain census tracts from an assessment 
area would reduce a bank's CRA obligation to serve its entire 
community, including low- or moderate-income individuals and census 
tracts, and the agencies consider this prohibition to be a vital 
component of the assessment area framework. Moreover, the agencies 
continue to recognize the importance of coordinating fair lending 
examinations with CRA examinations where feasible to ensure assessment 
areas do not reflect illegal discrimination.
Request for Feedback
    Question 39. Should both small and intermediate banks continue to 
have the option of delineating partial counties, or should they be 
required to delineate whole counties as facility-based assessment areas 
to increase consistency across banks?
    Question 40. Do the proposed definitions of ``remote service 
facility'' and ``branch'' include sufficient specificity for the types 
of facilities and circumstances under which banks would be required to 
delineate facility-based assessment areas, or are other changes to the 
CRA regulations necessary to better clarify when the delineation of 
facility-based assessment areas would be required?
    Question 41. How should the agencies treat bank business models 
where staff assist customers to make deposits on their phone or mobile 
device while the customer is onsite.
    Question 42. Should the proposed ``accepts deposits'' language be 
included in the definition of a branch?

C. Retail Lending Assessment Areas

    In Sec.  __.17, the agencies are proposing an approach for large 
banks that would establish retail lending assessment areas where a bank 
has concentrations of home mortgage or small business lending outside 
of its facility-based assessment areas. Large banks would be evaluated 
under the Retail Lending Test, and not under other performance tests, 
in these areas.
    The agencies consider it appropriate to evaluate large banks' 
retail lending in retail lending assessment areas on a local basis 
because it accords with CRA's focus on a bank's local performance in 
meeting community credit needs. A local evaluation promotes 
transparency by providing useful information to the public and banks 
regarding their performance in specific markets. The proposed approach 
of designating retail lending assessment areas is designed to provide a 
pathway to evaluate banks in a way that provides parity between banks 
that lend primarily through branches and those banks with different 
business models. Designating new retail lending assessment areas would 
ensure that, regardless of delivery channel, large banks would have 
evaluations of their retail lending in the local markets where they 
conduct significant retail lending business. In addition, as discussed 
in Sec.  __.22, for large banks, the agencies propose evaluating a 
bank's retail lending performance on an aggregate

[[Page 33919]]

basis in areas outside of facility-based and retail lending assessment 
areas. This is intended to ensure that bank lending that is too 
geographically dispersed to be evaluated on a local basis is still 
considered in the bank's evaluation.
    The agencies do not propose applying retail lending assessment area 
requirements to intermediate or small banks. For small banks, the 
agencies propose maintaining the status quo approach of evaluating a 
small bank in its facility-based assessment areas. For intermediate 
banks with more than 50 percent of lending outside of facility-based 
assessment areas, the agencies propose evaluating a bank's retail 
lending performance on an aggregate basis in areas outside of its 
facility-based assessment areas, rather than evaluating outside 
assessment area performance in specific MSAs or non-MSA portions of 
states where there are concentrations of lending. As discussed further 
in Section X, the agencies propose tailoring this approach so it 
applies to the subset of intermediate banks doing the most lending 
outside of facility-based assessment areas.
1. Overview of Requirements for Retail Lending Assessment Areas
    Under this proposal, large banks would be required to designate 
retail lending assessment areas that would consist of either: (i) The 
entirety of a single MSA excluding counties inside their facility-based 
assessment areas; or (ii) all of the nonmetropolitan counties in a 
single state, excluding counties inside their facility-based assessment 
areas, aggregated into a single retail lending assessment area. A large 
bank would be required to delineate a retail lending assessment area in 
any MSA or the combined non-MSA areas of a state, respectively, in 
which it originated in that geographic area, as of December 31 of each 
of the two preceding calendar years: (i) At least 100 home mortgage 
loans outside of its facility-based assessment areas; or (ii) at least 
250 small business loans outside of its facility-based assessment 
areas.
    The agencies believe retail lending assessment areas composed of 
MSAs and non-MSAs provide a way to evaluate retail lending that occurs 
outside of facility-based assessment areas on a local basis. In 
establishing a bank's retail lending assessment areas in non-MSAs, the 
agencies would combine all loans in nonmetropolitan counties within a 
state that are not part of a bank's facility-based assessment areas to 
determine whether the bank's lending levels in those areas are 
sufficient to trigger a retail lending assessment area, using the 100 
home mortgage loan or 250 small business loan thresholds. The agencies 
recognize that in many nonmetropolitan areas, retail lending is 
dispersed due to low population density and few bank branches. 
Combining non-MSA areas within a state is intended to ensure a 
sufficient volume of lending to require the delineation of retail 
lending assessment areas and ensure appropriate emphasis on these 
areas.\157\
---------------------------------------------------------------------------

    \157\ The agencies' analysis of home mortgage loan and small 
business loan data from 2017-2019 indicates that the share of bank 
loans in non-MSA areas that would be evaluated at the local level 
would have increased from 67 percent to 83 percent for home mortgage 
loans, and from 38 percent to 80 percent for small business loans in 
2019 under the proposed approach, due to adding retail lending 
assessment areas to existing facility-based assessment areas.
---------------------------------------------------------------------------

    Two Years of Data. With the objective of providing greater 
stability and certainty regarding the use of retail lending assessment 
areas over time, the agencies propose using two years of data to 
determine the need to establish retail lending assessment areas. 
Specifically, the proposal would be based on a bank's number of loans 
meeting the thresholds in both of the previous two calendar years 
before retail lending assessment areas would be required. This approach 
is intended to mitigate uncertainty for banks about when a retail 
lending assessment area could be designated and make retail lending 
assessment areas more durable over time. Furthermore, the agencies are 
considering publishing data, for example via an online dashboard, that 
would allow banks to assess how their current performance compares with 
relevant benchmarks in both facility-based assessment areas and retail 
lending assessment areas.
    Thresholds. The agencies propose thresholds of 100 home mortgage 
loans and 250 small business loans in two consecutive years to require 
the delineation of retail lending assessment areas. To determine these 
thresholds, the agencies considered what levels would appropriately 
align with the amount of lending typically evaluated in a facility-
based assessment area. The agencies also considered what threshold 
levels would result in a substantial percentage of loans that are 
outside of facility-based assessment areas being evaluated within a 
retail lending assessment area, as the agencies believe retail lending 
should be evaluated within a local context wherever feasible, based on 
a sufficient volume of loans and the size and business model of the 
bank.
    For the mortgage loan threshold, the agencies found that the median 
number of home mortgage loans within a facility-based assessment area 
by a large bank in 2019, defined using the asset threshold proposed in 
Sec.  __.12, was 114.\158\ The proposed threshold of 100 home mortgage 
loans would therefore establish a retail lending assessment area based 
on a similar level of lending present in a typical facility-based 
assessment area. In addition, as shown in Table 1, the proposed 
threshold of 100 home mortgage loans would result in approximately 50 
percent of bank home mortgage loans that are currently outside of 
facility-based assessment areas being evaluated within a retail lending 
assessment area, based on analysis of 2017-2019 lending data from the 
CRA Analytics Data Tables.\159\
---------------------------------------------------------------------------

    \158\ The median number of home mortgage loans and small 
business loans for facility-based assessment areas includes the 
banks' total inside assessment area loans for each whole MSA or 
state non-MSA area that contains at least one facility-based 
assessment area. For example, if a bank has two facility-based 
assessment areas in one MSA, the loan count for those two areas was 
summed and treated as one facility-based assessment area. The median 
number of loans in facility-based assessment areas without combining 
those in the same MSA or non-MSA area was smaller. This analysis 
included single-family and multifamily loan originations; however, 
the proposed rule would include only single-family (i.e., 1- to 4-
unit) originations.
    \159\ The CRA Analytics Data Tables combine HMDA data, CRA small 
business and small farm data, and manually extracted data from CRA 
performance evaluations. Bank and community attributes (e.g., 
assets, deposits, branching, and information about communities, such 
as percentage of low- and moderate-income households) and other 
third-party vendor data supplement the data tables. See https://www.federalreserve.gov/consumerscommunities/data_tables.htm.
---------------------------------------------------------------------------

    For small business lending, the agencies found that the median 
number of small business loans within a facility-based assessment area 
by a large bank in 2019, defined using the asset threshold proposed in 
Sec.  __.12, was 101. The agencies considered it appropriate to propose 
a higher threshold of 250 small business loans for the requirement to 
establish retail lending assessment areas because this level would 
result in a large share (62 percent) of bank loans that are currently 
outside of facility-based assessment areas being evaluated within a 
retail lending assessment area.
    Table 1 also shows, under different threshold options for home 
mortgage loans and small business loans, respectively: (i) The number 
of banks that would be affected by the delineation of a new retail 
lending assessment area; (ii) the number of retail lending assessment 
areas that would be delineated; (iii) the percentage of outside 
facility-based assessment area lending that would be included in retail 
lending assessment areas; and (iv) the percentage of lending overall 
that would be captured under either facility-based

[[Page 33920]]

assessment areas or retail lending assessment areas, on a combined 
basis.

                       Table 1 to Section _.17--Summary of Potential Effect of Different Retail Lending Thresholds on Large Banks
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Number of affected
                                                             banks (% of all)
                                                               Number of retail lending      Outside-    Lending
                                                           assessment areas (MSAs or state  facility-    covered
                                                                nonmetropolitan areas)          based         by
                                                                                            assessmen  facility-
                                                                                               t area  based and
                                                                                              lending     retail
                                                                                              covered    lending
                                                                                            by retail  assessmen
                                                                                              lending    t areas
                                                                                            assessmen      (% of
                                                                                              t areas      total
                                                                                                  (%)     loans)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 All banks     Median        Max  ..................  ..................
                                                                                ---------------------------------
Mortgage Loans:
    -50 loans............................................        148        46%      1,201          2        167                 62%                 92%
    -100 loans (proposed)................................         91         28        641          2        123                  50                  90
    -250 loans...........................................         38         12        204          2         59                  32                  86
Small business loans:
    -50 loans............................................        103         31      2,676          1        386                  76                  90
    -100 loans...........................................         48         15      1,771          5        337                  72                  88
    -250 loans (proposed)................................         26          8        877        9.5        233                  62                  84
    -500 loans...........................................         18          5        488          7        158                  54                  81
                                                          ----------------------------------------------------------------------------------------------
        Total (meeting either mortgage or small business         104         31      1,382          6        233                  60                  86
         thresholds).....................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The Retail Lending Assessment Areas are areas that would have been delineated in 2019 based on 2017 and 2018 data (two-year lending thresholds)
  using the CRA Analytics Data Tables. The bank lending volume was calculated using the 2017-2019 data. The sample includes banks with total assets of
  at least $2 billion in both 2017 and 2018. Wholesale banks, limited purpose banks, and military banks were excluded from this analysis.

    Major Product Line. To provide a consistent evaluation of large 
banks' retail lending across different types of assessment areas, the 
agencies would use the major product line standard, discussed in 
Section VIII, to determine which retail lending product lines would be 
evaluated in a retail lending assessment area. As with facility-based 
assessment areas, the major product line standard is intended to ensure 
that a bank's performance in retail lending assessment areas reflects 
performance over whichever of a bank's retail lending products it 
specializes in locally.
    The agencies seek feedback on an alternative approach to 
identifying major product lines in retail lending assessment areas. 
Under the alternative approach, rather than evaluating all of a bank's 
major product lines in a retail lending assessment area, the agencies 
would evaluate only home mortgage and small business lending. In 
addition, under the alternative approach, the agencies would only 
evaluate home mortgage lending if the bank surpassed the proposed 100 
home mortgage loans threshold in the retail lending assessment area and 
would only evaluate small business lending if the bank surpassed the 
proposed 250 small business loans threshold. This is in contrast to the 
proposed approach, which would evaluate all major product lines whether 
the bank surpasses either or both of the proposed retail lending 
assessment area thresholds. The agencies considered that this 
alternative would more narrowly tailor the evaluation approach in 
retail lending assessment areas.
    Option for Additional Tailoring. The agencies seek feedback on an 
alternative approach that would tailor the retail lending assessment 
area approach to exempt certain large banks that have a significant 
majority, such as at least 80 or 90 percent, of their retail loans 
inside their facility-based assessment areas. This exemption could 
tailor the retail lending assessment area approach so it does not 
include banks that are primarily branch-based, and therefore, the 
bank's overall Retail Lending Test conclusion could be reasonably 
derived by focusing on the activity within its facility-based 
assessment areas. A trade-off of this alternative is that it could 
exempt large banks which, despite having made a relatively low share of 
their loans outside of their facility-based assessment areas, have a 
large volume of such loans. As a result, these loans would be exempt 
from local evaluation, especially in smaller MSAs and rural areas. 
Under such an alternative, the agencies would evaluate the outside 
lending under the outside retail lending area approach described below.
2. Evaluation of Outside Lending of Large Banks and Certain 
Intermediate Banks
    The agencies propose that retail loans that are located outside of 
any facility-based assessment areas or retail lending assessment areas 
for a large bank, including a large bank that elects evaluation under 
an approved strategic plan, and outside of any facility-based 
assessment areas for intermediate banks with substantial outside 
assessment area lending, would be evaluated on an aggregate basis at 
the institution level, as discussed in Section X.\160\ The agencies 
considered that the inclusion of lending outside a bank's facility-
based assessment areas or retail lending assessment areas in the 
evaluation framework would allow for a comprehensive assessment of a 
bank's lending to low- and moderate-income individuals and communities. 
This approach is also intended to ensure that a large bank's lending 
that is too geographically dispersed to be examined within an 
assessment area would still be evaluated.
---------------------------------------------------------------------------

    \160\ Under the proposed approach, approximately 10 percent of 
large banks' home mortgage loans and 16 percent of small business 
loans during 2017-2019 would not be captured by facility-based or 
retail lending assessment areas.
---------------------------------------------------------------------------

3. Descriptive Analysis of Lending to Low- and Moderate-Income 
Borrowers or Smaller Businesses, and in Low- and Moderate-Income Census 
Tracts
    As reflected in Table 2, the agencies conducted a descriptive 
analysis showing the levels of lending to low- and moderate-income 
borrowers and small businesses or in low- and moderate-income census 
tracts as compared across facility-based assessment areas, retail 
lending assessment areas, and outside of any assessment area. This 
analysis does not account for underlying differences between a bank's 
facility-based assessment areas and other areas that could affect low- 
and moderate-income lending levels, including the percentage of low- 
and moderate-income individuals and census tracts. The

[[Page 33921]]

percentage of bank home mortgage loans to low- and moderate-income 
borrowers was slightly higher in facility-based assessment areas (21 
percent) than in areas that would have been delineated as retail 
lending assessment areas (19 percent). The share of bank home mortgage 
loans in low- and moderate-income census tracts showed a similar 
pattern. For bank small business loans, the gap was greater in terms of 
the share of loans to smaller businesses in facility-based assessment 
areas (62 percent) and in retail lending assessment areas (46 percent). 
The gap in terms of the share of loans to small businesses in low- and 
moderate-income census tracts was modest, at 24 percent for facility-
based assessment areas and 22 percent for retail lending assessment 
areas.

 Table 2 to Section _.17--Large Bank Low- and Moderate-Income Lending in Facility-Based Assessment Areas, Retail
                                    Lending Assessment Areas, and Other Areas
----------------------------------------------------------------------------------------------------------------
                                                                            Share of loans to
                                                                            low- and moderate- Share of loans in
                                                          Total number of    income borrowers  low- and moderate-
                                                         loans (2017-2019)      or smaller       income census
                                                                              businesses (%)       tracts (%)
----------------------------------------------------------------------------------------------------------------
Mortgage Loans:
 
    Facility-based Assessment Areas....................          4,777,269                21%                15%
    Retail Lending Assessment Areas....................            634,258                 19                 14
    Areas outside Bank Assessment Areas................            631,062                 17                 13
                                                        --------------------------------------------------------
        Total..........................................          6,042,589                 20                 14
Small Business Loans:
 
    Facility-based Assessment Areas....................          7,848,271                 62                 24
    Retail Lending Assessment Areas....................          3,490,558                 46                 22
    Areas outside Bank Assessment Areas................          2,097,510                 40                 21
                                                        --------------------------------------------------------
        Total..........................................         13,436,339                 54                 23
----------------------------------------------------------------------------------------------------------------
Note: The Retail Lending Assessment Areas are areas that would have been delineated in 2019 based on the 2017
  and 2018 data (two-year lending thresholds) from CRA Analytics Data Tables. The bank lending volume was
  calculated using the 2017-2019 data. The sample includes banks with total assets of at least $2 billion in
  both 2017 and 2018. Wholesale banks, limited purpose banks, and military banks were excluded.

Request for Feedback
    Question 43. If a bank's retail lending assessment area is located 
in the same MSA (or state non-MSA area) where a smaller facility-based 
assessment area is located, should the bank be required to expand its 
facility-based assessment area to the whole MSA (or non-MSA area) or 
should it have the option to designate the portion of the MSA that 
excludes the facility-based assessment area as a new retail lending 
assessment area?
    Question 44. Should a bank be evaluated for all of its major 
product lines in each retail lending assessment area? In the 
alternative, should the agencies evaluate home mortgage product lines 
only when the number of home mortgage loans exceeds the proposed 
threshold of 100 loans, and evaluate small business loans only when the 
number of small business loans exceeds the proposed threshold of 250 
loans?
    Question 45. The agencies' proposals for delineating retail lending 
assessment areas and evaluating remaining outside lending at the 
institution level for large banks are intended to meet the objectives 
of reflecting changes in banking over time while retaining a local 
focus to CRA evaluations. What alternative methods should the agencies 
consider for evaluating outside lending that would preserve a bank's 
obligation to meet the needs of its local communities?
    Question 46. The proposed approach for delineating retail lending 
assessment areas would apply to all large banks with the goal of 
providing an equitable framework for banks with different business 
models. Should a large bank with a significant majority of its retail 
loans inside of its facility-based assessment areas be exempted from 
delineating retail lending assessment areas? If so, how should an 
exemption be defined for a large bank that lends primarily inside its 
facility-based assessment area?

D. Areas for Eligible Community Development Activity

    The agencies propose to evaluate the community development 
performance of a large bank, including a large bank that elects 
evaluation under an approved strategic plan, a wholesale or limited 
purpose bank, or an intermediate bank that elects evaluation under the 
Community Development Financing Test within each facility-based 
assessment area, and also to consider any additional qualifying 
activities that the banks elect to conduct outside of their facility-
based assessment areas, referred to as ``areas for eligible community 
development activity'' in Sec.  __.18. The community development 
activities outside of a bank's facility-based assessment areas would 
not be required to serve the bank's retail lending assessment areas or 
any other specific geographies, and would be considered to inform 
state, multistate MSA, and institution level conclusions. This approach 
is intended to achieve a careful balance between emphasizing a bank's 
performance in its facility-based assessment areas, while also allowing 
banks the option of conducting qualifying community development 
activities outside of their facility-based assessment areas in broader 
geographic areas. The approach is described in detail in Sec. Sec.  
__.24 and __.26.
    The agencies recognize that the current approach to considering 
activities in broader statewide and regional areas has been beneficial 
from the standpoint of allowing a degree of flexibility but has also 
contributed to uncertainty about whether activities will qualify. For 
example, under the current approach, if a bank has conducted an 
activity in a broader statewide or regional area that examiners 
determine does not benefit an assessment area and the examiners 
determine that the bank has not already met the needs of its assessment 
areas, the bank may not receive consideration for that activity. In 
addition, banks may receive consideration at the assessment area level 
for an activity that serves a broader statewide or regional area 
provided that the assessment area is within the scope of the activity, 
even if the activity cannot be shown to have an immediate benefit to 
assessment area.

[[Page 33922]]

    Under the proposed approach, the agencies would consider all 
qualifying activities, regardless of the geographies served. The 
agencies would clearly distinguish between qualifying activities that 
serve a facility-based assessment area and those that serve other areas 
and would establish clear standards for performance for facility-based 
assessment areas, states, multistate MSAs, and at the institution 
level. This approach is intended to create additional flexibility for 
banks to conduct qualifying activities outside of facility-based 
assessment areas, while also more directly emphasizing facility-based 
assessment area performance.
    In determining the proposed assessment area approach for evaluating 
community development activities, the agencies considered the benefits 
of additional flexibility and certainty relative to the current 
approach. Granting additional flexibility may allow banks to identify 
impactful community development opportunities that serve geographies 
with high unmet community development needs, including geographies 
where few banks currently have facility-based assessment areas or 
concentrations of retail loans. Flexibility would also allow banks to 
identify those opportunities where the bank's business model, strategy, 
and expertise are well aligned with a community need.
    While the agencies consider the option of flexibility to be 
beneficial for all banks' community development activities, it may be 
especially beneficial for the community development activities that are 
conducted by banks that operate primarily or entirely without branches. 
Under the proposed approach, these banks would continue to be evaluated 
in their facility-based assessment areas, but would also have the 
ability to conduct activities that receive CRA consideration in other 
markets. The agencies consider that the additional flexibility and 
certainty of this change could help to address a stakeholder concern 
regarding high concentrations of community development activities in 
some markets, including those where the main offices of internet and 
wholesale banks are located, and where there are significant unmet 
needs in other markets.
    To affirm the current obligation that large, intermediate, and 
wholesale and limited purpose banks must meet the community development 
needs of their facility-based assessment areas, the agencies propose a 
number of provisions for the performance tests and overall ratings 
approach that emphasize assessment area performance, discussed in 
Sec. Sec.  __.24 and _.26. For example, the agencies would develop a 
conclusion in each facility-based assessment area for the applicable 
community development tests, which would be incorporated directly into 
institution ratings.
Request for Feedback
    Question 47. The agencies propose to give CRA consideration for 
community development financing activities that are outside of 
facility-based assessment areas. What alternative approaches would 
encourage banks that choose to do so to conduct effective community 
development activities outside of their facility-based assessment 
areas? For example, should banks be required to delineate specific 
geographies where they will focus their outside facility-based 
assessment area community development financing activity?
    Question 48. Should all banks have the option to have community 
development activities outside of facility-based assessment areas 
considered, including all intermediate banks, small banks, and banks 
that elect to be evaluated under a strategic plan?

VII. Performance Tests, Standards, and Ratings in General

    The agencies propose to tailor the evaluation framework based on 
three bank size categories, revised from the current bank size 
categories used in CRA evaluations. The agencies also propose a 
tailored approach for wholesale banks, limited purpose banks, and banks 
that are approved to be evaluated under a strategic plan. The agencies 
recognize the importance of an evaluation framework that reflects 
differences in bank capacities, business models, and strategies. In 
addition, the agencies also recognize the importance of ensuring that 
banks meet their affirmative obligation under the CRA to meet the 
credit needs of their communities, which may encompass a wide range of 
retail lending products, services, and community development 
activities.
    Proposed Sec.  __.21 details the proposed evaluation framework for 
each bank category and describes the treatment of bank subsidiaries, 
affiliates, consortiums, and third parties. In addition, this section 
of the proposed regulation provides performance context information 
considered, describes the categories for bank ratings, and outlines the 
requirement that bank CRA activities be conducted in a safe and sound 
manner.

A. Performance Tests, Tailoring to Bank Size, and Asset Thresholds

1. Current Approach
    The current evaluation approach includes different examination 
processes for banks of different sizes and business models. Large banks 
are evaluated under three performance tests: The lending test, which 
assesses retail and community development loans; the investment test, 
which assesses qualified investments; and the service test, which 
assesses retail services and community development services. 
Intermediate small banks are evaluated under a lending test and a 
community development test, which assesses community development loans, 
qualified investments, and community development services. Small banks 
are evaluated under a single lending test. Wholesale and limited 
purpose banks are evaluated under a single community development test 
which assesses community development loans, qualified investments, and 
community development services. In addition, any bank may seek approval 
to be evaluated under a strategic plan.
2. Proposed Bank Categories and Evaluation Framework
    The agencies propose an evaluation framework that is tailored based 
on bank size and business model, with different performance tests 
applied to banks of different sizes and to wholesale and limited 
purpose banks. The agencies are proposing updates to certain 
performance tests to incorporate standardized metrics and benchmarks. 
The agencies would assign conclusions for each performance test for 
each of a bank's facility-based assessment areas, states and multistate 
MSAs and at the institution level, as applicable. For large banks, the 
agencies would also assign Retail Lending Test conclusions for each 
retail lending assessment area. For large banks and certain 
intermediate banks, the agencies would also assign Retail Lending Test 
conclusions for outside retail lending areas.
    Large Banks. The agencies propose four performance tests for large 
banks: A Retail Lending Test, a Retail Services and Products Test, a 
Community Development Financing Test, and a Community Development 
Services Test. Each of the four tests measures a different aspect of 
how responsive a bank's retail and community development activities are 
to the credit needs of its local communities. This proposed approach 
reflects a similar breadth of evaluation approaches as compared to the 
current framework that applies to large banks. Given their financial 
resources and market position, these banks collectively play a 
significant role in serving low- and moderate-income individuals and 
communities. Furthermore, banks in this category generally have the 
capacity to deliver a range of credit products and

[[Page 33923]]

services that are covered under the four performance tests.
    The agencies propose that some new requirements would apply only to 
large banks with assets of over $10 billion, reflecting the increased 
resources of these institutions. For example, the agencies propose that 
only large banks with assets of over $10 billion would have 
requirements for deposits data, retail services data on digital 
delivery systems, retail services data on responsive deposit products, 
and community development services data. In addition, the agencies 
propose that banks with assets of over $10 billion, including wholesale 
and limited purpose banks, would have automobile lending data 
requirements.
    The proposed Retail Lending Test would measure how well a bank's 
retail lending meets the credit needs of low- and moderate-income 
individuals, small businesses and farms, and low- and moderate-income 
geographies through analysis of lending volume and lending 
distribution. To increase consistency in evaluations, the agencies 
propose that the Retail Lending Test rely on a set of metrics and 
community and market benchmarks that are grounded in local data. A 
bank's retail lending distribution metrics, calculated using the bank's 
number of loans, would be compared to local community and market 
benchmarks as proposed in Sec.  __.22 and discussed in Section IX. The 
agencies also propose that additional factors discussed in Sec.  
__.22(e) be considered when evaluating a bank's retail lending 
performance. Retail Lending Test conclusions would be assigned for each 
of a large bank's facility-based assessment areas, retail lending 
assessment areas, and outside retail lending area, as well as at the 
state, multistate MSA, and institution levels, as applicable.
    The proposed Community Development Financing Test would assess how 
well a bank meets community development financing needs. As proposed, 
the Community Development Financing Test would use metrics and 
benchmarks to standardize the review of community development loans and 
investments, while also incorporating a qualitative impact review of 
community development financing activities to complement the dollar-
based community development financing metric and benchmarks. As 
proposed in Sec.  __.24 and discussed in Section XII, conclusions would 
reflect the agencies' qualitative assessments of a bank's metric 
relative to the benchmarks and impact review. Conclusions would be 
assigned for each of a bank's facility-based assessment areas, states, 
and multistate MSAs, and at the institution level, as applicable.
    The proposed Retail Services and Products Test and Community 
Development Services Test would evaluate how well a bank's products and 
services meet community credit and community development needs, 
respectively. The agencies propose revised standards for these tests to 
reflect changes in banking over time and to introduce standard metrics, 
as well as benchmarks for the Retail Services and Products Test, to 
allow a more consistent evaluation approach.
    The agencies propose additional tailoring of the Retail Services 
and Products Test, as well as the Community Development Services Test, 
reflecting the increased resources of large banks with assets of over 
$10 billion. Under the Retail Services and Products Test, the agencies 
propose that all large banks would be evaluated on their branch and 
remote service facility availability, as well as responsive credit 
products. The agencies propose that the following parts of this 
evaluation, as well as the associated data requirements, would be 
required only for large banks with assets of over $10 billion: (i) 
Digital and other delivery systems; and (ii) responsive deposit 
products. For large banks with assets of $10 billion or less, these 
components would be optional.
    Under the Community Development Services Test, the agencies propose 
that only large banks with assets of over $10 billion would be required 
to collect, maintain, or report community development services data in 
a standardized format.
    Section __.23 addresses the proposed Retail Services and Products 
Test and is discussed in Section XI. Section __.25 addresses the 
proposed Community Development Services Test and is discussed in 
Section XIII. Conclusions for the Retail Services and Products Test and 
Community Development Services Test would be assigned for each of a 
bank's facility-based assessment areas, states, and multistate MSAs, 
and at the institution level, as applicable.
    Intermediate Banks. The agencies propose to evaluate intermediate 
banks under the proposed Retail Lending Test in Sec.  __.22 and the 
current intermediate small bank community development test as described 
in Sec.  __.29 or, at the bank's option, evaluation under the proposed 
Community Development Financing Test as described in Sec.  __.24. If an 
intermediate bank opts to be evaluated under the proposed Community 
Development Financing Test, the bank may request additional 
consideration at the institution level for community development 
services activities as described in Sec.  __.25 and for any retail 
services activities that serve low- or moderate-income individuals or 
communities (i.e., activities covered under the proposed Retail 
Services and Products Test in proposed Sec.  __.23) when bank 
performance is at least satisfactory without consideration of such 
activities.
    The agencies would tailor certain features of the Retail Lending 
Test and Community Development Financing Test for intermediate banks, 
including by maintaining current data collection, maintenance, and 
reporting requirements for intermediate banks that do not elect to be 
evaluated under the Community Development Financing Test, as discussed 
in Sec.  __42. By applying the Retail Lending Test to banks of this 
size, the proposal is intended to improve the clarity, consistency, and 
transparency of the evaluation of retail lending. The agencies believe 
retail lending remains a core part of a bank's affirmative obligation 
under the CRA to meet the credit needs of their entire communities. At 
the same time, the agencies recognize that, compared to large banks, 
intermediate banks might not offer as wide a range of retail products 
and services, have a more limited capacity to conduct community 
development activities, and may focus on the local communities where 
their branches are located.
    Small Banks. The agencies propose to evaluate small banks under the 
current lending test as the default evaluation method. However, small 
banks would have the ability to opt into the proposed Retail Lending 
Test. Consistent with the current approach, small banks would continue 
to have the ability to request additional consideration at the 
institution level for qualifying community development activities or 
retail services activities that serve low- or moderate-income 
individuals and communities, when bank performance is at least 
satisfactory without consideration of such activities.
    Allowing small banks the option of being evaluated under the 
proposed Retail Lending Test is intended to ensure that small banks 
have available a metrics-based approach to increase the clarity, 
consistency, and transparency of how their retail loans are evaluated. 
The agencies recognize the capacity constraints of these banks, and 
their more targeted focus on retail lending as opposed to the types of 
activities evaluated by other performance tests. To tailor the test to 
small banks' more limited capacities, the agencies propose to evaluate 
a small bank that opts into the Retail Lending Test under the 
provisions that pertain to an

[[Page 33924]]

intermediate bank, with the exception that no small bank would be 
evaluated on its retail lending outside of its assessment areas, 
regardless of the percentage of the bank's overall retail lending it 
comprises.
    Wholesale and Limited Purpose Banks. As proposed in Sec.  __.26 and 
discussed further in Section XIV, the agencies propose evaluating 
wholesale and limited purpose banks under only the Community 
Development Financing Test for Wholesale and Limited Purpose Banks, 
which would retain much of the current qualitative approach for this 
evaluation, with the addition of a quantitative metric at the 
institution level to improve consistency. The agencies also propose 
giving wholesale and limited purpose banks the option to have community 
development service activities in Sec.  __.25 considered to inform a 
bank's overall institution rating when bank performance is at least 
satisfactory without consideration of community development service 
activities.
3. Alternative Evaluation Under a CRA Strategic Plan
    The agencies propose retaining the option for any bank to elect 
evaluation under an approved CRA strategic plan as discussed in Sec.  
__.27 and in Section XV. The agencies propose to retain this 
alternative evaluation method to give banks flexibility to meet their 
CRA obligations in a manner that is tailored to community needs and 
opportunities as well as their own capacities, business strategies, and 
expertise. To ensure that banks evaluated under a strategic plan meet 
their CRA obligations, the agencies propose that strategic plans 
incorporate a metrics-based analysis of a bank's lending to low- or 
moderate-income individuals and communities. In addition, large banks 
evaluated under an approved strategic plan would be expected to 
delineate both facility-based and retail lending assessment areas, as 
applicable. For purposes of data collection, maintenance, and reporting 
requirements under proposed Sec.  __.42, the agencies believe that a 
bank evaluated under an approved strategic plan should have the same 
requirements as another bank of the same asset sizes. For example, a 
bank evaluated under an approved strategic plan with assets of over $10 
billion would have the same data collection, maintenance, and reporting 
requirements of a large bank with assets of over $10 billion.
Conclusions for Tests
    Under the proposal, the agencies would assign conclusions on each 
performance test in facility-based assessment areas, states, multistate 
MSAs, and at the institution level, as applicable. In addition, Retail 
Lending Test conclusions would also be assigned to retail lending 
assessment areas and outside retail lending areas, as applicable. The 
agencies propose retaining the five categories for conclusions composed 
of ``Outstanding,'' ``High Satisfactory,'' ``Low Satisfactory,'' 
``Needs to Improve,'' and ``Substantial Noncompliance.'' The proposed 
``High Satisfactory'' and ``Low Satisfactory'' conclusions allow the 
agencies to better differentiate very good performance from performance 
at the lower end of the satisfactory range as compared to developing 
conclusions with only four categories including a single satisfactory 
category.
4. Asset Thresholds
    As defined in proposed Sec.  __.12, the agencies propose to raise 
the asset threshold for each bank category. The agencies intend to 
balance the goals of providing more clarity, consistency, and 
transparency in the evaluation process, with minimizing the associated 
data requirements for smaller banks. Specifically, the proposal would 
modify the definition of a small bank to increase the asset threshold 
from $346 million to $600 million in assets. The proposal would create 
a new intermediate bank category that would include banks of at least 
$600 million and not more than $2 billion. The proposed intermediate 
bank threshold would be higher than the current intermediate small bank 
category, which currently includes banks with assets between $346 
million and $1.384 billion. Large banks would be defined as banks with 
assets of at least $2 billion, which is higher than the current large 
bank threshold of $1.384 billion. A calculation of a bank's assets 
would be based on its average assets over four quarters of the calendar 
year, for two consecutive calendar years. If a bank's average assets 
correspond to two different bank size categories in two consecutive 
years, the bank would be considered to belong to the smaller of the two 
size categories. The agencies would also use this approach for 
calculating a bank's assets for purposes of distinguishing between 
large banks with assets of $10 billion or less from large banks with 
assets of over $10 billion for purposes of further tailoring certain 
elements of the proposal, as discussed in each respective section. As 
also specified in proposed Sec.  __.12, the agencies propose that both 
the $600 million asset size threshold and the $2 billion asset size 
threshold would be adjusted annually for inflation (based on the annual 
percentage change in a measure of the Consumer Price Index).
    The agencies are proposing changes to the definition of a small 
bank in recognition of the potential challenges associated with 
regulatory changes for banks with more limited capacity. The agencies 
are in the process of seeking approval from the SBA to use the proposed 
$600 million threshold, adjusted annually for inflation, rather than 
the SBA's recently updated size standards, which include a $750 million 
threshold for small banks.\161\ In requesting this approval, the 
agencies believe that it is appropriate to evaluate banks with assets 
of between $600 million and $750 million under the proposed 
intermediate banks standards, and that these banks have the capacity to 
conduct community development activities, as would be a required 
component of the evaluation for intermediate, but not small banks. 
Based on an analysis of current bank size characteristics, the agencies 
estimate that the proposed change to the small bank asset threshold 
would result in approximately 778 banks, representing 2 percent of all 
deposits, transitioning from the current intermediate-small bank 
category to the proposed small bank category.\162\
---------------------------------------------------------------------------

    \161\ 87 FR 18627, 18830 (Mar. 31, 2022). The SBA revised the 
size standards applicable to small commercial banks and savings 
institutions, respectively, from $600 million to $750 million, based 
upon the average assets reported on such a financial institution's 
four quarterly financial statements for the preceding year. The 
final rule has a May 2, 2022, effective date.
    \162\ Estimates are based on average assets from 2020 and 2021 
Call Report data and the 2021 FDIC's Summary of Deposits.
---------------------------------------------------------------------------

    At the same time, by replacing the current intermediate small bank 
category with a new intermediate bank category that starts at a higher 
asset size threshold, the proposal reflects the agencies' view that 
banks of this size should have meaningful capacity to conduct community 
development financing, as they do under the current approach.
    In proposing to increase the threshold for large banks, the 
agencies considered that banks of this size generally have the capacity 
to conduct the range of activities that would be evaluated under each 
of the four applicable performance tests. The agencies also recognize 
that the proposed Retail Lending Test and Community Development 
Financing test would require new data collection and reporting and 
propose a higher asset threshold because smaller large banks may have 
more limited capacity. The agencies estimate that the proposed increase 
in the large bank threshold would result in approximately 216

[[Page 33925]]

banks representing approximately 2 percent of all deposits 
transitioning from the current large bank category to the proposed 
intermediate bank category. The agencies considered that increasing the 
large bank asset threshold beyond the proposed $2 billion level would 
remove a greater share of banks that play a significant role in 
fulfilling low- and moderate-income credit needs in local areas from 
the more comprehensive evaluation included in the proposed large bank 
evaluation approach.
Request for Feedback
    Question 49. The agencies' proposed approach to tailoring the 
performance tests that pertain to each bank category aims to 
appropriately balance the objectives of maintaining strong CRA 
obligations and recognizing differences in bank capacity. What 
adjustments to the proposed evaluation framework should be considered 
to better achieve this balance?
    Question 50. The proposed asset thresholds consider the associated 
burden related to new regulatory changes and their larger impact on 
smaller banks, and it balances this with their obligations to meet 
community credit needs. Are there other asset thresholds that should be 
considered that strike the appropriate balance of these objectives?
    Question 51. Should the agencies adopt an asset threshold for small 
banks that differs from the SBA's size standards of $750 million for 
purposes of CRA regulations? Is the proposed asset threshold of $600 
million appropriate?

B. Affiliate and Other Considerations

1. Current Approach for Evaluating Affiliate Activities
    Under the current CRA regulations, banks are not required to 
include the activities of their affiliates in the evaluation of their 
CRA performance. Instead, any bank may elect to include affiliate 
lending,\163\ community development investments,\164\ and community 
development services,\165\ as applicable, in the bank's evaluation. A 
bank provides the data necessary for evaluation if it elects to have 
the CRA activities of its affiliates considered.
---------------------------------------------------------------------------

    \163\ 12 CFR __.22(c). A bank may elect to have only a 
particular category of its affiliate's lending considered. The basic 
categories of loans that can be considered are home mortgage loans, 
small business loans, small farm loans, community development loans 
and the five categories of consumer loans (automobile loans, credit 
card loans, home equity loans, other secured loans, and other 
unsecured loans). See Q&A Sec.  __.22(c)(1)-1.
    \164\ 12 CFR __.23(c).
    \165\ 12 CFR __.24(c).
---------------------------------------------------------------------------

    Affiliate activities evaluated under the current CRA framework are 
subject to certain constraints.\166\ In general, an affiliate may not 
claim a loan origination or purchase claimed by another affiliate; 
however, a bank may count as a purchase a loan originated by an 
affiliate that the bank subsequently purchases (even if the affiliate 
claimed the origination for CRA purposes), or count as an origination a 
loan later sold to an affiliate (even if the affiliate also claims the 
purchase for CRA purposes), provided the same loans are not sold 
several times to inflate their value for CRA purposes.\167\ In 
addition, if a bank elects to have a particular category of affiliate 
lending in a particular assessment area considered, all loans of that 
type made by all of its affiliates in that particular assessment area 
must be considered.\168\ For example, the bank cannot elect to include 
only home mortgage loans to low- or moderate-income individuals or in 
low- or moderate-income areas made by its affiliates and not include 
home mortgage loans to middle- and upper-income individuals or in 
middle- and upper-income areas.\169\
---------------------------------------------------------------------------

    \166\ 12 CFR __.22(c); __.23(c); and __.24(c).
    \167\ See Q&A Sec.  __.22(c)(2)(i)-1.
    \168\ 12 CFR __.22(c)(2)(ii).
    \169\ See Q&A Sec.  __.22(c)(2)(i)-1.
---------------------------------------------------------------------------

    There are differing views among stakeholders on how to evaluate a 
bank's affiliates' activities. Some stakeholders have expressed support 
for permitting banks to have the option to have their affiliates' 
activities considered in their CRA evaluations. These stakeholders 
maintain that activities of bank affiliates are important in the 
overall strategy of a bank to meet the needs of the communities it 
serves. Other stakeholders have disagreed with the optionality of 
including affiliate activities, particularly affiliate lending, stating 
that doing so creates deficiencies in the examination process of a bank 
and could lead to abuse, because there are no consequences for 
affiliates that do not address the credit needs of low- and moderate-
income individuals and in low- and moderate-income communities.
2. Treatment of Certain Bank Subsidiaries
    Regarding the treatment of certain bank subsidiaries described 
below, the agencies propose: (i) Requiring the inclusion of relevant 
activities of a state member bank's ``operations subsidiaries'' and a 
national bank's, Federal savings association's, state non-member 
bank's, and state savings association's ``operating subsidiaries'' 
(referred to collectively as ``bank subsidiaries'' in this 
SUPPLEMENTARY INFORMATION) in the evaluation of the relevant bank's CRA 
performance; and (ii) maintaining the current flexibility for banks to 
choose to include or exclude the relevant activities of other bank 
affiliates.\170\
---------------------------------------------------------------------------

    \170\ The proposed rule defines these terms in proposed Sec.  
__.12.
---------------------------------------------------------------------------

    The agencies believe that where banks exercise a high level of 
ownership, control, and management of their subsidiaries, the 
activities of those subsidiaries should reasonably be attributable to 
the bank. Moreover, the agencies believe that evidence of 
discriminatory or illegal practices by these bank subsidiaries should 
be factored into a bank's performance evaluation, because their 
activities would be considered to be a component of the bank's own 
operations.
    In this regard, the agencies are proposing to add a definition of 
``operations subsidiary'' to the Board's CRA regulation and a 
definition of ``operating subsidiary'' to the FDIC's and OCC's CRA 
regulations to identify those bank affiliates whose activities would be 
required to be attributed to a bank's CRA performance.
    Specifically, as defined in proposed Sec.  __.12 of the Board's CRA 
regulation, an ``operations subsidiary'' would mean an organization 
designed to serve, in effect, as a separately incorporated department 
of the bank, performing functions that the bank is empowered to perform 
directly at locations at which the bank is authorized to engage in 
business. As defined in proposed Sec.  25.12 of the OCC's CRA 
regulation, an ``operating subsidiary'' would mean an operating 
subsidiary as described in: (i) 12 CFR 5.34 in the case of an operating 
subsidiary of a national bank; and (ii) 12 CFR 5.38 in the case of an 
operating subsidiary of a Federal or state savings association. As 
defined in proposed Sec.  345.12 of the FDIC's CRA regulation, 
``operating subsidiary'' for state non-member banks would have the same 
meaning as given to the term in 12 CFR 5.34 of the OCC's regulations.
    Although the FDIC's regulations define ``subsidiary'' under 12 CFR 
362.2(r), the definition includes all subsidiaries, not just operating 
subsidiaries. Neither the FDIC's regulations nor its implementing 
statute defines an ``operating'' or ``operations'' subsidiary. The FDIC 
and OCC, therefore, seek comment on whether, for purposes of CRA, the 
proposed definition of ``operating subsidiary'' for

[[Page 33926]]

state non-member banks and state savings associations would be the best 
approach, or whether the FDIC and OCC should consider alternative 
definitions of operating subsidiary for FDIC-regulated entities for 
purposes of their CRA regulations. For example, the FDIC seeks feedback 
regarding whether, for purposes of CRA, the FDIC should develop its own 
definition of operating subsidiary or, alternatively, adopt the Board's 
proposed definition of ``operations subsidiary.''
    Similarly, the Board requests comment on the advantages and 
disadvantages of the proposed definition of ``operations subsidiary.'' 
For example, to make the definitions among the agencies more uniform, 
should the Board, for purposes of CRA, adopt the OCC's definition of 
``operating subsidiary''? Would it be more appropriate for the Board to 
define, for purposes of CRA, an ``operations subsidiary'' to be a 
company that: (i) Is domiciled in a state of the United States or in 
the District of Columbia; (ii) engages solely in activities in which 
the parent state member bank may engage, at locations at which the 
state member bank may engage in the activity, and subject to the same 
limitations as if the state member bank were engaging in the activity 
directly; and (iii) is controlled (as defined in 12 CFR 225.2(e)) by 
the parent state member bank? What other criteria should the Board 
include in the definition of ``operations subsidiary'' for purposes of 
CRA?
3. Treatment of Other Bank Affiliates
    The agencies propose that the current flexibilities that allow a 
bank to choose to include or exclude the activities of other bank 
affiliates that are not considered ``bank subsidiaries'' would be 
maintained. Thus, under the proposed Retail Lending Test, if a bank 
chooses to have the agencies consider retail loans within a retail loan 
category that are made or purchased by one or more of the bank's 
affiliates in a particular assessment area, provided those loans are 
not claimed for purposes of CRA by any other bank, the agencies would 
consider all of the retail loans within that retail loan category made 
by all of the bank's affiliates in that particular assessment area. The 
agencies are also considering an alternative approach when a bank 
chooses to have the agencies consider retail loans within a retail loan 
category that are made or purchased by one or more of the bank's 
affiliates in a particular assessment area. Under the alternative 
approach, the agencies would consider all of the retail loans within 
that retail loan category made by all of the bank's affiliates in all 
assessment areas.
    Also similar to current practice, the agencies propose to retain 
the provision that discriminatory practices by a bank's affiliates 
could adversely affect a bank's CRA performance if those bank 
affiliates' loans were submitted by the bank for CRA consideration as 
part of the bank's lending activity. In addition, the agencies propose 
to expand the current provision that provides that other illegal credit 
practice by a bank's affiliates could adversely affect a bank's CRA 
performance to include all illegal practices.\171\
---------------------------------------------------------------------------

    \171\ See 12 CFR __.28(c) and proposed Sec.  __.28(d).
---------------------------------------------------------------------------

    Thus, proposed Sec.  __.21(c) would provide that the agencies would 
consider retail loans by a bank subsidiary unless the bank subsidiary 
is subject to its own CRA requirements. Additionally, at a bank's 
option, the agencies would consider retail loans by other affiliates of 
the bank, if those activities are not claimed for purposes of CRA by 
any other bank. With respect to bank subsidiaries, and other affiliates 
the bank elects to include in its retail lending performance 
evaluation, the proposal would require that: (i) The bank provide data 
on the retail loans of those subsidiaries' and affiliates' pursuant to 
proposed Sec.  __.42; (ii) no affiliate may claim a retail loan 
origination or purchase if another bank claims, for purposes of CRA, 
the same retail loan origination or purchase; and (iii) if a bank 
elects to have the agencies consider retail loans within a particular 
retail loan category made by one or more of the bank's affiliates in a 
particular facility-based assessment area, retail lending assessment 
area, or outside retail lending areas (i.e., outside of its facility-
based assessment areas and retail lending assessment areas), the bank 
must elect to have the agencies consider all of the retail loans within 
that loan category made by all of the bank's affiliates in that 
particular facility-based assessment area, retail lending assessment 
area, or outside retail lending area (i.e., nationwide), provided those 
loans are not claimed for purposes of CRA by any other bank.
    Regarding retail services and products activities, community 
development financing activities, and community development services 
activities, the proposal provides that the agencies would consider the 
activities conducted by a bank subsidiary unless the bank subsidiary is 
subject to its own CRA requirements. Additionally, at a bank's option, 
the agencies would consider the activities of other affiliates of the 
bank, if those activities are not claimed for purposes of CRA by any 
other bank. With respect to bank subsidiaries and other affiliates that 
the bank elects to include in its retail services and products and 
community development activities performance evaluation, the bank would 
be required to provide data on the bank subsidiaries' and affiliates' 
activities, as applicable, pursuant to Sec.  __.42. Further, a bank 
would not be able to claim an affiliate's activity if any other bank 
claims, for purposes of CRA, the same activity.
4. Community Development Financing by a Consortium or a Third Party
    Currently, community development loans and community development 
investments by a consortium in which the bank participates or by a 
third party in which the bank has invested are considered at the bank's 
option.\172\ If the bank requests consideration for these activities, 
the bank must report the data pertaining to these loans or investments. 
Although the current CRA regulations permit participants or investors 
to choose the allocation of qualifying loans or investments among 
themselves for consideration, no participant or investor may claim a 
loan origination or loan purchase or investment if another participant 
or investor claims the same loan origination or purchase.\173\ In 
addition, the bank may not claim loans accounting for more than its 
percentage share (based on the level of its participation or 
investment) of the total qualifying loans or investments made by the 
consortium or third party.\174\
---------------------------------------------------------------------------

    \172\ See 12 CFR __.22(d) and __.25(d)(2).
    \173\ See id.
    \174\ See id.
---------------------------------------------------------------------------

    As specified in proposed Sec.  __.21(d), the agencies propose to 
retain the current flexibility with respect to consideration for 
community development loans and investments by a consortium in which 
the bank participates or by a third party in which the bank has 
invested. Consistent with current regulations, under the proposal, a 
bank that requests to have these activities considered may not claim an 
activity claimed by another participant or investor and may not claim 
more than its percentage share of the total activity made by the 
consortium or third party. In addition, a bank that requests 
consideration for these activities would be required to collect and 
report the data on loans or investments for which it seeks 
consideration under the Community Development Financing Test pursuant 
to Sec.  __.42.

[[Page 33927]]

Request for Feedback
    Question 52. The agencies propose to require that the activities of 
a bank's operations and operating subsidiaries be included as part of 
its CRA evaluation, as banks exercise a high level of ownership, 
control, and management of their subsidiaries, such that the activities 
of these subsidiaries could reasonably be attributable directly to the 
bank. What, if any, other factors should be taken into account with 
regard to this requirement?
    Question 53. As discussed above, what factors and criteria should 
the agencies consider in adopting definitions of ``operating 
subsidiary'' for state non-member banks and state savings associations, 
and ``operations subsidiary'' for state member banks, for purposes of 
this proposed requirement?
    Question 54. When a bank chooses to have the agencies consider 
retail loans within a retail loan category that are made or purchased 
by one or more of the bank's affiliates in a particular assessment 
area, should the agencies consider all of the retail loans within that 
retail loan category made by all of the bank's affiliates only in that 
particular assessment area, or should the agencies then consider all of 
the retail loans made by all of the bank's affiliates within that 
retail loan category in all of the bank's assessment areas?

C. Performance Context Information Considered

    The agencies propose that each performance test would be applied to 
a bank in light of the relevant performance context information. Under 
the current CRA regulations, examiners rely on a broad range of 
economic, demographic, and bank- and community-specific information to 
understand the context in which a bank's record of performance should 
be evaluated. In order to fairly evaluate the responsiveness of a 
bank's activities, the agencies propose that consideration would be 
given to performance context information, including the bank's capacity 
and constraints, its business strategy, the needs of the community, and 
the opportunities for lending, investments, and services in the 
community.
    The proposed Sec.  __.21(e) provides that the agencies could 
consider performance context information to the extent it is not 
otherwise considered as part of a proposed performance test. This 
reference is intended to acknowledge that the proposed performance 
tests incorporate aspects of performance context in different ways. The 
agencies propose using benchmarks for the performance tests that would 
help inform and tailor CRA evaluations to the local communities being 
served by banks. The agencies considered ways in which these proposed 
metrics, benchmarks, and approaches would directly capture many aspects 
of performance context. For example, the proposed community benchmarks 
for the Retail Lending Test metrics, as described in Section X, would 
reflect information about an assessment area, such as the percentage of 
owner-occupied residential units, the percentage of low-income 
families, or the percentage of small businesses or small farms. The 
market benchmark of the Retail Lending Test, as described in Section X, 
would reflect the aggregate lending to targeted areas or targeted 
borrowers by all lenders operating in the same assessment area. The use 
of these two kinds of benchmarks is intended to tailor the Retail 
Lending Test to the lending opportunities and needs that are unique to 
each assessment area. While some aspects of performance context are 
already embedded into the proposed metrics evaluation approach for the 
Retail Lending Test and Community Development Financing Test, there are 
some aspects that are unique to each bank that examiners would consider 
as outlined in Sec.  __.21(e). For example, this would include bank-
specific factors such as a bank's past performance, size and financial 
condition, and safety and soundness limitations, as well any other 
information provided by the bank about community credit and development 
needs of the bank's local communities.
    As a complement to the proposed performance context factors in 
Sec.  __.21(e), the agencies intend to explore ways to provide more 
information to banks and the public on factors impacting community 
credit needs. The agencies believe that this could provide greater 
consistency and transparency, while also enhancing public participation 
in the identification of community credit needs through both 
quantitative and qualitative information.
Request for Feedback
    Question 55. The agencies request feedback on the proposed 
performance context factors in Sec.  __.21(e). Are there other ways to 
bring greater clarity to the use of performance context factors as 
applied to different performance tests?

D. Institution Performance Score and Assigned Ratings

    As discussed in each performance test section and in Sec.  __.28, 
the agencies propose to assign conclusions for each applicable 
performance test at each applicable level (e.g., facility-based 
assessment areas). The agencies propose to retain the five conclusions 
used in current practice: ``Outstanding, ``High Satisfactory,'' ``Low 
Satisfactory,'' ``Needs to Improve,'' and ``Substantial 
Noncompliance.''
    In proposed Sec.  __.21(f)(2), the agencies are proposing to retain 
existing language regarding assigning ratings in current Sec.  
__.21(c), indicating that the four performance ratings that can be 
assigned a bank are ``Outstanding,'' ``Satisfactory,'' ``Needs to 
Improve,'' and ``Substantial Noncompliance.'' The agencies have also 
retained language indicating that ratings reflect a bank's record of 
helping to meet the credit needs of its community, including low- and 
moderate-income neighborhoods, consistent with the safe and sound 
operation of a bank. The agencies are proposing to add language 
referencing requirements in the CRA statute \175\ to provide greater 
clarity regarding which geographic areas receive a rating in addition 
to an institution-level rating. Specifically, the agencies propose to 
include language indicating that they assign to a bank a rating 
regarding its CRA performance overall, across performance tests under 
which the bank is evaluated, and for its performance in, as applicable, 
each state, and multistate MSA (for any multistate MSA in which a bank 
maintains a branch in two or more states within that multistate MSA). 
As is further discussed in Section XVI, the agencies provide the 
methodology for assigning conclusions and ratings in more detail in the 
performance test sections of the proposed regulation; in the assigned 
conclusions and ratings section in Sec.  __.28, and in Appendices C and 
D of the proposed regulations.
---------------------------------------------------------------------------

    \175\ 12 U.S.C. 2906.
---------------------------------------------------------------------------

    For banks other than a small bank or a bank evaluated based on a 
strategic plan, the agencies would assign a performance score at the 
state, multistate MSA, as applicable, and institution level that 
reflects the precise numeric value on a ten-point scale that was 
derived to determine the overall rating category, as proposed in Sec.  
__.28 and discussed in Section XVI. The agencies intend for the 
performance score to provide greater transparency regarding a bank's 
overall performance, such as whether a bank that earned a particular 
rating was close to the numeric threshold for a rating that was either 
higher or lower than the rating it ultimately received.

E. Safe and Sound Operations

    In proposed Sec.  __.21(g), the agencies would retain the 
requirement, based in

[[Page 33928]]

the CRA statute,\176\ that a bank's CRA lending, investment, and 
service activities must be consistent with safe and sound banking 
practices, including underwriting standards. The agencies would also 
retain the statement that, although banks may employ flexible 
underwriting standards for lending that benefits low- or moderate-
income individuals and low- or moderate-income census tracts, they must 
also be consistent with safe and sound operations. The agencies are 
proposing certain revisions to the language in this section for 
clarity, including by expressly stating that banks may employ flexible 
underwriting standards for small business and small farm lending, if 
consistent with safe and sound operations.
---------------------------------------------------------------------------

    \176\ 12 U.S.C. 2901.
---------------------------------------------------------------------------

VIII. Retail Lending Test Product Categories and Major Product Lines

    The agencies propose to update the definitions for certain retail 
lending products, to clarify the evaluation of automobile lending, to 
aggregate certain retail loan types for evaluation, and to develop a 
clear quantitative threshold for determining when to evaluate a retail 
product line under the Retail Lending Test. Specifically, the agencies 
seek to improve transparency and streamline retail lending evaluations 
by:
    <bullet> Aggregating, respectively, all closed-end home mortgage 
loans, all open-end home mortgage loans, and all multifamily loans as 
separate product lines for the purposes of evaluation under the Retail 
Lending Test.
    <bullet> Adding definitions of small business and small farm that 
align with the CFPB's proposed small business definition in its current 
rulemaking pursuant to section 1071 of the Dodd-Frank Act to minimize 
burden.
    <bullet> Evaluating automobile lending using metrics in recognition 
of its importance to low- and moderate-income borrowers and 
communities.
    <bullet> Establishing a clear major product line threshold of 15 
percent of the dollar value of a bank's retail lending in each 
facility-based assessment area (and, as applicable, in each retail 
lending assessment area and in its outside retail lending area) to 
determine whether to evaluate, respectively, closed-end home mortgage, 
open-end home mortgage, multifamily, small business, and small farm 
lending under the Retail Lending Test.
    <bullet> Establishing a major product line threshold for automobile 
lending of 15 percent based on the average of the percentage of 
automobile lending retail lending dollars out of total retail lending 
dollars and percentage of automobile loans by loan volume out of total 
retail lending by loan volume.

A. Background

1. Current Approach to Retail Lending Product Lines
    The CRA regulations do not currently define major product line. 
Large banks are generally evaluated on all home mortgage, small 
business, and small farm loans. Additionally, a large bank's consumer 
loans are currently considered at its option or if these loans 
constitute a substantial majority of the bank's business.\177\ There is 
currently no established threshold for determining whether consumer 
loans constitute a substantial majority of a bank's business, meaning 
examiner judgment is used to determine whether consumer loans meet the 
standard.
---------------------------------------------------------------------------

    \177\ Current interagency guidance on when to consider large 
banks' consumer lending states, ``[t]he Agencies interpret 
`substantial majority' to be so significant a portion of the 
institution's lending activity by number and dollar volume of loans 
that the lending test evaluation would not meaningfully reflect its 
lending performance if consumer loans were excluded.'' See Q&A Sec.  
__.22(a)(1)-2.
---------------------------------------------------------------------------

    In contrast, small banks, including intermediate small banks, are 
evaluated only with respect to those retail lending categories that are 
considered primary products or major product lines (``major product 
lines''). Examiners select small bank major product lines for 
evaluation based on a review of relevant information, including the 
bank's business strategy and its areas of expertise. Examiners may 
evaluate all of a small bank's consumer loans taken together or select 
a category of consumer lending (e.g., credit card, automobile) if those 
consumer loans are deemed to constitute a major product line.
2. Stakeholder Feedback on Retail Lending Product Lines
    Stakeholders have expressed varying opinions on setting a threshold 
amount for determining major product lines in individual assessment 
areas. They have also diverged on whether a major product line 
designation should be based upon a percentage threshold of total loans, 
a certain level of lending volume by dollar amount, or a combination of 
the two. For example, some community group stakeholders have suggested 
that the retail lending threshold should be based on number of loans, 
rather than the dollar amount of loans, to emphasize the importance of 
smaller value loans to low- and moderate-income borrowers.
    Stakeholders generally supported aligning the definitions of small 
business and small farm used for CRA purposes to the CFPB proposed 
definition of small business in its proposal to effect changes required 
by section 1071 of the Dodd-Frank Act. Stakeholders noted that 
harmonizing the definitions across the two rulemakings would bring more 
certainty in measuring CRA performance. It would also reduce burden 
related to data collection and reporting, particularly if institutions 
could submit data for CRA purposes under the format of the CFPB's 
Section 1071 Rulemaking.
    For consumer lending, industry groups generally preferred to retain 
the current approach of having consumer loans considered at a bank's 
option and when such loans amount to a substantial majority of a bank's 
business. Community groups instead favored requiring consideration 
where consumer lending amounts reach a significant quantitative 
threshold and emphasized that predatory products should not receive CRA 
credit. Most stakeholders favored evaluating consumer loans as separate 
categories rather than as a single category considered in the 
aggregate.

B. Retail Lending Test Product Categories

    In Sec.  __.22(a)(4), the agencies propose the following categories 
of retail lending for evaluation under the Retail Lending Test's 
metrics-based approach described in Section IX: Closed-end home 
mortgage loans, open-end home mortgage loans, multifamily loans, small 
business loans, small farm loans, and automobile loans.
1. Aggregating Closed-End Home Mortgage Loans
    The agencies propose to analyze all closed-end home mortgage loans 
secured by a one-to-four unit dwelling as a single major product line 
under the Retail Lending Test. The approach streamlines the evaluation 
process for retail lending by consolidating several related mortgage 
loan purposes. The agencies propose to use metrics to evaluate all 
closed-end home mortgage loans under the approach described in Section 
IX. Multifamily loans would be evaluated as a product line separate 
from aggregated closed-end or aggregated open-end home mortgage loans.
    Given the different credit needs that these loan purposes fulfill 
for low- and moderate-income borrowers and communities, the agencies 
seek feedback on whether to evaluate home purchase and home refinance 
loans separately. In general, the agencies also request feedback on 
whether aggregation may lead to less transparency in the

[[Page 33929]]

reported metrics when one loan purpose takes prominence over another. 
For example, a bank's home purchase lending performance could be 
obscured during periods of high home mortgage refinance lending, and a 
bank's mortgage refinance performance could be similarly obscured 
during periods of high home purchase activity. The agencies seek 
feedback on the magnitude of this risk, and whether it outweighs the 
efficiency gained from more streamlined closed-end home mortgage 
lending evaluations.
    Similarly, the agencies also seek feedback on whether to evaluate 
home improvement loans and ``other purpose'' loans reported under HMDA 
only under the Retail Services and Products Test described in Section 
XI. Because home purchase and refinance mortgages significantly 
outnumber home improvement mortgages, aggregating these categories 
would give less emphasis to a bank's home improvement lending to low- 
or moderate-income individuals.
    The agencies also propose to continue the current practice of 
aggregating home mortgage loans for owner-occupied units and non-owner-
occupied properties together under the appropriate major product line, 
for example within closed-end home mortgage loans. This approach 
provides a fuller picture of the bank's total engagement in home 
mortgage lending across different borrower types and geographies.
    The agencies also recognize that home mortgage loans for non-owner-
occupied properties can facilitate the provision of affordable housing. 
As such, the proposal considers this aspect of a bank's home mortgage 
lending, along with other qualitative aspects of retail lending, under 
the Retail Services and Products Test.
2. Aggregating Open-End Home Mortgage Loans
    The agencies propose to aggregate all open-end home mortgage loans 
secured by a one-to-four unit dwelling as a separate product line under 
the Retail Lending Test. This category would include home equity lines 
of credit loans and other open-end lines of credit secured by a 
dwelling. The proposal recognizes that open-end home mortgage loans and 
closed-end home mortgage loans serve distinct purposes to low- and 
moderate-income borrowers and communities that are different enough to 
warrant separate evaluation.
    The agencies propose to use metrics to evaluate all open-end home 
mortgage loans under the approach described in Section IX. However, the 
agencies seek feedback on whether to instead evaluate open-end home 
mortgage loans qualitatively under the Retail Services and Products 
Test described in Section XI. A qualitative review would focus on the 
responsiveness of open-end home mortgage loans, which may be 
appropriate given the range of uses that an open-end home mortgage loan 
can have. Relatedly, lower lending volumes for open-end home mortgage 
loans may limit the usefulness of market benchmarks under the Retail 
Lending Test, particularly in assessment areas with very little open-
end home mortgage lending.
3. Multifamily Loans
    The agencies propose to evaluate multifamily loans as a separate 
product line under the Retail Lending Test. The approach recognizes the 
role of multifamily loans in helping to meet community credit needs by 
financing housing in different geographies and for tenants of different 
income levels. Consistent with the current approach, the proposal also 
considers the subset of multifamily loans that provide affordable 
housing to low- or moderate-income individuals under the Community 
Development Financing Test.
    As with other home mortgage loan purposes under the Retail Lending 
Test, a bank's multifamily lending performance would be evaluated using 
loan count rather than the dollar amount. The agencies also propose to 
evaluate multifamily loans under only the geographic distribution test 
which would not consider the income of borrowers. Given that few 
multifamily loans are made to low- or moderate-income borrowers, 
borrower income would not meaningfully measure whether multifamily 
loans met community credit needs. And solely evaluating geographic 
distributions for multifamily loans would account for banks that are 
primarily multifamily lenders and might otherwise fail the borrower 
distribution test because they do not lend directly to low- or 
moderate-income individuals.
    Alternatively, the agencies seek feedback on whether to evaluate 
multifamily loans only under the Community Development Financing Test, 
because a bank's record of serving the credit needs of its community 
through multifamily loans may not be effectively measured with only 
geographic distributions. For example, the geographic distribution of a 
bank's multifamily loans does not indicate whether low- or moderate-
income individuals benefit from the loans. The location of the housing 
is likely a less significant indicator of serving local low- or 
moderate-income needs than its affordability to low- and moderate-
income residents, which would be reviewed under the Community 
Development Financing Test. Relatedly, the number of multifamily loans 
made in low- and moderate-income census tracts may not adequately 
reflect its value to the community. Unlike home mortgages, one 
multifamily loan could represent housing for anywhere from five 
households to hundreds of households, which makes loan count a poor 
measure for how multifamily loans benefit local communities.
    Under the Community Development Financing Test, examiners could 
alternately account for the affordability and degree to which 
multifamily loans serve low- or moderate-income tenants. This approach 
would also avoid double-counting of multifamily lending under retail 
lending and community development performance tests. The agencies also 
seek feedback on whether an alternative measure of geographic loan 
distribution for multifamily lending under the Retail Lending Test 
would be preferable. For example, the agencies could evaluate the 
number of units a bank's multifamily lending financed in low- or 
moderate-income census tracts. This measure may better accord with the 
benefit the bank's lending brought to its community.
4. Small Business and Small Farm Loans
    The agencies propose to define ``small business'' and ``small 
farm'' in the CRA regulations in alignment with the CFPB's proposed 
definition of small business in its Section 1071 Rulemaking.\178\ As 
such, the agencies propose to define ``small business'' as a business 
having gross annual revenues of $5 million or less for its preceding 
fiscal year.\179\ The agencies propose to

[[Page 33930]]

define ``small farm'' as a farm having gross annual revenues of $5 
million or less for its preceding fiscal year. Further, when these 
small business and small farm definitions become effective, the 
agencies would use updated definitions for ``small business loan'' and 
``small farm loan.'' Specifically, a small business loan would be 
updated to mean a loan to a business with gross annual revenues of $5 
million or less, and a small farm loan would be a loan to a farm with 
gross annual revenues of $5 million or less. The current definition of 
``small business loan'' and ``small farm loan'' would remain in effect 
until the new definitions become effective.
---------------------------------------------------------------------------

    \178\ See 86 FR 56356 (Oct. 8, 2021), as corrected by 86 FR 
70771 (Dec. 13, 2021). The CFPB proposed the following definition in 
its Section 1071 Rulemaking: ``Small business has the same meaning 
as the term `small business concern' in 15 U.S.C. 632(a), as 
implemented in 13 CFR 121.101 through 121.107. Notwithstanding the 
size standards set forth in 13 CFR 121.201, for purposes of this 
subpart, a business is a small business if and only if its gross 
annual revenue, as defined in Sec.  1002.107(a)(14) of this part, 
for its preceding fiscal year is $5 million or less.'' 86 FR at 
56577.
    \179\ Under the CRA regulations, and as proposed until the 
agencies transition to using the CFPB's proposed data collection, a 
``small business loan'' means a loan included in ``loans to small 
businesses'' as defined in the instructions for preparation of Call 
Report. See 12 CFR __.12(v) and proposed Sec.  __.12. Under the Call 
Report, a small business loan is defined as a loan made to a 
business in an amount of $1 million or less that is secured by 
nonfarm nonresidential properties or categorized as a commercial or 
industrial loan. Also, under the CRA regulations, and as proposed 
until the agencies transition to using the CFPB's proposed data 
collection, ``small farm loan'' means a loan included in ``loans to 
small farms'' as defined in the instructions for preparation of the 
Call Report. See 12 CFR __.12(w) and proposed Sec.  __.12. Under the 
Call Report, a small farm loan is defined as a loan to a farm in an 
amount of $500,000 or less that is secured by farmland (including 
farm residential and other improvements) or categorized as a loan to 
finance agricultural production or other loan to farmers.
---------------------------------------------------------------------------

    The agencies expect the small business lending data proposed to be 
collected by the CFPB would be more comprehensive than the data 
currently collected and reported by large banks, and used by the 
agencies, under the current interagency CRA regulations. The CFPB's 
proposed data collection would represent an improvement over small 
business lending and small farm lending data currently captured under 
CRA in two ways, because the CFPB's small business definition would be 
based on the revenue size of the business or farm rather than loan size 
as is the case under the current CRA regulations.\180\ First, the CFPB 
data would capture all lending, including larger loans, to small 
businesses and small farms meeting the CFPB's proposed definition. 
Second, the CFPB data would exclude loans made to large businesses and 
large farms.
---------------------------------------------------------------------------

    \180\ The agencies estimated the percentage of large banks that 
would have passed various potential retail lending volume thresholds 
at the assessment area level based on historical lending and 
deposits data. Comparing those that received ``very good'' or 
``excellent'' conclusions (or ``High Satisfactory'' or 
``Outstanding'' ratings if applicable) on the lending test in the 
assessment area to those that received ``poor'' conclusions (or 
``Needs to Improve'' ratings), the agencies found that the largest 
difference in the estimated pass rate occurred at 30 percent of the 
market volume benchmark. As a caveat, note that these lending test 
conclusions were based on many factors in addition to the volume of 
retail lending, such as loan distributions and (for large banks) 
community development lending. Furthermore, examinations under 
current procedures do not use the retail lending volume screen the 
agencies are proposing to evaluate the amount of retail lending a 
bank engages in. These data can be referenced in the CRA Analytics 
Data Tables.
---------------------------------------------------------------------------

    The agencies are in the process of seeking approval from the SBA to 
use the proposed standard of gross annual revenues of $5 million or 
less, consistent with the size proposed by the CFPB in its Section 1071 
Rulemaking, rather than the SBA's size standards.\181\ The proposed CRA 
definitions of ``small business'' and ``small farm'' would enable the 
agencies to expand and improve the current analysis of CRA small 
business and small farm lending. The agencies' proposal to leverage the 
CFPB small business loan definition and associated data reporting would 
enable the agencies to use borrower and geographic distribution metrics 
that provide more insight into banks' performance relative to the 
demand for small business loans in a given geographic area. It would 
also allow for an analysis that uses an expanded data set measuring 
loans to small businesses of different revenue sizes, including--
importantly--to the businesses and farms with gross annual revenues of 
$250,000 or less, as discussed in Section IX.
---------------------------------------------------------------------------

    \181\ This assumes the CFPB's section 1071 rulemaking is 
finalized as proposed with a ``small business'' defined as having 
gross annual revenues of $5 million or less.
---------------------------------------------------------------------------

    Importantly, the agencies' proposal to leverage the CFPB's 
definitions would reduce bank data collection and reporting burden 
under CRA regulations. The agencies would intend to eliminate the 
current CRA small business and small farm data collection and reporting 
and replace it with the CFPB's section 1071 data, once available, which 
covered banks would be required to collect and report under section 
1071. The proposed approach is responsive to various stakeholders' 
request that the agencies coordinate the small business and small farm 
definitions across the two rulemakings. Should both rulemakings be 
finalized, the agencies anticipate making the compliance date similar 
to the compliance date in a final rulemaking by the CFPB.
5. Purchased Loans
    The agencies propose to evaluate a bank's record of helping to meet 
community credit needs through the origination and purchase of retail 
loans under the Retail Lending Test by counting an examined bank's 
purchased retail loans as equivalent to its retail loan originations. 
The market for purchased loans can provide liquidity to banks and other 
lenders, such as CDFIs, and extend their capability to originate loans 
to low- and moderate-income individuals and in low- and moderate-income 
areas. Banks may also purchase loans to develop business opportunities 
in markets where they otherwise lack the on-the-ground ability to 
originate loans.
    On the other hand, some stakeholders have argued that purchased 
loans should not receive the same consideration as originated loans for 
CRA credit because they require fewer business development and borrower 
outreach resources than originating loans. And generally, despite their 
potential value in increasing secondary-market liquidity, purchases of 
loans may do less to extend the availability of credit than new 
originations. This concern is particularly acute where loan purchases 
do not directly provide liquidity to the originator, such as with 
purchases of seasoned loans that have been sold once or more in the 
past.
    In response, the agencies propose to adjust a retail lending 
conclusion where an examiner determines that loan purchases reflect 
loan churning, after conducting the retail lending volume and 
distribution analyses. Loan churning would occur where loans to 
targeted borrowers or census tracts were purchased and sold repeatedly 
by different banks, with the possibility of each bank receiving CRA 
credit equivalent to the banks that originated the loans. In such 
cases, the re-purchase of loans does not provide additional liquidity 
to the originating banks nor additional benefit for low- and moderate-
income borrowers and areas.
    The agencies' analysis of historical data suggests that some CRA-
motivated repeat purchases of home mortgage loans may be occurring. A 
review of 2017 HMDA data found that bank purchased low- and moderate-
income loans are over five times as likely to be repurchased by another 
bank within a year as other purchased home mortgage loans. The analysis 
found that 0.6 percent of home mortgage loans to non-low- and moderate-
income borrowers purchased by commercial banks were sold to another 
commercial bank within the same year, whereas the share was 3.3 percent 
for low- and moderate-income borrower loans.
    The agencies seek feedback on whether only loans purchased from the 
loan originator should be eligible for CRA consideration. The agencies 
also seek feedback on whether to engage in ongoing analysis of HMDA 
data to identify institutions that appear to engage in significant 
churning of mortgage loans, with proposed Sec.  __.22 describing this 
as the purchase of home mortgage loans for the sole or primary

[[Page 33931]]

purpose of inappropriately influencing their retail lending performance 
evaluation. Examiners could use such analysis to inform their review of 
a bank's retail lending for potential loan churning.
6. Treatment of Consumer Loans
    Consumer lending can be important for fulfilling the credit needs 
of low- and moderate-income borrowers. The agencies propose to define a 
consumer loan as an automobile loan, credit card loan, or other secured 
or unsecured loan to one or more individuals for household, family, or 
other personal expenditures. However, apart from automobile loans, this 
category spans several product categories that are heterogeneous in 
meeting low- and moderate-income credit needs and are difficult to 
evaluate on a consistent quantitative basis. Therefore, the agencies 
propose to treat automobile lending as the sole consumer loan type 
evaluated under the metrics-based Retail Lending Test. The agencies 
propose to consider the qualitative aspects of all other consumer 
loans, including credit card loans, only under the Retail Services and 
Products Test.
    Automobile Loans. The agencies propose to evaluate automobile 
lending under the Retail Lending Test. Under proposed Sec.  __.12, the 
agencies propose defining an automobile loan as a consumer loan 
extended for the purchase of and secured by a new or used passenger car 
or other vehicle, for personal use, as defined in Schedule RC-C of the 
Call Report. Automobile loans can be important in areas where jobs are 
a significant distance from where people reside and where public 
transportation is not readily available. Safe and sound automobile 
loans can also serve as a means of building a credit history.
    As discussed further in Section XIX, the agencies propose requiring 
new automobile lending data collection and reporting by banks with 
assets of over $10 billion because the agencies recognize that credit 
reporting agency data and other existing market sources lack the 
comprehensiveness required to construct the necessary metrics to 
evaluate automobile lending. Collecting and maintaining automobile 
lending data would be optional for small banks that elect evaluation 
under the Retail Lending Test, for intermediate banks, and for banks 
with assets of $10 billion or less. Although limiting data collection 
and reporting requirements for automobile lending to only banks with 
assets of over $10 billion would have the benefit of tailoring these 
requirements such that they do not apply to banks under this asset 
level, it would also lead to less comprehensive metrics for all banks, 
particularly in areas where banks with assets of over $10 billion have 
a low market share of bank automobile lending.
    Credit Card Loans and Other Consumer Loan Categories. The agencies 
propose to evaluate other consumer loan categories, including credit 
cards, qualitatively under the Retail Services and Products Test. The 
agencies define a credit card loan as a line of credit for household, 
family, or other personal expenditures that is accessed by a borrower's 
use of a credit card. A bank's record of serving the credit needs of 
its community through credit card lending may not be effectively 
measured under the Retail Lending Test. Credit card lending is 
concentrated among a relatively small number of lenders, with many 
designated as limited purpose banks for which credit card lending is a 
large share of their overall lending activity. While some banks issue 
credit card loans as a small share of their business, most of these 
business lines would not meet a major product line threshold for 
inclusion in a CRA evaluation. Further, banks may not currently retain 
or have the capability to capture borrower income at origination or 
subsequently as cardholders maintain their accounts, location, or other 
data fields relevant to constructing appropriate benchmarks for credit 
card lending. As such, credit card-specific retail lending metrics 
would likely require new data collection and reporting from large 
banks.
    Instead, the agencies propose to qualitatively review whether 
credit cards and other consumer loan categories meet low- or moderate-
income credit needs under the Retail Services and Products Test. Under 
this approach examiners would review the responsiveness of these credit 
products by considering the number of low- and moderate-income 
customers using each selected product and how they use the product, 
including rates of successful repayment under the original loan terms. 
Other aspects of responsiveness could include the loan terms, 
underwriting, pricing, and safeguards that minimize adverse borrower 
outcomes.
    The agencies' overall approach to consumer loans recognizes that 
with the exception of automobile lending, consumer products are 
originated, structured, and maintained differently than home mortgage, 
small business, and small farm loans. Accordingly, the agencies seek 
feedback on whether evaluating all consumer lending products, including 
automobile loans, qualitatively under the Retail Services and Products 
Test would better meet the overarching goals of CRA modernization.
Request for Feedback
    Question 56. Should the agencies aggregate closed-end home mortgage 
loans of all purposes? Or should the agencies evaluate loans with 
different purposes separately given that the factors driving demand for 
home purchase, home refinance, and other purpose home mortgage loans 
vary over time and meet different credit needs?
    Question 57. Should the agencies exclude home improvement and other 
purpose closed-end home mortgage loans from the closed-end home 
mortgage loan product category to emphasize home purchase and refinance 
lending? If so, should home improvement and other purpose closed-end 
home mortgage loans be evaluated under the Retail Lending Test as a 
distinct product category or qualitatively under the Retail Services 
and Products Test?
    Question 58. Should the agencies include closed-end non-owner-
occupied housing lending in the closed-end home mortgage loan product 
category?
    Question 59. Should open-end home mortgage loans be evaluated 
qualitatively under the Retail Services and Products Test rather than 
with metrics under the Retail Lending Test?
    Question 60. Should multifamily lending be evaluated under the 
Retail Lending Test and the Community Development Financing Test (or 
the Community Development Test for Wholesale or Limited Purpose Banks)? 
Or should multifamily lending be instead evaluated only under the 
Community Development Financing Test?
    Question 61. Should banks that are primarily multifamily lenders be 
designated as limited purpose banks and have their multifamily lending 
evaluated only under the Community Development Financing Test?
    Question 62. Should the agencies adopt a size standard for small 
business loans and small farm loans that differs from the SBA's size 
standards for purposes of the CRA? Is the proposed size standard of 
gross annual revenues of $5 million or less, which is consistent with 
the size standard proposed by the CFPB in its Section 1071 Rulemaking, 
appropriate? Should the CRA compliance date for updated ``small 
business,'' ``small business loan,'' ``small farm,'' and ``small farm 
loan'' definitions be directly aligned with a future compliance date in 
the CFPB's Section 1071 Rulemaking, or should the

[[Page 33932]]

agencies provide an additional year after the proposed updated CRA 
definitions become effective?
    Question 63. Should the agencies' current small business loan and 
small farm loan definitions sunset on the compliance date of the 
definitions proposed by the agencies?
    Question 64. Should retail loan purchases be treated as equivalent 
to loan originations? If so, should consideration be limited to certain 
purchases--such as from a CDFI or directly from the originator? What, 
if any, other restrictions should be placed on the consideration of 
purchased loans?
    Question 65. Would it be appropriate to consider information 
indicating that retail loan purchases were made for the sole or primary 
purpose of inappropriately influencing the bank's retail lending 
performance evaluation as an additional factor in considering the 
bank's performance under the metrics or should such purchased loans be 
removed from the bank's metrics?
    Question 66. Do the benefits of evaluating automobile lending under 
the metrics-based Retail Lending Test outweigh the potential downsides, 
particularly related to data collection and reporting burden? In the 
alternative, should the agencies adopt a qualitative approach to 
evaluate automobile lending for all banks under the proposed Retail 
Lending Test?
    Question 67. Should credit cards be included in CRA evaluations? If 
so, when credit card loans constitute a major project line, should they 
be evaluated quantitatively under the proposed Retail Lending Test or 
qualitatively under the proposed Retail Services and Products Test?
    Question 68. What data collection and reporting challenges, if any, 
for credit card loans could adversely affect the accuracy of metrics?
    Question 69. Should the agencies adopt a qualitative approach to 
evaluate consumer loans? Should qualitative evaluation be limited to 
certain consumer loan categories or types?

C. Major Product Line Approach

    For banks evaluated under the Retail Lending Test, the agencies 
propose using a major product line standard for determining when to 
evaluate a bank's closed-end home mortgage, open-end home mortgage, 
multifamily, small business, small farm, and automobile lending. The 
agencies propose to use a different standard for automobile loans than 
the other product lines to account for the generally lower dollar value 
of automobile loans.
1. Closed-End Home Mortgage, Open-End Home Mortgage, Multifamily, Small 
Business, and Small Farm Major Product Line Standard
    The agencies propose to define major product lines for each of a 
bank's facility-based assessment areas and, as applicable, for each of 
its retail lending assessment areas and the outside retail lending area 
as a retail lending product line constituting 15 percent or more of the 
dollar value of the bank's retail lending in the respective geography.
    The proposal focuses on evaluating the retail lending products with 
the biggest impact at each bank and within its community. For large 
banks, the proposal would remove less significant, incidental home 
mortgage, small business, and small farm product lines currently 
evaluated by default in CRA examinations. Small banks that opt into the 
Retail Lending Test would benefit from the predictability associated 
with operating under a single defined standard for identifying major 
product lines. And all banks would benefit from more streamlined retail 
lending evaluations that focus only on their most significant retail 
lending products.
    The proposed definition also ties the major product line 
designation to a bank's retail lending focus in individual markets. For 
example, by focusing on major product lines at the assessment area or 
geographical level, a bank that primarily extends home mortgage and 
small business loans, but also specializes in small farm lending in a 
handful of rural assessment areas would have its small farm lending 
considered in those rural assessment areas, but not in assessment areas 
where the bank makes few or no small farm loans. Lastly, by using a 
standard specific to each facility-based assessment area and retail 
lending assessment area, the approach captures lending that affects 
local communities even if it might not meet a 15 percent standard at 
the institution level.
    The agencies propose to divide retail lending into six distinct 
categories (closed-end home mortgage, open-end home mortgage, 
multifamily, small business, small farm, and automobile lending). As 
such, every assessment area in which a bank conducts any retail lending 
would have at least one product that represents at least 16.6 percent 
of the dollar volume of its total retail lending. The agencies propose 
to set the major product line threshold below that number at 15 percent 
to preclude the possibility of a bank having no major product lines to 
evaluate.
    The agencies request feedback on different standards for 
determining when to evaluate multifamily loans under the Retail Lending 
Test. For example, multifamily lending could be considered a major 
product line only where the bank is a monoline multifamily lender or is 
predominantly a multifamily lender within the applicable geographic 
area (i.e., facility-based assessment area, retail lending assessment 
area, or outside of facility-based assessment areas and retail lending 
areas, as applicable, at the institution level). The ``predominantly'' 
standard could mean either that multifamily lending ranks first in the 
dollar amount of the bank's retail lending in an assessment area or 
that it accounts for a significant percentage of the dollar volume of a 
bank's retail lending, for example 50 percent. This approach helps 
ensure that the agencies assess a bank's relevant multifamily lending 
performance with respect to meeting community credit needs using the 
proposed Retail Lending Test's retail lending volume screen and 
geographic distribution measures.
2. Automobile Loan Major Product Line Standard
    The agencies propose to use both the dollar volume and loan count 
of a bank's automobile lending to determine when to evaluate it as a 
major product line under the Retail Lending Test. Specifically, the 
agencies propose a 15 percent threshold based on the average of the 
percentage of automobile lending dollars out of total retail lending 
dollars, and the percentage of automobile loans by loan count out of 
total retail loan count in the relevant area. For example, if a bank's 
automobile lending accounts for 10 percent of its total retail lending 
dollars and 22 percent of its total retail loans by loan count in an 
applicable geographic area (facility-based assessment area, retail 
lending assessment area, or outside of facility-based assessment areas 
and retail lending assessment areas at the institution level), its 
combined percentage would be 16 percent, and automobile lending would 
be evaluated as a major product line.
    As automobile loans generally have a lower dollar value than the 
other products considered under the Retail Lending Test, automobile 
loans would be rarely evaluated under the 15 percent dollar volume-only 
threshold applicable to the other product lines. Instead, by 
considering both the average of dollar volume and loan count 
percentage, the agencies' approach would treat automobile loans as a 
major product line for banks that would not otherwise meet a standard 
that considers only dollar volume. This approach would

[[Page 33933]]

help account for the lower dollar value of automobile loans while also 
recognizing that among other categories of consumer loans, automobile 
loans can fulfill unique and important credit needs for low- and 
moderate-income borrowers and communities.
Request for Feedback
    Question 70. Should the agencies use a different standard for 
determining when to evaluate closed-end home mortgage, open-end home 
mortgage, multifamily, small business, and small farm lending? If so, 
what methodology should the agencies use and why? Should the agencies 
use a different standard for determining when to evaluate automobile 
loans?
    Question 71. Should the agencies use a different standard for 
determining when to evaluate multifamily loans under the Retail Lending 
Test? If so, should the standard be dependent on whether the lender is 
a monoline multifamily lender or is predominantly a multifamily lender 
within the geographic area? Relatedly, what should a ``predominantly'' 
standard be for determining whether multifamily loans constitute a 
major product line entail?

IX. Retail Lending Test Evaluation Framework for Facility-Based 
Assessment Areas and Retail Lending Assessment Areas

A. Overview of Proposed Retail Lending Test Approach

    The agencies propose to use metrics and performance standards to 
evaluate a bank's lending to low-income and moderate-income borrowers, 
small businesses and small farms, and low-income and moderate-income 
neighborhoods in its assessment areas. The metrics and performance 
standards would apply to all large banks and intermediate banks. The 
approach is intended to make a bank's retail lending evaluation more 
transparent and predictable by specifying quantitative standards for 
lending consistent with achieving, for example, a ``Low Satisfactory'' 
or ``Outstanding'' conclusion in an assessment area.
    The agencies propose two sets of metrics for this test. First, the 
agencies propose to use a retail lending volume screen that would 
assess a bank's volume of retail lending relative to its deposit base, 
compared to other banks in each facility-based assessment area. Second, 
the agencies propose a series of distribution metrics and dynamic 
thresholds to individually evaluate each of a bank's major product 
lines, in each facility-based assessment area, and, as applicable, in 
each retail lending assessment area and outside retail lending area. 
These metrics would separately evaluate the geographic distribution and 
borrower distribution of a bank's lending for each product line. As 
part of this evaluation, the metrics would distinguish between 
different income levels and business and farm sizes, with separate 
metrics for lending to low- and to moderate-income census tracts; to 
low- and to moderate-income borrowers; and to different sizes of small 
businesses and small farms. Each metric would be compared to thresholds 
that would differ across assessment areas and across different business 
cycles based on local data that reflects credit demand and lending 
opportunities, with the intent of incorporating performance context 
information directly into the metric-based approach.
    Through these metrics and thresholds, the agencies propose to 
assign a score reflecting performance on each of a bank's major product 
lines in each assessment area and outside retail lending area, as 
applicable. For example, under the proposal, a bank may receive a score 
reflecting its closed-end home mortgage lending performance and a 
different score for its small business lending performance in a 
facility-based assessment area, providing transparency at the product-
line level and showing more granularly how a bank is serving the credit 
needs of its communities. The scores across the various major product 
lines would be combined to determine a recommended Retail Lending Test 
conclusion for each assessment area, weighted by the dollar volume 
associated with each product line. This aggregation would allow strong 
performance in one product line to potentially offset weaker 
performance in another product line. The agencies also propose to 
consider specific additional factors discussed in Sec.  __.22(e) that 
would allow for adjusting a bank's recommended conclusion, such as the 
bank's dispersion of loans to different geographies in the assessment 
area, or missing or faulty data that affects the accuracy of the 
metrics or thresholds.

B. Background

1. Current Approach to Retail Lending Evaluations
    Under the current CRA regulations, the lending test includes 
quantitative and qualitative criteria, but does not specify what level 
of lending is needed to achieve ``Satisfactory'' or ``Outstanding'' 
performance. Large banks are evaluated based on the volume of retail 
lending activity, in number and dollars, within their assessment areas 
as well as the geographic distribution and borrower distribution of 
retail lending.
    Large bank lending activity is evaluated to determine whether the 
bank has a sufficient aggregate value of lending in its assessment 
areas given its performance context, including its capacity and the 
lending opportunities available in its assessment areas. Examiners 
consider the number and dollar amount of loans in assessment areas and 
the number of loans inside and outside of assessment areas. These 
approaches rely on examiner judgment to draw a conclusion about a 
bank's level of lending.
    For the geographic distribution analysis, examiners evaluate the 
distribution of a bank's retail loans in low-income, moderate-income, 
middle-income, and upper-income census tracts. Examiners review the 
geographic distribution of home mortgage loans by income category and 
compare the percentage distribution of lending to the percentage of 
owner-occupied housing units in the census tracts. Similarly, in each 
income category of census tract, examiners compare small business 
lending to the percentage distribution of businesses; small farm 
lending to the percentage distribution of farms; and consumer lending 
to the percentage distribution of households in each category of census 
tract, as applicable.
    For the borrower distribution analysis, examiners evaluate the 
distribution of a bank's retail loans based on specified borrower 
characteristics, such as the income level of borrowers for home 
mortgage lending. The comparators used to inform the borrower 
distribution analysis are families by income level for home mortgage 
lending; businesses with gross annual revenues of $1 million or less 
for small business lending; farms with gross annual revenues of $1 
million or less for small farm lending; and households by income level 
for consumer lending. Examiners supplement these distribution analyses 
by also reviewing the dispersion of a bank's loans throughout census 
tracts of different income levels in its assessment areas to determine 
if there are conspicuous lending gaps.
    Small banks are evaluated using similar, but simplified standards 
that do not rely on data collection or reporting. Instead of the 
lending activity criteria, a small bank is evaluated based on its loan-
to-deposit ratio and the portion of its lending within its assessment 
areas. Performance for the loan-to-deposit calculation is based on the 
balance sheet dollar values at the institution level, and

[[Page 33934]]

a review of the number of loans made inside and outside of assessment 
areas to determine whether a bank's lending activity is sufficient. The 
geographic and borrower distribution for small banks is similar to that 
for large banks but uses bank data collected in the normal course of 
business. The purpose of evaluating lending activity for both small and 
large banks is the same--to determine whether a bank has a sufficient 
aggregate value of lending in its assessment areas in light of a bank's 
performance context, including its capacity and the lending 
opportunities available in its assessment areas.
2. Stakeholder Feedback on Retail Lending Evaluations
    Stakeholders generally supported using metrics to increase the 
clarity and transparency of retail lending evaluations. However, 
community stakeholders emphasized that the performance measures and 
thresholds should be sufficiently rigorous to ensure that banks help to 
meet credit needs in their communities. Stakeholders were mixed on 
whether the low- income and moderate-income categories of borrowers 
should be combined when calculating the distribution metrics, but many 
recommended analyzing them separately. And most stakeholders agreed 
that performance context and qualitative aspects of performance should 
continue as an important dimension of evaluations.

C. Retail Lending Volume Screen

    In Sec.  __.22(c), the agencies propose a retail lending volume 
screen that measures the total dollar volume of a bank's retail lending 
relative to its presence and capacity to lend in a facility-based 
assessment area compared to peer lenders. Large banks that underperform 
on the retail lending volume screen would have, as applicable, a 
recommended ``Needs to Improve'' or ``Substantial Noncompliance'' 
Retail Lending Test conclusion in a facility-based assessment area.
    The screen serves to ensure that a bank's performance evaluation 
reflects the amount of a bank's retail lending relative to its presence 
and lending capacity in an assessment area. A bank fails to meet the 
credit needs of its entire community if it makes too few loans relative 
to its community presence, capacity, and local opportunities, even if 
those loans happened to be concentrated among, for example, low- and 
moderate-income borrowers and low- and moderate-income census tracts.
1. Bank Volume Metric
    In each facility-based assessment area, the agencies propose using 
a bank volume metric as the measure of how much of a bank's local 
capacity has been oriented toward retail lending. This measure is 
calculated as a ratio, with the average annual dollar amount of a 
bank's originations and purchases of all retail loans in the 
numerator--including home mortgage, multifamily, small business, small 
farm, and automobile loans. This overall retail lending amount would be 
divided by the annual average amount of its deposits collected from 
that assessment area in the denominator, if the bank collects and 
maintains this data.
    As proposed in Sec.  __.42, collecting and maintaining deposits 
data would be required for large banks with assets of over $10 billion, 
and would be optional for small banks that elect evaluation under the 
Retail Lending Test, for intermediate banks, and for large banks with 
assets of $10 billion or less. For any bank evaluated under the Retail 
Lending Test that did not collect deposits data, the agencies propose 
to use the deposits assigned to the banks' branches in each assessment 
area as reported in the FDIC's Summary of Deposits to calculate the 
local deposit base in the denominator. As discussed elsewhere in this 
SUPPLEMENTARY INFORMATION, deposits data that are collected and 
reported as proposed in Sec.  __.42 would facilitate metrics that 
accurately reflect a bank's deposits inside and outside of its 
assessment areas. By contrast, the FDIC's Summary of Deposits data 
necessarily assigns all deposits to bank branch locations and does not 
identify the amount or percentage of deposits sourced from outside of a 
bank's facility-based assessment areas. As a result, for a bank with 
assets of $10 billion or less that, in fact, sources deposits from 
outside of its facility-based assessment areas, electing to collect and 
maintain deposits data could meaningfully increase the bank volume 
metric in a facility-based assessment area by decreasing the amount of 
deposits included in the denominator of that metric. Conversely, 
electing not to collect and maintain deposits for such a bank may 
result in a lower bank volume metric, because deposits sourced from 
outside of the assessment area would then be included in the 
denominator of the metric.
    The proposed retail lending volume screen uses the dollar amount of 
a bank's retail lending instead of the number of loans. Although this 
approach gives more credit to larger loans, the agencies propose to use 
total dollar amount to measure how fully a bank has utilized its 
capacity, as measured using total deposit dollars. The dollars of 
deposits also serves as a measure of the extent of a bank's local 
presence.
2. Assessing Performance Using Market Volume Benchmark and Threshold
    To assess the level of a bank's retail lending volume, as measured 
by the bank volume metric, relative to local opportunities, the 
agencies propose using a market volume benchmark that reflects the 
level of lending by all large banks in the facility-based assessment 
area. The market volume benchmark would measure the average annual 
dollar amount of retail originations in the assessment area by all 
large banks that operate a branch in the assessment area in the 
numerator, divided by the annual average amount of deposits collected 
by those same banks from that assessment area in the denominator. The 
dollars of deposits in the denominator would be based on reported data 
for large banks with assets of over $10 billion, and on the FDIC's 
Summary of Deposits for large banks with assets of $10 billion or less, 
using the deposits assigned to branches located in each assessment area 
for which the benchmark is calculated.
    Under the proposal, the denominator of the market volume benchmark 
would not include deposits data voluntarily collected and maintained by 
a large bank with assets of $10 billion or less, because the agencies 
would not require a large bank of this size to also report that 
deposits data. Instead, the agencies would continue using FDIC's 
Summary of Deposits data for the market volume benchmark, even when a 
bank voluntarily collects and maintains more specific information for 
its own examination. The agencies acknowledge that there are tradeoffs 
to this approach. On the one hand, this approach reduces the burden of 
a bank that chooses to voluntarily collect and maintain deposits data 
by not also having to report that data. On the other hand, the agencies 
would not be able to use that collected and maintained deposits data to 
construct more accurate market volume benchmarks. This downside would 
be most pronounced in markets where banks with assets of $10 billion or 
less have a large market share. The agencies seek feedback about these 
tradeoffs and the alternative approach of requiring a large bank with 
assets of $10 billion or less to also report deposits data if it wants 
to voluntarily collect and maintain deposits data for use in its own 
examination.

[[Page 33935]]

    The agencies also seek feedback on whether assigning FDIC's Summary 
of Deposits data to the county in which a bank has a branch, as 
provided in Sec.  __.12, is the best way to allocate these deposits for 
purposes of constructing the market volume benchmark. An alternative 
approach to incorporating Summary of Deposits data into the market 
volume benchmark could be proportionately allocating the deposits 
associated with a branch of a large bank with assets of $10 billion or 
less to each of the counties of that bank's assessment area where the 
branch is located. However, without more data about the location of 
deposits, it is hard for the agencies to determine whether this method 
would be more or less accurate than assigning deposits to a single 
county.
    Under the proposal, banks would pass the retail lending volume 
screen with a bank volume metric of at least 30 percent of the market 
volume benchmark. If a bank meets or exceeds this threshold, the 
agencies would evaluate the bank's major product lines under the 
distribution metrics approach, described in Sections IX.D and IX.E, and 
the bank would be eligible for any recommended performance conclusion.
    The relatively low threshold set at 30 percent of the market volume 
benchmark helps ensure that passing the screen would not be onerous for 
banks with different business strategies. In particular, banks that 
generally hold loans on their balance sheet may have substantially 
lower bank volume metrics than banks that generally sell them on the 
secondary market. The agencies therefore propose to set the threshold 
at a level that is well below local averages, so banks with various 
business strategies could meet the threshold.
    Based on an analysis of historical lending data and assessment area 
level conclusions on the Retail Lending Test, the agencies found that a 
threshold set at 30 percent of the market volume benchmark created the 
largest distinction in passing rates between banks whose performance 
was judged by their examiner to be poor from those whose performance 
was judged to be very good or excellent.\182\ Barring additional 
mitigating information, banks that fail to meet 30 percent or more of 
the market volume benchmark are substantially underperforming their 
peers in terms of meeting the credit needs of their communities.
---------------------------------------------------------------------------

    \182\ The agencies estimated the percentage of large banks that 
would have passed various potential retail lending volume thresholds 
at the assessment area level based on historical lending and 
deposits data. Comparing those that received ``very good'' or 
``excellent'' conclusions (or ``High Satisfactory'' or 
``Outstanding'' ratings if applicable) on the lending test in the 
assessment area to those that received ``poor'' conclusions (or 
``Needs to Improve'' ratings), the agencies found that the largest 
difference in the estimated pass rate occurred at 30 percent of the 
market volume benchmark. These lending test conclusions were based 
on many factors in addition to the volume of retail lending, such as 
loan distributions and (for large banks) community development 
lending. Furthermore, examinations under current procedures do not 
use the retail lending volume screen the agencies are proposing to 
evaluate the amount of retail lending a bank engages in. These data 
can be referenced in the CRA Analytics Data Tables.
---------------------------------------------------------------------------

3. Additional Review
    The proposal recognizes that not all performance context factors 
are captured in the metrics. Therefore, the proposal requires a review 
of specific performance context factors to determine whether there is 
an acceptable basis for a bank failing to meet the threshold for the 
retail lending volume screen in a facility-based assessment area. In 
particular, institutional capacity and constraints would be considered 
to determine if a bank's lending volume is sufficient. Institutional 
capacity and constraints may include the financial condition of a bank, 
the presence or lack thereof of other lenders in the geographic area, 
safety and soundness limitations, the bank's business strategy (for 
example if it holds loans in portfolio or sells them into the secondary 
market), or other factors that limit the bank's ability to lend in the 
assessment area. If the performance context assessment concludes that 
the bank failed to meet the threshold for the retail lending volume 
screen due to institutional capacity or other constraints, the bank 
would pass the retail lending volume screen and the agencies would then 
consider the retail loan distribution of its major product lines. If 
such capacity and constraints issues do not account for the bank's 
insufficient volume of bank retail lending in the assessment area, the 
agencies propose to consider the bank to have failed the retail lending 
volume screen.
    Where a large bank fails the retail lending volume screen, barring 
the performance context assessment described above, the agencies 
propose to assign that bank either a ``Needs to Improve'' or 
``Substantial Noncompliance'' conclusion on the Retail Lending Test in 
the assessment area. Which of these two conclusions the large bank 
receives would be determined by a consideration of additional factors, 
such as the margin by which the bank volume metric fell short of the 
threshold, and the bank's performance on the retail distribution 
metrics described in Sections IX.D and IX.E, below. The agencies 
propose that this approach would apply to both large banks with assets 
of over $10 billion and large banks with assets of $10 billion or less.
    Where an intermediate bank or a small bank opting to be evaluated 
under the Retail Lending Test fails the retail lending volume screen, 
the agencies propose that the bank would not be limited to receiving 
only a conclusion of ``Needs to Improve'' or ``Substantial 
Noncompliance'' on the Retail Lending Test in that assessment area. 
Instead, the bank's outcome on the retail lending volume screen would 
be reviewed as an additional factor indicative of its lending 
performance and considered when reaching Retail Lending Test 
conclusions for facility-based assessment areas as discussed in Section 
IX.H.
    This manual review accounts for the lower capacity of intermediate 
and small banks to ensure that their lending is commensurate with their 
deposits. In addition, this approach would account for the proposed use 
of FDIC's Summary of Deposits data to calculate the bank volume metric 
for intermediate banks and for small banks that opt into the Retail 
Lending Test (if the bank does not voluntarily collect and maintain 
deposits data under proposed Sec.  __.42). Specifically, the agencies 
have considered that the FDIC's Summary of Deposits data may not always 
accurately reflect the location of depositors, which could affect 
whether these banks underperform on the retail lending volume screen. 
As such, a manual review by examiners could account for factors related 
to a bank's performance, including the degree to which a bank gathers 
deposits and make loans outside of its facility-based assessment areas.
    The agencies considered whether this approach of reviewing an 
intermediate or small bank's outcome on the retail lending volume 
screen as an additional factor, but not limiting the Retail Lending 
Test conclusion the bank could receive in an assessment area in which 
it failed the screen, should also be extended to large banks with 
assets of $10 billion or less. However, the agencies believe that these 
large banks have greater capacity to ensure their lending is 
commensurate with their deposits, and to voluntarily collect and 
maintain deposits data in cases where the bank's FDIC's Summary of 
Deposits data do not accurately reflect the location of the bank's 
depositors.
Request for Feedback
    Question 72. For calculating the bank volume metric, what 
alternatives should

[[Page 33936]]

the agencies consider to the proposed approach of using collected 
deposits data for large banks with assets of over $10 billion and for 
other banks that elect to collect this data, and using the FDIC's 
Summary of Deposits data for other banks that do not collect this data? 
For calculating the market volume benchmark, what alternatives should 
the agencies consider to the proposed approach of using reported 
deposits data for large banks with assets of over $10 billion, and 
using the FDIC's Summary of Deposits data for large banks with assets 
of $10 billion or less?
    Question 73. Should large banks receive a recommended Retail 
Lending Test conclusion of ``Substantial Noncompliance'' for 
performance below a threshold lower than 30 percent (e.g., 15 percent 
of the market volume benchmark) on the retail lending volume screen?

D. Bank Geographic Distribution Metrics and Borrower Distribution 
Metrics

    In Sec.  __.22(d), the agencies propose to use a set of geographic 
distribution and borrower distribution metrics to measure bank 
performance for each major product line. The geographic distribution 
metrics measure the level of bank lending in low-income and moderate-
income census tracts in an assessment area. The borrower distribution 
metrics measure the level of lending to low-income borrowers, moderate-
income borrowers, small businesses or small farms with gross annual 
revenues of $250,000 or less, and small businesses or small farms with 
gross annual revenues greater than $250,000 but less than or equal to 
$1 million, depending on the product line being evaluated. The agencies 
would calculate these distribution metrics for each major product line 
evaluated under the Retail Lending Test in a facility-based assessment 
area or retail lending assessment area, as applicable.
1. Overview
    To calculate these distribution metrics, the agencies propose using 
the number of a bank's loans, not the dollar amount of those loans. For 
example, under the proposed approach, one $250,000 home mortgage would 
count the same as one $80,000 home mortgage. This approach emphasizes 
the number of households, small businesses, and small farms served 
within each product line, and avoids weighting larger loans (and hence 
higher-income borrowers) more heavily than smaller loans, as would 
occur if the metrics instead used dollar amounts. As a result, the 
proposed approach reflects the importance and responsiveness of smaller 
value loans to meet the needs of lower-income borrowers, smaller 
businesses, and smaller farms. An approach that encouraged larger 
retail loans over smaller ones would not appropriately emphasize 
smaller-value loans that meet the credit needs of low- and moderate-
income communities.
    Table 3 shows the specific distribution metric components the 
agencies propose calculating for each product line evaluated under the 
Retail Lending Test.

  Table 3 to Section _.22--Lending Distributions Considered in the Bank
                                 Metrics
------------------------------------------------------------------------
                                      Geographic           Borrower
                                     distribution        distribution
                                        metrics             metrics
   Retail lending product line      (percentage of      (percentage of
                                  bank loans for the  bank loans for the
                                       following           following
                                      categories)         categories)
------------------------------------------------------------------------
Closed-End Home Mortgage Lending  Low-Income Census   Low-Income
                                   Tracts.             Borrowers.
                                  Moderate-Income     Moderate-Income
                                   Census Tracts.      Borrowers.
Open-End Home Mortgage Lending..  Low-Income Census   Low-Income
                                   Tracts.             Borrowers.
                                  Moderate-Income     Moderate-Income
                                   Census Tracts.      Borrowers.
Multifamily Lending.............  Low-Income Census   N/A.
                                   Tracts.
                                  Moderate-Income
                                   Census Tracts.
Small Business Lending..........  Low-Income Census   Small businesses
                                   Tracts.             with gross annual
                                                       revenues of
                                                       $250,000 or less.
                                  Moderate-Income     Small businesses
                                   Census Tracts.      with gross annual
                                                       revenues of more
                                                       than $250,000 but
                                                       less than or
                                                       equal to $1
                                                       million.
Small Farm Lending..............  Low-Income Census   Small farms with
                                   Tracts.             gross annual
                                                       revenues of
                                                       $250,000 or less.
                                  Moderate-Income     Small farms with
                                   Census Tracts.      gross annual
                                                       revenues of more
                                                       than $250,000 but
                                                       less than or
                                                       equal to $1
                                                       million.
Automobile Lending..............  Low-Income Census   Low-Income
                                   Tracts.             Borrowers.
                                  Moderate-Income     Moderate-Income
                                   Census Tracts.      Borrowers.
------------------------------------------------------------------------

    The proposed distribution metrics draw upon measures that the 
agencies currently use as part of CRA evaluations. The agencies have 
historically evaluated both a bank's geographic and borrower 
distributions, and the proposal would both update and standardize these 
metrics. The agencies have long considered, and propose to continue 
considering, a bank's record of providing credit both to borrowers of 
different income or revenue levels as well as neighborhoods of 
different income levels to be important determinants of its overall 
record of helping to meet the credit needs of its entire community. 
This approach recognizes the importance of lending that benefits low-
income and moderate-income communities, regardless of the income or 
revenue size of the particular borrower, and lending that benefits low-
income and moderate-income individuals and smaller farms and 
businesses, regardless of where they are located.
2. Geographic Distribution Metrics
    The agencies propose using two geographic distribution components/
metrics for each product line:
    <bullet> Loans in low-income census tracts; and
    <bullet> Loans in moderate-income census tracts.
    These components are reflected above in Table 3.
    The proposed regulation refers to these geographic distribution 
metrics as geographic bank metrics. For each product line, the 
geographic bank

[[Page 33937]]

metrics measure the number of a bank's loans located in low-income and 
moderate-income census tracts, respectively, relative to the total 
number of the bank's loans in the assessment area. For example, if Bank 
A originated 25 total closed-end home mortgage loans in an assessment 
area, and made 5 of those loans in low-income census tracts, then it 
has a low-income geographic bank metric of 0.2 because 20 percent of 
its total loans were made in low-income census tracts.
[GRAPHIC] [TIFF OMITTED] TP03JN22.000

    The agencies propose separately calculating a bank's record of 
lending in low-income census tracts and moderate-income census tracts, 
respectively. This approach recognizes the importance of evaluating 
lending performance in each census tract category. The agencies 
considered using a metric that combined performance in low-income 
census tracts and moderate-income census tracts in order to simplify 
the metrics approach. However, the agencies recognize that this could 
have the unintended effect of concealing poor performance for an income 
group. For example, a bank practice of avoiding lending in low-income 
census tracts in favor of moderate-income census tracts may not be 
apparent in the bank's performance evaluation when using only a 
combined income category. Such an outcome would be at odds with the 
objective of evaluating bank performance in both low-income and 
moderate-income census tracts, as befits a bank's obligation under the 
CRA to help meet the credit needs of its entire community.
    For closed-end home mortgage, open-end home mortgage, and 
automobile loans, the agencies propose that loans to borrowers of any 
income would be included in the geographic distribution metrics if they 
are in low-income census tracts and moderate-income census tracts. The 
evaluation of the borrower income distribution of the bank's lending, 
described below, would ensure that a bank would not receive a positive 
rating by solely lending to middle- or upper-income borrowers in low- 
and moderate-income neighborhoods.
    Certain assessment areas, particularly in rural areas, may have few 
or no low- or moderate-income census tracts within their boundaries. 
However, they may contain geographies with acute credit needs. The 
agencies seek feedback on whether the geographic distribution metrics 
described previously should be expanded to include bank performance in 
distressed and underserved middle-income census tracts in assessment 
areas with few or no low- or moderate-income census tracts.
3. Borrower Distribution Metrics
    With the exception of multifamily lending, the agencies propose 
using two borrower distribution components for each product line. These 
components are reflected above in Table 3:
    <bullet> For closed-end home mortgage loans, open-end home mortgage 
loans, and automobile lending, the two borrower distribution components 
would be:
    [cir] Loans to low-income borrowers; and
    [cir] Loans to moderate-income borrowers.
    <bullet> For small businesses, the two borrower distribution 
components would be:
    [cir] Loans to small businesses with gross annual revenues of 
$250,000 or less; and
    [cir] Loans to small businesses with gross annual revenues above 
$250,000 and less than or equal to $1 million.
    <bullet> For small farms, the two borrower distribution components 
would be:
    [cir] Loans to small farms with gross annual revenues of $250,000 
or less; and
    [cir] Loans to small farms with gross annual revenues above 
$250,000 and less than or equal to $1 million.
    The proposed regulation refers to these borrower distribution 
metrics as borrower bank metrics. For each product line, the borrower 
bank metrics measure the number of a bank's loans in each of the 
categories outlined above relative to the total number of the bank's 
loans in the assessment area. For example, if Bank A originated 100 
total closed-end home mortgage loans in an assessment area, and made 20 
of those loans to low-income borrowers, it has a low-income borrower 
bank metric of 0.2 because 20 percent of its total loans were made to 
low-income borrowers.
[GRAPHIC] [TIFF OMITTED] TP03JN22.001

    For closed-end home mortgages, open-end home mortgages, and 
automobile lending, the agencies propose to separately calculate a 
bank's record of lending to low-income borrowers and moderate-income 
borrowers, respectively. Similar to the considerations for separately 
evaluating performance in low-income census tracts and moderate-income 
census tracts, this approach recognizes the importance of evaluating 
lending to individuals in both income categories. As noted with the 
proposal for geographic distribution metrics, the agencies have similar 
concerns about using a metric that combines performance for low-income 
borrowers and moderate-income borrowers because it could fail to 
identify banks that do not lend to low-income borrowers, despite 
available opportunities to do so. Such an outcome would be at odds with 
the objective of evaluating bank performance to both low-income and 
moderate-income borrowers.
    The agencies propose to evaluate the geographic distribution of 
multifamily lending under the Retail Lending Test, but not the borrower 
distribution. Multifamily loans can help meet the credit needs of their 
communities by financing housing in different geographies and for 
tenants of different income levels. However, the income of the 
borrower--often a corporate entity--is less meaningful for evaluating 
the loans' benefit to the community. As discussed in Section XII, the 
agencies propose to evaluate the provision of affordable housing 
through multifamily lending under the Community Development Financing 
Test.

[[Page 33938]]

    For small business and small farm loans, the agencies propose to 
separately calculate the bank's record of lending to small businesses 
or small farms with gross annual revenues of $250,000 or less, and 
those with gross annual revenues greater than $250,000 but less than or 
equal to $1 million, respectively. The agencies propose retaining the 
$1 million gross annual revenue threshold from the current regulation 
to identify smaller businesses and farms and adding an evaluation of 
lending to even smaller businesses and farms with gross annual revenue 
of $250,000 or less whose access to credit may be lacking. According to 
the 2022 Small Business Credit Survey on employer firms, employer firms 
with total annual revenues less than $1 million were substantially more 
likely to experience difficulties obtaining financing than employer 
firms with total annual revenues between $1 million and $5 
million.\183\ Furthermore, employer firms with total annual revenues 
less than $500,000, and particularly those with total annual revenues 
less than $100,000, were even more likely to report financing 
challenges.\184\ The agencies therefore believe that making small 
business loans available to these very low-revenue firms is an 
important marker of a bank meeting the credit needs of its entire 
community. The agencies propose to evaluate bank lending to small 
businesses and small farms with gross annual revenues of $250,000 or 
less to maintain focus on the borrowers with the greatest need, while 
still capturing a large enough population of firms, particularly 
employer firms. The agencies seek feedback on whether this threshold 
should instead be set higher, for example at $500,000. A higher 
threshold would capture more firms, particularly employer firms. 
However, these somewhat higher-revenue small businesses and farms may 
not have very different credit needs than those with gross annual 
revenues between $500,000 and $1 million. The agencies also seek 
feedback on whether this threshold should instead be set lower, for 
example at $100,000. A lower threshold would tighten focus on the 
businesses and farms with the greatest unmet credit needs. However, 
these businesses and farms may be less likely to be employers and, as a 
result, this alternative may detract focus from small local employers 
also in need of credit.
---------------------------------------------------------------------------

    \183\ Federal Reserve System, Small Business Credit Survey 2022. 
Data is available at https://www.fedsmallbusiness.org/survey/2022/report-on-employer-firms.
    \184\ Id.
---------------------------------------------------------------------------

    For both the geographic distribution metric and the borrower 
distribution metric, the agencies propose using all loans to businesses 
or farms with gross annual revenues of $5 million or below, 
respectively, as the denominator for these calculations when measuring 
small business loan or small farm loan product lines. This approach 
would establish an appropriately comprehensive measure of overall bank 
lending to small businesses and farms. As explained above, the agencies 
propose to align the CRA's small business and small farm definitions 
with the CFPB's proposed ``small business'' definition under its 
Section 1071 Rulemaking using a $5 million gross annual revenue 
threshold. As described in Section XXI and proposed in appendix A, 
until the data reported under the Section 1071 Rulemaking is available, 
the agencies propose to calculate a borrower bank metric for only a 
single revenue category for small business lending and small farm 
lending: The percentage of a bank's small business or small farm loans 
that went to a business or farm with gross annual revenues less than $1 
million. As discussed in Section XIX, the agencies seek feedback on 
whether to require banks, as applicable, to collect and report an 
indicator of whether a loan is to a business or farm with gross annual 
revenues of $250,000 or less prior to the use of section 1071 data.
Request for Feedback
    Question 74. Should the geographic distribution evaluations of 
banks with few or no low- and moderate-income census tracts in their 
assessment areas include the distribution of lending to distressed and 
underserved census tracts? Alternatively, should the distribution of 
lending in distressed and underserved census tracts be considered 
qualitatively?
    Question 75. Is the choice of $250,000 gross annual revenue an 
appropriate threshold to distinguish whether a business or farm may be 
particularly likely to have unmet credit needs, or should the threshold 
be lower (e.g., $100,000) or higher (e.g., $500,000)?

E. Methodology for Setting Performance Ranges

    For each of a bank's distribution metrics described above, the 
agencies propose comparing a bank's level of lending to specific 
quantitative standards. These standards would be set using a 
methodology that leverages local data and existing CRA examination 
practices. As a result, the performance expectations established under 
this proposal would be tailored and, as a result, would vary from 
product-to-product and assessment area-to-assessment area.
    While the proposal maintains some key parts of how examiners carry 
out examinations under the status quo, the proposal would set 
standardized and transparent performance expectations for the first 
time. This differs from current practice in CRA examinations, which 
does not specify how much lending is necessary to achieve, for example, 
a ``Low Satisfactory'' or ``Outstanding'' performance conclusion.
    Under the proposed approach, the bank distribution metric for each 
distribution test, income category, and major product line would be 
compared to a set of ``performance ranges'' that would correspond to 
the following conclusion categories: ``Outstanding,'' ``High 
Satisfactory,'' ``Low Satisfactory,'' ``Needs to Improve,'' and 
``Substantial Noncompliance.'' As a result, the performance ranges 
approach would comprehensively assess bank performance across all five 
conclusion categories. The proposed approach would produce separate 
assessments for each component described above in Table 3. For example, 
if a bank had a major product line for closed-end home mortgages, the 
proposed approach would separately assess the bank's closed-end home 
mortgage performance to low-income borrowers and moderate-income 
borrowers and in low-income census tracts and moderate-income census 
tracts in an assessment area.
1. Thresholds and Performance Ranges
    The agencies propose a transparent set of steps, set forth in Sec.  
__.22 and appendix A of the proposed regulations, to define performance 
ranges for evaluating a bank's retail lending performance in each of 
its assessment areas. A consistent methodology would be used to 
establish thresholds and resulting performance ranges for each bank 
distribution metric in different product lines and income categories, 
and in different local markets. Yet, because the methodology relies on 
local data points, the resulting performance ranges are tailored to 
each local market and product line.
    At its most basic level, the proposal involves defining four 
thresholds that would set the boundaries for each performance range. 
The four thresholds are represented below in Figure 1.

[[Page 33939]]

[GRAPHIC] [TIFF OMITTED] TP03JN22.002

    <bullet> The ``Outstanding'' performance range would be set at or 
above the ``Outstanding'' threshold level.
    <bullet> The ``High Satisfactory'' performance range would be set 
at or above the ``High Satisfactory'' threshold and below the 
``Outstanding'' threshold.
    <bullet> The ``Low Satisfactory'' performance range would be set at 
or above the ``Low Satisfactory'' threshold and below the ``High 
Satisfactory'' threshold.
    <bullet> The ``Needs to Improve'' performance range would be set at 
or above the ``Needs to Improve'' threshold and below the ``Low 
Satisfactory'' threshold.
    <bullet> The ``Substantial Noncompliance'' performance range would 
be set below the ``Needs to Improve'' threshold.
2. Using Local Data for Benchmarks
    Under the proposal, the four thresholds are calculated using local 
data points referred to as benchmarks. By leveraging local data in the 
form of the proposed benchmarks, the approach seeks to tailor the CRA 
retail lending expectations to the assessment areas in which a bank 
lends. The benchmarks include both community benchmarks and market 
benchmarks. Community benchmarks reflect the demographics of an 
assessment area, such as the percentage of owner-occupied units that 
are in census tracts of different income levels, the percentage of 
families that are low-income, and the percentage of small businesses or 
small farms of different levels of revenue in an assessment area. 
Market benchmarks reflect the aggregate lending to targeted areas or 
targeted borrowers in an assessment area by all reporting lenders. 
Unlike the bank metrics, which include both loan purchases and 
originations, the market benchmarks are based only on originations by 
reporting lenders. While loan purchases can help improve the credit 
environment for borrowers and thus represent a way in which banks can 
help meet the credit needs of their community, the agencies do not 
consider the aggregate level of loan purchases to reflect the extent of 
local lending opportunities. Aggregate loan originations, in contrast, 
are directly tied to these opportunities.
    The two sets of benchmarks provide complementary information about 
local lending opportunities. The community benchmarks measure the 
presence of potential borrowers but lack other information about local 
factors that might influence the local lending environment (such as an 
economic shock that causes local credit demand to be higher or lower 
than expected). The market benchmarks more closely reflect local demand 
by measuring the actual loan distribution resulting from aggregate 
lending in the area; however, they lack information about how well that 
aggregate lending actually serves all potential borrowers.
    The proposed benchmarks and data sources used to measure them 
(described below) generally align with what examiners use today to 
evaluate bank retail lending performance, with some differences. 
Current CRA examinations use local data as points of comparison 
prescribed in the interagency examination procedures to aid examiners 
in assessing bank performance. However, the current CRA regulations and 
examination procedures give examiners discretion when evaluating bank 
lending in comparison to the local data points. While examiner judgment 
allows for tailoring to reflect local community needs, some 
stakeholders have noted that it can also lead to inconsistent outcomes.
    The agencies considered several benefits of the proposed approach 
to setting quantitative thresholds for performance ranges based on 
local data. One benefit is that this approach would provide a bank with 
greater certainty about CRA performance expectations in an assessment 
area because the performance ranges are based on a consistent formula 
and set of data points. The agencies contemplate providing banks and 
the public with a means (e.g., an online dashboard) to track bank 
performance over time. Another benefit of the proposal is that it would 
consistently tailor expectations to the unique conditions in different 
local communities across the country. For example, expectations for 
mortgage lending to low-income borrowers would be higher in markets 
that have proportionately more potential, and actual, low-income 
borrowers.
    A third benefit of the proposed approach is that the threshold 
levels also automatically adjust over time in a way that can reflect 
changes in the business cycle because the market benchmarks follow 
overall lending activity in each assessment area. This approach reduces 
the need for the agencies to adjust the threshold levels and 
performance ranges through a rulemaking or other regulatory action, or 
for examiners to make a subjective adjustment. If, for example, a 
market downturn affected an assessment area by making low- and 
moderate-income lending relatively more difficult, the market benchmark 
would decrease, causing thresholds for the performance ranges 
(described below in Section IX.E.3) to adjust downward. Conversely, if 
overall low- and moderate-income lending opportunities expanded, the 
market benchmark would rise, creating greater expectations of local 
banks to make loans in low- and moderate-income census tracts, to low- 
and moderate-income borrowers, and to small businesses and small farms.
    Closed-End and Open-End Home Mortgage Lending Benchmarks. For 
closed-end and open-end home mortgages, the proposed benchmarks and 
data sources are provided in Table 4 and are the same as examiners 
generally use today.

[[Page 33940]]



  Table 4 to Section __.22--Benchmarks for Closed-End Home Mortgage and
                      Open-End Home Mortgage Loans
------------------------------------------------------------------------
                                       Community
       Distribution metric             benchmark       Market benchmark
------------------------------------------------------------------------
            Closed-End Home Mortgage, Open-End Home Mortgage
------------------------------------------------------------------------
Geographic Distribution Metric:
    Data Point..................  Percentage of       Percentage of home
                                   owner-occupied      mortgages in low-
                                   residential units   income census
                                   in low-income       tracts or
                                   census tracts or    moderate-income
                                   moderate-income     census tracts in
                                   census tracts, as   assessment area,
                                   applicable, in      as applicable, by
                                   assessment area.    all lender-
                                                       reporters.
    Data Source.................  American Community  HMDA Data.
                                   Survey (Census).
Borrower Distribution Metric:
    Data Point..................  Percentage of low-  Percentage of home
                                   income families     mortgages to low-
                                   or moderate-        income borrowers
                                   income families,    or moderate-
                                   as applicable, in   income borrowers
                                   assessment area.    in assessment
                                                       area, as
                                                       applicable, by
                                                       all lender-
                                                       reporters.
    Data Source.................  American Community  HMDA Data.
                                   Survey (Census).
------------------------------------------------------------------------

    For the geographic distribution metric, the proposed community 
benchmark is intended to measure the opportunities for home mortgage 
lending in the low-income and moderate-income census tracts of an 
assessment area. The proposed market benchmark is intended to show the 
overall level of mortgage lending taking place in the assessment area's 
low-income and moderate-income census tracts by all HMDA reporting 
lenders.
    For the borrower distribution metric, the proposed community 
benchmark is intended to measure the opportunities for banks to lend to 
low-income or moderate-income families in a specific assessment area. 
The proposed market benchmark is intended to show the overall level of 
mortgage lending by all HMDA reporting lenders to low-income and 
moderate-income borrowers in the assessment area. The agencies propose 
to continue the practice commonly used by examiners under current 
procedures of using family counts to measure lending opportunities.
    For the borrower distribution metric, the agencies also seek 
feedback on alternative community benchmark options. For example, one 
option could measure the share of low-income or moderate-income 
households in owner-occupied housing units in an assessment area. This 
alternative approximates the level of existing homeowners at these 
income levels, including households that recently became homeowners. A 
potential downside of this alternative is that it could be seen as 
failing to reflect the full level of opportunity for lending to low-
income or moderate-income households.
    For both of the home mortgage market benchmarks, the agencies 
propose using benchmarks that capture mortgage lending by all reporting 
lenders, not just mortgage lending by banks. Using HMDA reporter data 
enables this benchmark to reflect a larger percentage of the mortgage 
market, including bank and non-bank mortgage lending. The agencies 
propose to set bank performance expectations relative to all mortgage 
lending, as captured in HMDA data, in a community, rather than just to 
mortgage lending by banks. This measure is a more complete reflection 
of a community's total credit needs than is a measure that only 
captures those met by bank lenders.
    Multifamily Mortgage Lending Benchmarks. For multifamily mortgage 
lending, the proposed benchmarks are in Table 5. The proposed community 
benchmarks and data sources would be comparable to what is used in 
evaluations today.
    For the geographic distribution metric, the proposed community 
benchmark is intended to measure the opportunities for multifamily 
mortgage lending in the low-income or moderate-income census tracts of 
an assessment area; the proposed market benchmark is intended to show 
the overall level of mortgage lending taking place in low- and 
moderate-income census tracts by all HMDA reporting lenders.

       Table 5 to Section __.22--Benchmarks for Multifamily Loans
------------------------------------------------------------------------
                                       Community
       Distribution metric             benchmark       Market benchmark
------------------------------------------------------------------------
                               Multifamily
------------------------------------------------------------------------
Geographic Distribution Metric:
    Data Point..................  Percentage of       Percentage of
                                   multifamily units   multifamily
                                   in low-income       mortgages in low-
                                   census tracts or    income census
                                   moderate-income     tracts or
                                   census tracts as    moderate-income
                                   applicable, in      census tracts in
                                   assessment area.    assessment area,
                                                       as applicable, by
                                                       all lender-
                                                       reporters.
    Data Source.................  American Community  HMDA Data.
                                   Survey (Census).
------------------------------------------------------------------------

    Small Business and Small Farm Lending Benchmarks. For small 
business and small farm lending, the proposed benchmarks are in Table 
6. The proposed community benchmarks and data sources would be 
comparable to what is used in evaluations today, and the agencies 
propose using section 1071 data, once available, to develop market 
benchmarks.

[[Page 33941]]



 Table 6 to Section __.22--Benchmarks for Small Business and Small Farm
                                  Loans
------------------------------------------------------------------------
                                       Community
       Distribution metric             benchmark       Market benchmark
------------------------------------------------------------------------
                             Small Business
------------------------------------------------------------------------
Geographic Distribution Metric:
    Data Point..................  Percentage of       Percentage of
                                   small businesses    small business
                                   with gross annual   loans in low-
                                   revenue less than   income or
                                   $5M in low income   moderate-income
                                   or moderate-        census tracts in
                                   income census       assessment area,
                                   tracts, as          as applicable, by
                                   applicable, in      all lender-
                                   assessment area.    reporters.
    Data Source.................  Third-party data    CFPB section 1071
                                   provider.           data.*
Borrower Distribution Metric:
    Data Point..................  Percentage of       Percentage of
                                   small businesses    small business
                                   with gross annual   loans to small
                                   revenue more than   businesses with
                                   $250K and less      gross annual
                                   than or equal to    revenue more than
                                   $1M or $250K or     $250K and less
                                   less, as            than or equal to
                                   applicable, in      $1M or $250K or
                                   assessment area.    less in
                                                       assessment area,
                                                       as applicable, by
                                                       all lender-
                                                       reporters.
    Data Source.................  Third-party data    CFPB section 1071
                                   provider.           data.*
------------------------------------------------------------------------
                               Small Farm
------------------------------------------------------------------------
Geographic Distribution Metric:
    Data Point..................  Percentage of       Percentage of
                                   small farms with    small farms loans
                                   gross annual        in low- income or
                                   revenue less than   moderate-income
                                   $5M in low income   census tracts in
                                   or moderate-        assessment area,
                                   income census       as applicable, by
                                   tracts, as          all lender-
                                   applicable, in      reporters.
                                   assessment area.
    Data Source.................  Third-party data    CFPB section 1071
                                   provider.           data.*
Borrower Distribution Metric:
    Data Point..................  Percentage of       Percentage of
                                   small farms with    small farms loans
                                   gross annual        to small farms
                                   revenue of more     with gross annual
                                   than $250K and      revenue or more
                                   less than or        than $250K and
                                   equal to $1M or     less than or
                                   $250K or less, as   equal to $1M or
                                   applicable, in      $250K or less in
                                   assessment area.    assessment area,
                                                       as applicable, by
                                                       all lender-
                                                       reporters.
    Data Source.................  Third-party data    CFPB section 1071
                                   provider.           data.*
------------------------------------------------------------------------
* As proposed in Sec.   __.51 and discussed in Section XXI, the agencies
  would continue to maintain the current definitions related to small
  business loans and small farm loans until, and subject to a transition
  period, such time as the CFPB finalizes and implements its Section
  1071 Rulemaking and section 1071 data becomes available.

    For the geographic distribution metric, the proposed community 
benchmark is intended to measure the opportunities for small business 
lending in, respectively, the low-income and moderate-income census 
tracts of an assessment area. The proposed market benchmark is intended 
to show the overall level of small bank or small farm lending taking 
place in low-income and moderate-income census tracts in the assessment 
area by all section 1071 reporting lenders.
    For the borrower distribution metric, the proposed community 
benchmark is intended to measure the opportunities for banks to lend to 
small businesses or small farms with gross annual revenues of $250,000 
or less and gross annual revenues more than $250,000 and less than or 
equal to $1 million in an assessment area. The proposed market 
benchmark is intended to show the overall level of small business or 
small farm lending to businesses or farms using the same gross annual 
revenue thresholds. As described in Section XXI, until the data 
reported under the Section 1071 Rulemaking is available, the agencies 
propose to calculate a borrower market benchmark for only a single 
revenue category for small business lending and small farm lending: The 
percentage of all reporter banks' small business or small farm loans 
that went to a business or farm with gross annual revenues of less than 
$1 million. Likewise, the agencies propose to calculate a borrower 
community benchmark for only a single revenue category: The percentage 
of all small businesses or farms with gross annual revenues of less 
than $1 million--until the data reported under the Section 1071 
Rulemaking is available.
    Automobile Lending Benchmarks. For automobile lending, the proposed 
benchmarks are in Table 7. The proposed community benchmarks and data 
sources would be comparable to what is currently used in evaluations, 
and the agencies propose using new data collection and reporting for 
large banks with assets of over $10 billion, once available, to develop 
market benchmarks.

        Table 7 to Section __.22--Benchmarks for Automobile Loans
------------------------------------------------------------------------
                                       Community
       Distribution metric             benchmark       Market benchmark
------------------------------------------------------------------------
                               Automobile
------------------------------------------------------------------------
Geographic Distribution Metric:
    Data Point..................  Percentage of       Percentage of
                                   households in low-  automobile loans
                                   income or           in low-income or
                                   moderate-income     moderate-income
                                   census tracts, as   census tracts in
                                   applicable, in      assessment area,
                                   assessment area.    as applicable, by
                                                       all lender-
                                                       reporters.
    Data Source.................  American Community  CRA reported data.
                                   Survey (Census).
Borrower Distribution Metric:

[[Page 33942]]

 
    Data Point..................  Percentage of low-  Percentage of
                                   income or           automobile loans
                                   moderate-income     to low-income, or
                                   households, as      moderate-income
                                   applicable in       borrowers, in
                                   assessment area.    assessment area
                                                       as applicable, by
                                                       all lender-
                                                       reporters.
    Data Source.................  American Community  CRA reported data.
                                   Survey (Census).
------------------------------------------------------------------------

    For the geographic distribution metric, the proposed community 
benchmark is intended to measure the opportunities for automobile 
lending in the low-income or moderate-income census tracts of an 
assessment area. The proposed market benchmark is intended to show the 
overall level of automobile lending taking place in low-income and 
moderate-income census tracts in an assessment area by banks with 
assets of over $10 billion. For the borrower distribution metric, the 
proposed community benchmark is intended to measure the opportunities 
for automobile lending to low-income or moderate-income households in 
an assessment area. The proposed market benchmark is intended to show 
the overall level of automobile lending by all large banks to low-
income or moderate-income borrowers in an assessment area.
    For both the geographic and borrower community benchmarks, the 
agencies propose to use household counts to measure lending 
opportunities. The market benchmark would involve comparing a bank's 
automobile lending only to the automobile lending by banks with assets 
of over $10 billion. This reflects that only banks with assets of over 
$10 billion evaluated under CRA would be required to report automobile 
lending data under this proposal.
    The agencies considered not developing market benchmarks for 
automobile lending to avoid introducing an additional data collection 
and reporting requirement for banks with assets of over $10 billion, 
but believe that a lack of benchmarks would diminish the value in 
adopting a metrics-based approach to evaluating a bank's automobile 
lending. Without a market benchmark, a bank's automobile lending could 
only be compared to the community benchmark, which could lead to 
performance expectations that are too high in some markets, such as 
metropolitan areas with accessible public transportation.
    The agencies also considered whether credit bureau data could be 
used as a data source for creating market benchmarks for automobile 
lending. However, the agencies found that credit bureau data could not 
be used to construct a market benchmark for the borrower distribution 
metric since sufficiently accurate borrower income information is not 
available from the credit bureaus. The agencies instead propose to 
require data collection and reporting in order to construct market 
benchmarks for both distribution metrics--geographic distribution 
metric and borrower distribution metric--rather than pursuing an 
incomplete metrics approach using credit bureau data.
    Timing Issues for Using Benchmarks. For all the community 
benchmarks described in this section, the agencies are considering 
whether to calculate them using the most recent data available as of 
the first day of a bank's CRA examination. This would provide the most 
accurate possible picture of the potential borrowers in the bank's 
community during an evaluation period. However, under this approach, 
the values of the community benchmarks may not be known at the outset 
of the evaluation period if additional data subsequently becomes 
available in later years, which may result in the benchmarks changing. 
The agencies seek feedback on alternative methods to set the community 
benchmark. An alternative approach would be to lock in the community 
benchmarks at the outset of the evaluation period, using the most 
recent data available at that time. This approach would provide more 
certainty to banks, but the thresholds in place could be out-of-date by 
the end of a performance evaluation period.
    Another approach would be to lock in the community benchmark at the 
outset of the evaluation period using data available then, but let the 
benchmark decrease if demographic data collected during the evaluation 
period would lead to a lower benchmark. This ``float down'' approach 
has the advantage of both giving banks a pre-specified bar to clear, 
while also providing leniency if lending opportunities worsen during 
their evaluation period. However, the agencies have also considered 
that this alternative may reduce the expectations for banks to meet the 
credit needs of their communities under certain market conditions.
    For all the market benchmarks, the agencies are considering 
measuring the benchmarks using all the available reported data from the 
years of the bank's evaluation period, recognizing that some evaluation 
periods could include a year for which reported data is not yet 
available. Similarly, the market volume benchmark described in Section 
IX.C and proposed appendix A would be calculated using reported lending 
data from the bank's evaluation period. In some cases, this approach 
has the potential to create a mismatch between the economic conditions 
described by the market benchmarks and those faced by the bank during 
the full course of its evaluation period. The agencies seek feedback on 
whether this approach to comparing bank metrics to market benchmarks is 
appropriate. An alternative approach would be to only include in the 
bank distribution metrics and bank volume metrics data from the same 
years that the market distribution benchmarks and market volume 
benchmarks are able to be measured over. This approach would have the 
advantage of setting performance standards for banks that correspond to 
the period (and the economic conditions during that period) over which 
an agency is evaluating a bank's performance. However, this approach 
has the disadvantage of, in some circumstances, not fully covering the 
recent lending a bank has done.
3. Setting Thresholds Using Benchmarks
    The agencies propose to translate the proposed benchmarks into the 
four thresholds. First, the community benchmark and market benchmark 
would each be calibrated using defined percentages, referred to in 
proposed appendix A as a community multiplier and a market multiplier. 
The multipliers are proposed as follows, with the objective of aligning 
the benchmarks with the agencies' performance expectations:
    <bullet> 33 percent of the market benchmark and 33 percent of the 
community benchmark are intended to reflect performance expectations 
for the ``Needs to Improve'' threshold.
    <bullet> 80 percent of the market benchmark and 65 percent of the 
community benchmark are intended to reflect performance expectations 
for the ``Low Satisfactory'' threshold.

[[Page 33943]]

    <bullet> 110 percent of the market benchmark and 90 percent of the 
community benchmark are intended to reflect performance expectations 
for the ``High Satisfactory'' threshold.
    <bullet> 125 percent of the market benchmark and 100 percent of the 
community benchmark are intended to reflect performance expectations 
for the ``Outstanding'' threshold.
    Second, the four thresholds would be set by selecting, for each 
conclusion category, the lesser of the calibrated market benchmark (the 
product of the market multiplier times the market benchmark) and 
calibrated community benchmark (the product of the community multiplier 
and the community benchmark). This proposed approach is reflected in 
Table 8.

                      Table 8 to Section __.22--Thresholds for Defining Performance Ranges
----------------------------------------------------------------------------------------------------------------
                                           Market multiplier and market                Community multiplier and
                                                     benchmark                           community benchmark
----------------------------------------------------------------------------------------------------------------
                                       Select the Lesser of the Two Values
----------------------------------------------------------------------------------------------------------------
``Needs to Improve'' Threshold...........  33% of the Market Benchmark.         OR   33% of the Community
                                                                                      Benchmark.
``Low Satisfactory'' Threshold...........  80% of the Market Benchmark.         OR   65% of the Community
                                                                                      Benchmark.
``High Satisfactory'' Threshold..........  110% of the Market Benchmark         OR   90% of the Community
                                                                                      Benchmark.
``Outstanding'' Threshold................  125% of the Market Benchmark         OR   100% of the Community
                                                                                      Benchmark.
----------------------------------------------------------------------------------------------------------------

    The agencies propose to set thresholds as the lesser of the two 
calibrated benchmarks because, as described below, this establishes 
standards that are achievable everywhere, while still ensuring that the 
performance standards are set appropriately in markets in which low- 
and moderate-income individuals and census tracts, and small businesses 
and small farms may be underserved. Specifically, the agencies' 
proposal would tend to assign better ratings in markets where more 
banks were meeting the credit needs of the community. At the same time, 
it would also prevent thresholds from becoming too stringent in markets 
with fewer opportunities to lend to lower-income communities or smaller 
establishments.
    To demonstrate the importance of using both benchmarks in this 
manner, the agencies outline a hypothetical assessment area in which 
the market benchmark is close to or above the community benchmark and 
one in which the market benchmark is well below the community 
benchmark. First, in the area with a higher market benchmark, lower-
income communities or smaller establishments are receiving loans at 
close to the same rate as higher income or larger establishments. The 
calibrated community benchmark, with its lower multipliers, would set 
the threshold for performance ranges there. Local lenders--whose strong 
performance is the reason for the high market benchmark--would 
generally perform well on the performance ranges set by the community 
benchmark. The proposal would therefore reward more banks for 
contributing to the overall strong distribution of credit in such a 
market.
    In the second area, the low level of the market benchmark may be 
due to reduced lending opportunities not reflected in the community 
benchmark, so basing performance ranges on the community benchmark 
there could set thresholds unattainably high. However, the low level of 
the market benchmark could also reflect local lenders failing to meet 
their community's credit needs. By setting thresholds based on the 
calibrated market benchmark with its higher multipliers, the proposal 
would assign lower conclusions to more banks in these potentially 
underserved markets, while ensuring that satisfactory or better 
conclusions are attainable by the better local performers.
    The agencies also seek feedback on an alternative approach to 
determining the thresholds based on the market and community benchmarks 
to address potential concerns that the proposed approach may set 
performance expectations too low in places where all lenders, or a 
significant share of lenders, are underserving the market and failing 
to meet community credit needs. In cases where the calibrated community 
benchmark is higher than the calibrated market benchmark, instead of 
using the lower of the calibrated community and market benchmark as 
proposed, an alternative approach could instead calculate a weighted 
average of the calibrated benchmarks for each threshold. The agencies 
are considering applying a weight ranging between 10 percent and 30 
percent to the calibrated community benchmark, and a weight of 70 
percent to 90 percent to the calibrated market benchmark, for purposes 
of computing the weighted average. However, in cases in which the 
calibrated community benchmark is lower than the calibrated market 
benchmark, the calibrated community benchmark alone would be used to 
set the threshold.
    In places where all lenders, or a significant fraction of lenders, 
are underserving the market and failing to meet community credit needs, 
this weighted average approach would ensure that in such a community, 
the performance ranges are based on a combination of community 
characteristics and market lending patterns, both of which reflect 
local credit needs and opportunities. However, for components of the 
retail lending distribution metrics in which the calibrated community 
benchmark is much higher than the calibrated market benchmark due to 
limited lending opportunities (such as low demand), this alternative 
approach could set thresholds higher in some areas than may be 
desirable.
    Under this alternative, the agencies would apply more weight to the 
calibrated market benchmark than to the calibrated community benchmark. 
This is intended to adequately reflect changes in credit demand and 
lending opportunities over time that are not reflected in the community 
benchmark, such as the emergence of new products and services, or 
economic shocks that affect the level of low- and moderate-income 
credit needs and opportunities. Furthermore, a lower weight on the 
community benchmark lessens the risk of setting the effective 
thresholds unattainably high in circumstances in which the calibrated 
community benchmark is much higher than the calibrated market 
benchmark. In determining the exact weighting that would be used under 
this alternative approach, the agencies consider a weight on the 
calibrated community benchmark as high as 30 percent may give a strong 
emphasis on local demographic factors and to aim towards equitable 
lending outcomes for

[[Page 33944]]

individuals and communities of all income levels. However, a lower 
weight on the community benchmark of 10 percent may make the resulting 
thresholds more responsive to changes in lending conditions over time 
and would capture more information about credit demand that is better 
reflected by the market benchmark than the community benchmark.
4. Proposed Multiplier Levels
    The agencies have proposed threshold levels--using the proposed 
multipliers identified in Table 8--that recognize the existing strong 
retail lending performance of many banks while also seeking to 
appropriately strengthen performance expectations for a 
``Satisfactory'' Retail Lending Test conclusion. The agencies analyzed 
historical bank lending data under the proposed metrics-based approach 
with these multipliers. The analysis, and the estimated conclusions 
banks would have received, are presented in Section X.E. The implied 
outcomes, as measured by the distribution of conclusions that would 
have been assigned under the proposed approach historically, indicate 
that the proposed multipliers are producing a level of stringency that 
the agencies believe to be appropriate.
    A discussion of each set of proposed multipliers follows:
    Proposed Multipliers for ``Needs to Improve'' Threshold. The 
agencies propose multipliers for the needs to improve threshold as 
shown in Table 8.

----------------------------------------------------------------------------------------------------------------
                                           Market multiplier and market                Community multiplier and
                                                     benchmark                           community benchmark
----------------------------------------------------------------------------------------------------------------
                                       Select the Lesser of the Two Values
----------------------------------------------------------------------------------------------------------------
``Needs to Improve'' Threshold...........  33% of the Market Benchmark.         OR   33% of the Community
                                                                                      Benchmark.
----------------------------------------------------------------------------------------------------------------

    The agencies propose setting both the market multiplier and the 
community multiplier at 33 percent for the ``Needs to Improve'' 
threshold, reflecting bank performance that is extremely poor relative 
to opportunities. Performance that falls below this threshold would be 
in the ``Substantial Noncompliance'' performance range.
    The agencies propose that performance serving less than 33 percent 
of the market average is an appropriate dividing line between 
performance low enough to warrant the lowest conclusion category and 
performance that is not satisfactory but is more appropriately 
recognized as needing improvement. Similarly, the agencies propose that 
33 percent of the community benchmark is also appropriate for 
distinguishing between ``Substantial Noncompliance'' performance and 
``Needs to Improve'' performance.
    The agencies considered setting both of these multipliers at 25 
percent but considered that this would set standards that may be too 
narrow for ``Substantial Noncompliance'' performance. Similarly, the 
agencies considered that setting a higher set of percentages for these 
multipliers, such as 50 percent, may be too wide for ``Substantial 
Noncompliance'' performance and may reduce the effectiveness of the 
``Needs to Improve'' category.
    Proposed Multipliers for ``Low Satisfactory'' Threshold. The 
agencies propose multipliers for the ``Low Satisfactory'' threshold as 
shown in Table 8.

 
----------------------------------------------------------------------------------------------------------------
                                           Market multiplier and market                Community multiplier and
                                                     benchmark                           community benchmark
----------------------------------------------------------------------------------------------------------------
                                       Select the Lesser of the Two Values
----------------------------------------------------------------------------------------------------------------
``Low Satisfactory'' Threshold...........  80% of the Market Benchmark.         OR   65% of the Community
                                                                                      Benchmark.
----------------------------------------------------------------------------------------------------------------

    The agencies propose setting the market multiplier at 80 percent 
and the community multiplier at 65 percent for the ``Low Satisfactory'' 
threshold, reflecting performance that is adequate relative to 
opportunities. Performance that falls below this threshold would be in 
the ``Needs to Improve'' performance range.
    The agencies consider the industry's performance to be broadly, 
although not universally, satisfactory and, as such, the proposed 80 
percent market multiplier is meaningfully below the average performance 
of banks in an assessment area. This would provide banks with average 
performance--100 percent of the market benchmark--with a passing 
conclusion on a distribution metric in the ``Low Satisfactory'' 
performance range.
    While the agencies consider that this proposed market multiplier 
would appropriately calibrate the ``Low Satisfactory'' threshold to 
capture some performance below the market average, this proposal is 
also intended to set strong performance expectations necessary to 
achieve a ``Low Satisfactory'' conclusion. The agencies considered 
alternative market multipliers of 75 percent and 70 percent, but 
considered that these levels may be too far below average for 
performance necessary to demonstrate adequately meeting community 
credit needs.
    For the proposed community multiplier, the agencies propose to 
select a percentage below the market multiplier to account for the fact 
that the community benchmark figures are generally higher, and 
therefore more difficult to achieve. While the agencies believe that it 
is appropriate to raise standards for the market multiplier, the 
agencies believe that 65 percent for the community multiplier is more 
appropriate for the ``Low Satisfactory'' threshold. The agencies 
considered a community multiplier of 55 percent for the ``Low 
Satisfactory'' threshold. However, the agencies considered that 
performance just above 50 percent of the community benchmark--
reflecting, for example, the percentage of low-income or moderate-
income families in an assessment area--may be too low for performance 
necessary to demonstrate adequately meeting community credit needs.
    Proposed Multipliers for ``High Satisfactory'' Threshold. The 
agencies propose multipliers for the ``High

[[Page 33945]]

Satisfactory'' threshold as shown in Table 8.

 
----------------------------------------------------------------------------------------------------------------
                                           Market multiplier and market                Community multiplier and
                                                     benchmark                           community benchmark
----------------------------------------------------------------------------------------------------------------
                                       Select the Lesser of the Two Values
----------------------------------------------------------------------------------------------------------------
``High Satisfactory'' Threshold..........  110% of the Market Benchmark         OR   90% of the Community
                                                                                      Benchmark.
----------------------------------------------------------------------------------------------------------------

    The agencies propose setting the market multiplier for a ``High 
Satisfactory'' conclusion at 110 percent. This reserves the ``High 
Satisfactory'' conclusion for banks that are not just average, but a 
meaningful increment above the average of local lenders. A community 
multiplier of 90 percent would establish a recommended ``High 
Satisfactory'' conclusion if a bank achieved close to per-capita parity 
in its lending across different income groups.
    Proposed Multipliers for ``Outstanding'' Threshold. The agencies 
propose multipliers for the ``Outstanding'' threshold as shown in Table 
8.

 
----------------------------------------------------------------------------------------------------------------
                                           Market multiplier and market                Community multiplier and
                                                     benchmark                           community benchmark
----------------------------------------------------------------------------------------------------------------
                                       Select the Lesser of the Two Values
----------------------------------------------------------------------------------------------------------------
``Outstanding'' Threshold................  125% of the Market Benchmark         OR   100% of the Community
                                                                                      Benchmark.
----------------------------------------------------------------------------------------------------------------

    The agencies propose to set the market multiplier at 125 percent 
for an ``Outstanding'' conclusion. This sets a threshold well in excess 
of the average of local lenders, while still being an attainable target 
for many better performers. The agencies recognize that many banks, 
especially large banks, frequently employ dedicated CRA teams with 
strong relationships to the community to ensure that the bank 
appropriately identifies and helps to meet community credit and 
community development needs. Thus, the agencies propose to set the 
threshold for an ``Outstanding'' conclusion at a point that is 
attainable for banks that are actively working and making choices to be 
leaders in helping to meet community credit and community development 
needs. At the same time, the agencies propose not to set the 
``Outstanding'' conclusion threshold too low to ensure that an 
``Outstanding'' conclusion is awarded only to banks that have 
demonstrated an exceptional level of performance.
    The agencies propose to set the community multiplier at 100 
percent. As bank metrics and market benchmarks are usually 
substantially below the community benchmark, the agencies considered 
that a 100 percent multiplier represents an aspirational goal. 
Furthermore, it represents equal per-capita lending to communities of 
different income levels.
    Example of Performance Ranges Methodology. For example, in an 
assessment area with 30 percent of owner-occupied housing units and 
where 25 percent of all closed-end home mortgage loans were in 
moderate-income census tracts, the closed-end home mortgage moderate-
income geographic community and market benchmarks would be 30 percent 
and 25 percent, respectively.
    A bank making 18 loans in moderate-income census tracts out of 100 
total closed-end home mortgage loans in the assessment area would have 
a bank metric of 18 percent for this component of lending. The bank 
metric would fall into the ``Needs to Improve'' performance range 
because it is between the threshold (8.25 percent and 19.5 percent) for 
the ``Needs to Improve'' conclusion.
    Thresholds for the relevant performance ranges are calculated using 
the multipliers in Table 8 as follows:
    <bullet> For the ``Low Satisfactory'' category: the calibrated 
market benchmark is 80 percent of the market benchmark (0.8 x 25 
percent = 20 percent), and the calibrated community benchmark is 65 
percent of the community benchmark (0.65 x 30 percent = 19.5 percent). 
The threshold for a ``Low Satisfactory'' conclusion would be 19.5 
percent, the lesser of these two calibrated benchmarks.
    <bullet> For the ``Needs to Improve'' category: the calibrated 
market benchmark is 33 percent of the market benchmark (0.33 x 25 
percent = 8.25 percent), and the calibrated community benchmark is 33 
percent of the Community Benchmark (0.33 x 30 percent = 9.9 percent). 
The threshold for a ``Needs to Improve'' conclusion would be 8.25 
percent, the lesser of these two calibrated benchmarks.
    The Board has developed a search tool, which includes illustrative 
examples of the thresholds and performance ranges in a given geography, 
using past lending data. Specifically, this tool provides illustrative 
examples of the thresholds for the relevant performance ranges in each 
MSA, metropolitan division, and county based on historical lending from 
2017-2019. This tool can be found on the Board's website at https://www.federalreserve.gov/consumerscommunities/performance-thresholds-search-tool.htm.
Request for Feedback
    Question 76. Should the community benchmarks be set using the most 
recent data available at the time of the examination? Would an 
alternative method that establishes benchmarks earlier be preferable?
    Question 77. Should the bank volume metric and distribution bank 
metrics use all data from the bank's evaluation period, while the 
market volume benchmark and distribution market benchmarks use only 
reported data available at the time of the exam? Would an alternative 
in which the bank volume metrics and distribution bank metrics were 
calculated from bank data

[[Page 33946]]

covering only the same years for which that reported data was available 
be preferable?
    Question 78. Are the proposed community benchmarks appropriate, 
including the use of low-income and moderate-income family counts for 
the borrower distribution of home mortgage lending? Would alternative 
benchmarks be preferable? If so, which ones?
    Question 79. Should automobile lending for all banks be evaluated 
using benchmarks developed only from the lending of banks with assets 
of over $10 billion?
    Question 80. Are the proposed market and community multipliers for 
each conclusion category set at appropriate levels? If not, what other 
set of multipliers would be preferable? In general, are the resulting 
thresholds set at an appropriate level for each conclusion category?
    Question 81. How should the agencies use the calibrated market 
benchmark and calibrated community benchmark to set performance 
thresholds? Should the agencies set thresholds based on the lower of 
the calibrated market benchmark or calibrated community benchmark?
    Question 82. How should the agencies address the potential concern 
that the proposed approach may set performance expectations too low in 
places where all lenders, or a significant share of lenders, are 
underserving the market and failing to meet community credit needs? 
Should the agencies consider an alternative approach to setting the 
performance thresholds that would use a weighted average of the 
calibrated market benchmark and calibrated community benchmark?

F. Developing Product Line Scores in Each Assessment Area

    For each major product line in an assessment area, the agencies 
propose to use a product line score to synthesize lending performance 
in the geographic and borrower distribution metrics. For example, a 
bank's closed-end home mortgage product line score in an assessment 
area would encompass its lending within four categories: (i) In low-
income census tracts and (ii) in moderate-income census tracts (both 
are geographic distribution metrics); and (iii) to low-income borrowers 
and (iv) to moderate-income borrowers (both are borrower distribution 
metrics). The agencies propose combining the conclusions into a product 
line score for each major product to enable stakeholders to better 
understand performance by providing greater transparency and to 
differentiate lending performance for each major product line in the 
same assessment area. The approach could also highlight exemplary 
performance in a product line and provide context for why a bank 
received a particular recommended Retail Lending Test conclusion.
    Scoring Approach. The agencies propose that the two income 
categories within each distribution test receive a conclusion ranging 
from ``Outstanding'' to ``Substantial Noncompliance,'' associated with 
a point value as follows: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs to 
Improve'' (3 points); ``Substantial Noncompliance'' (0 points). As a 
result, each major product line in an assessment area would receive 
four scores, except that multifamily lending would receive two scores 
for the geographic distribution metrics only.
    This proposed mapping between conclusion categories and point 
values fulfills two purposes. First, it creates a meaningful difference 
between each category, including between the ``Low Satisfactory'' and 
``High Satisfactory'' categories. Second, it makes the difference 
between ``Low Satisfactory'' and ``High Satisfactory'' less than the 
differences between the other categories. This choice emphasizes that 
``Low Satisfactory'' and ``High Satisfactory'' represent different 
degrees of performance within the broader ``Satisfactory'' range.
    The agencies also considered an alternate mapping that would use a 
four-point scale with uniform spacing of point values between the 
conclusion categories (i.e., each category would be assigned an integer 
from 0 through 4). However, under the method of deriving assessment 
area, state, multistate MSA, and institution-level conclusions 
described below and in Section X.D, this four-point scale would have 
the tendency to cause more banks to receive one of the ``Satisfactory'' 
conclusions, as these two categories would cover a greater fraction of 
the range of possible scores. The agencies found that the proposed 10-
point scale better allowed a distinction between the strongest- and 
weakest-performing banks and those with closer to average performance.
    Combining Income Categories. After assigning each category a score, 
a weighted average of the scores for the two income categories (or 
revenue categories for small business and small farm borrower 
distribution metrics) would then be taken to produce a geographic 
income average for the geographic distribution metrics scores and a 
borrower income average for the borrower distribution metrics scores 
for that product line within each assessment area.
    The agencies propose to weight these two scores by the community 
benchmark to make the scores proportional to the population of 
potential borrowers in the assessment area. For example, for the 
closed-end home mortgage borrower distribution metrics, the weights are 
based on the percentage of families in the assessment area that are 
either low-income or moderate-income. In a hypothetical assessment area 
in which twice as many low-income families as moderate-income families 
resided, the low-income borrower score would carry twice the weight of 
the moderate-income borrower score in forming the borrower income 
average for closed-end home mortgage lending.
    Combining Borrower Distribution and Geographic Distribution 
Averages. For each major product line, the two distribution income 
averages (geographic income average and borrower income average) are 
then averaged to arrive at the product line average. The scores from 
the two distribution metrics are weighted equally to ensure parity 
between the borrower and geographic distribution metrics. The agencies 
believe that both geographic and borrower distributions are important 
measures of how a bank is meeting its community's credit needs, and an 
equal weighting ensures that both distributions are important to 
overall conclusions and ratings. The agencies seek feedback on whether 
the equal weighting approach is appropriate or if the geographic 
distribution score should be weighted less heavily than the borrower 
distribution, and whether this would account for banks operating in 
rural areas, or other areas with few low- and moderate-income census 
tracts. In assessment areas with no low- and moderate-income census 
tracts, and hence no geographic distribution scores, the agencies 
propose to set the product line average equal to the borrower income 
average.
Request for Feedback
    Question 83. Should the agencies weight the two distribution 
results equally? Should the borrower distribution conclusion be 
weighted more heavily than the geographic distribution conclusion to 
provide an additional incentive for lending to low- and moderate-income 
borrowers in certain areas? Are there circumstances under which the 
geographic distribution conclusion should be weighed less heavily, such 
as in rural areas with few low- and moderate-income census tracts

[[Page 33947]]

or where the number of investor loans is increasing rapidly?

G. Using Weighted Average of Product Line Scores To Create Recommended 
Retail Lending Test Conclusion

    The agencies propose to develop a recommended conclusion on the 
Retail Lending Test for each assessment area by combining the scores 
the bank received on each of its major product lines in that assessment 
area. The proposal recognizes the importance of using a clear and 
transparent method that appropriately weights product lines when 
creating a recommended Retail Lending Test conclusion for each 
assessment area. The agencies propose weighting each product by the 
dollar volume of lending the bank engaged in for that product line 
within that assessment area, so that assessment area conclusions 
reflect performance in each of a bank's major product lines, with more 
weight assigned to a bank's larger major product lines.
    The recommended Retail Lending Test conclusion for an assessment 
area would be derived by taking a weighted average of all the product 
line scores, weighting each product by the dollar volume of lending the 
bank engaged in each product line in that assessment area. The 
resulting score would be rounded to the nearest conclusion category 
using the same point value correspondence as before: ``Outstanding'' 
(10 points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); ``Substantial Noncompliance'' 
(0 points). This would be the recommended conclusion on the Retail 
Lending Test for the assessment area. The examiner would determine a 
final conclusion based on this metric-derived recommendation, as well 
as a consideration of additional factors described in Section IX.H.
    This approach would give proportionate weight to a bank's product 
offerings so that more prominent product lines, as measured in dollars, 
have more weight on the bank's overall conclusion in an assessment 
area. The test is, thus, tailored to individual bank business model, as 
evaluations are based on the lending a bank specializes in locally. 
Moreover, weighing product lines by dollar recognizes the continued 
importance of home mortgage and small business lending to low- and 
moderate-income communities, which have been a focus of the CRA, while 
also accounting for the importance of consumer loans to low- and 
moderate-income individuals.
    Considering the role of consumer loans to low- and moderate-income 
communities, the agencies seek feedback on alternatives to the proposed 
weighting approach, including incorporating loan count with dollar 
volume. For example, averaging the percentage by dollar volume and the 
percentage by number of loans would give consumer lending more weight 
than under an approach that only considers dollar volume. This 
alternative recognizes that loan size can vary among different product 
lines (e.g., automobile loans versus home mortgage loans) and seeks to 
balance the value of dollars invested in a community with the number of 
borrowers served.
Request for Feedback
    Question 84. Should the agencies use loan count in conjunction 
with, or in place of, dollar volume in weighting product line 
conclusions to determine the overall Retail Lending Test conclusion in 
an assessment area?

H. Additional Factors Considered for Retail Lending Test Conclusion

    While the proposed metrics and benchmarks are calibrated to reflect 
differences in local market conditions, bank capacities, business 
models and strategies, there are a limited number of additional factors 
that would not be captured in the proposed metrics and benchmarks that 
the agencies believe should be considered when evaluating a bank's 
retail lending performance. Therefore, the agencies propose to consider 
additional factors that are indicative of a bank's lending performance 
or lending opportunities, but are not captured in the metrics, when 
reaching Retail Lending Test conclusions for facility-based assessment 
areas. The agencies propose to limit this consideration to a prescribed 
set of factors to create more certainty regarding when to depart from a 
recommended conclusion derived from the metrics and performance ranges. 
The agencies seek feedback on whether the agencies should consider a 
different or broader set of additional factors. For example, the 
agencies seek feedback on whether oral or written comments about a 
bank's retail lending performance, as well as the bank's responses to 
those comments, should be considered by the agencies in developing 
Retail Lending Test conclusions.
    Specifically, under the proposal, performance context related to a 
bank's retail lending performance that is not reflected in the metrics, 
such as information related to the bank's capacity and constraints, 
could raise the assigned conclusion under the ranges approach. The 
proposal also recognizes that lowering an assigned conclusion may be 
warranted in other situations as provided in proposed Sec.  __.22(e). 
For example, an assigned conclusion could be lowered where a bank 
manipulated loan data to obtain better scores under the distribution 
tests. Examples of manipulation could include loan churning, defined as 
the purchase of loans for the sole or primary purpose of influencing a 
bank's retail lending performance evaluation, as evidenced by the 
subsequent resale of some or all of those loans within a short time 
period, or when some or all of the loans were considered in multiple 
banks' CRA evaluations.
    The geographic dispersion of loans is another aspect of performance 
not captured in the retail lending measures. For example, an assigned 
conclusion may be lowered where geographic lending patterns exhibit 
gaps in census tracts served that cannot be explained by performance 
context.
    Further, the proposal allows for consideration of data anomalies 
that could produce an inappropriate recommended conclusion. For 
example, where there are very few banks reporting retail lending and 
deposits data, or where one bank has an outsized market share, the 
proposed benchmarks may not provide an accurate measure of local 
opportunities. Measurement errors in the data could also cause issues: 
For example, due to sampling noise, the American Community Survey might 
indicate a particular assessment area had zero owner-occupied units in 
low- or moderate-income census tracts (and hence no geographic income 
average) in an assessment area that the bank did do some mortgage 
lending in low- or moderate-income census tracts. Another problem could 
occur if a monoline multifamily lender were evaluated in an assessment 
area with no low- or moderate-income census tracts. The metric approach 
would not be appropriate in such a situation, as the bank would have 
neither a geographic nor a borrower distribution conclusion.
    An additional approach that the agencies are considering is to use 
data to identify assessment areas in which lenders may be 
underperforming in the aggregate and the credit needs of substantial 
parts of the community are not being met. This information about the 
assessment area could be used as an additional factor to consider when 
assigning Retail Lending Test conclusions. In such an assessment area, 
the agencies may consider that the market benchmark is not an accurate 
measure of the credit needs and opportunities of low- and moderate-
income communities, small businesses,

[[Page 33948]]

or small farms, because lenders as a whole are not meeting their 
obligations. The agencies would apply additional qualitative review of 
retail lending in these assessment areas, the results of which could be 
used to adjust the recommended conclusion produced by the bank metrics 
and performance ranges.
    One way the agencies could implement such an approach would be by 
developing statistical models that predict the level of the market 
benchmark that would have been expected in each assessment area based 
on its demographics (e.g., income distributions, household 
compositions), housing market conditions (e.g., housing affordability, 
the share of housing units that are rentals), and economic activity 
(e.g., employment growth, cost of living). A model could be estimated 
using data at the census tract or county level that are collected 
nationwide. An assessment area in which market benchmarks fell 
significantly below their expected levels would be considered 
underperforming for the relevant product line, distribution test, and 
income level.
    The agencies could identify underperforming markets using a 
relative standard--for example, assessment areas in which the 
difference between the market benchmark and its expected value was two 
standard deviations below average. They could also identify 
underperforming markets using an absolute standard--for example, 
assessment areas in which the market benchmark was less than 75 percent 
of its expected value. Alternatively, rather than designate a specific 
set of underperforming markets, the agencies could use the difference 
between the actual and expected market benchmarks as an additional 
factor to consider in every assessment area.
Request for Feedback
    Question 85. Would identifying underperforming markets 
appropriately counter the possibility that the market benchmarks might 
be set too low in some assessment areas? If so, what data points should 
be used to set expectations for the market benchmark? How far below 
this expectation should an observed market benchmark be allowed to fall 
before the market is designated as underperforming?
    Question 86. Should the agencies consider other factors, such as 
oral or written comments about a bank's retail lending performance, as 
well as the bank's responses to those comments, in developing Retail 
Lending Test conclusions?

X. Retail Lending Test: Evaluation Framework for Retail Lending Test 
Conclusions at the State, Multistate MSA, and Institution Level

    The agencies propose a transparent and standardized approach to 
determining Retail Lending Test conclusions at the state, multistate 
MSA, and institution level. The proposed approach would leverage 
performance in a bank's local assessment areas. In addition, the 
agencies also propose evaluating a large bank's retail lending 
performance in areas outside of its assessment areas, referred to as 
the outside retail lending area. This approach is intended to 
complement the proposed retail lending assessment areas, as described 
in Section VI. The agencies propose a tailored application of this 
approach for intermediate banks. Specifically, the agencies propose 
evaluating an intermediate bank's retail lending performance outside of 
its facility-based assessment areas only if it does more than 50 
percent of its lending outside of its facility-based assessment areas.
    As discussed in Section VI, the agencies recognize that changing 
technology increasingly allows banks to reach consumers with loans and 
deposit products without any in-person contact at a branch office. As a 
result, a bank's lending may be geographically dispersed, without 
concentrations in particular local markets that would be captured by 
the proposed retail lending assessment areas. As shown in Table 1 in 
Section VI, the agencies estimate that approximately 11 percent of home 
mortgage loans and 16 percent of small business loans originated by 
large banks would fall outside of facility-based assessment areas or 
the proposed retail lending assessment areas.

A. Background

    Under the current CRA regulations, lending test ratings are 
assigned at the state, multistate MSA, and institution levels using 
conclusions reached about performance on the various performance 
criteria in a bank's assessment areas. Retail lending conducted outside 
of assessment areas is not evaluated using the Lending Test criteria. 
However, the Interagency Questions and Answers do allow for 
consideration of loans to low- or moderate-income persons, and small 
business and small farm loans outside of a bank's assessment 
areas.\185\
---------------------------------------------------------------------------

    \185\ See Q&A Sec.  __.22(b)(2) and Sec.  __.22(b)(3)-4.
---------------------------------------------------------------------------

    The current process relies on examiner judgment to reach 
conclusions (inside assessment areas and outside when applicable), 
using the descriptions of performance under each of the criteria and 
ratings categories.\186\ Conclusions are then aggregated to reach 
lending test ratings at each of the rated areas--state and multistate 
MSA levels. Examiners aggregate conclusions considering the 
significance of the bank's lending in the area compared to the bank's 
overall activities as well as information about the number and 
activities of other banks, lending opportunities, and demographic and 
economic conditions in the rated areas.
---------------------------------------------------------------------------

    \186\ See Appendix A to part __--Ratings.
---------------------------------------------------------------------------

B. Overview

    The agencies propose to assign conclusions on the Retail Lending 
Test at the state and multistate MSA levels based on the conclusions 
reached at individual facility-based and retail lending assessment 
areas, as applicable. The weight assigned to each assessment area level 
conclusion in determining the state or multistate MSA rating would be 
measured as a combination of the percentage of the banks' retail loans 
made in that assessment area, and the percentage of the banks' deposits 
sourced from that assessment area. The use of the combination of retail 
lending and deposits is intended to ensure that a bank's ratings 
reflect its performance in the communities where most of its borrowers 
and depositors live.
    The agencies also propose to assign conclusions on the Retail 
Lending Test at the institution level by similarly combining 
conclusions from a bank's facility-based and retail lending assessment 
areas, as applicable. In addition, large banks and certain intermediate 
banks would be assigned a conclusion on their retail lending 
performance in outside retail lending areas, which are the areas 
outside of a bank's facility-based and retail lending assessment areas, 
as defined in proposed Sec.  __.12. This conclusion would factor into 
the institution-level Retail Lending Test conclusion for these banks 
just as assessment area conclusions do, with a weight measured as a 
combination of the percentage of the banks' retail loans made, and the 
percentage of the banks' deposits sourced from, outside any facility-
based or retail lending assessment area.
    For intermediate banks, the agencies propose to perform an 
evaluation of outside-assessment area retail lending only if greater 
than 50 percent of the bank's retail lending, by dollar volume, 
occurred outside its assessment areas during the evaluation period. The 
agencies recognize that most intermediate banks perform the bulk of 
their lending within their assessment

[[Page 33949]]

areas.\187\ Tailoring the evaluation approach for these banks is 
intended to reflect the more limited capacity of intermediate banks 
relative to large banks, and to reflect that their business models are 
generally focused on their facility-based assessment areas.
---------------------------------------------------------------------------

    \187\ Using data from the CRA Analytics Data Tables, the 
agencies found that the median bank with assets greater than $600 
million evaluated under the intermediate small bank exam procedures 
conducted almost 80 percent of its retail lending, by dollar volume, 
within its assessment areas. Additionally, over 90 percent of the 
sampled banks conducted the majority of their retail lending within 
their assessment areas.
---------------------------------------------------------------------------

    The agencies seek feedback on whether all large banks should be 
evaluated on their retail lending outside of facility-based and retail 
lending assessment areas, as applicable. An alternative option would be 
to evaluate outside-assessment area retail lending only for large banks 
for which outside-assessment area lending met some minimum threshold. 
For example, large banks that originated or purchased more than 80 
percent of their retail loans, by dollar amount, within their facility-
based and retail lending assessment areas could be exempted from an 
evaluation of their outside-assessment area retail lending.
    To develop conclusions for a bank's outside retail lending area 
performance, the agencies propose to use distribution metrics to 
evaluate each of a bank's major product lines. As with the procedure 
for developing a recommended conclusion for each assessment area, the 
bank's outside retail lending area metrics would be compared to a set 
of benchmarks. These benchmarks, described below in Section X.C, would 
be established as tailored combinations of the market and community 
benchmarks from the outside retail lending area geographies in which 
the bank was engaged in retail lending. As in the bank's assessment 
areas, focusing on major product lines tailors the evaluation to the 
bank's business model by assessing how it met the credit needs of its 
community in the products it specializes in.
Request for Feedback
    Question 87. Should all large banks have their retail lending in 
their outside retail lending areas evaluated? Should the agencies 
exempt banks that make more than a certain percentage, such as 80 
percent, of their retail loans within facility-based assessment areas 
and retail lending assessment areas? At what percentage should this 
exemption threshold be set?

C. Outside Assessment Area Lending

    For the reasons described in Section VIII, the agencies propose 
using the same major product line standards and bank geographic and 
borrower distribution metrics to evaluate a bank's retail lending 
activity in an outside retail lending area. In addition, the agencies 
propose only performing this evaluation at the institution level. This 
means that retail lending activity outside a bank's assessment areas 
would only be evaluated if that lending meets the major product line 
standard. Because this retail lending activity would be aggregated 
nationwide, the agencies propose a modified approach to setting 
performance expectations that draws on the approach used for assessment 
areas but reflects the larger geographic area.
1. Establishing Performance Expectations for Bank Distribution Metrics
    Similar to the proposed method for reaching recommended conclusions 
in individual assessment areas, the agencies propose to set 
expectations for bank performance via a standardized methodology as 
described in Section IX.E.1. The bank distribution metrics for each 
income level, distribution test (geographic or borrower), and major 
product line would be compared to a set of performance ranges that 
correspond to the different conclusion categories.
a. Tailoring Benchmarks To Match the Bank's Geographic Footprint
    Banks that engage in retail lending outside of their assessment 
areas do not all have the same regional distributions of lending across 
the country. As such, the lending opportunities in the communities 
served by different banks in outside retail lending areas are not the 
same. The agencies propose to tailor performance expectations for 
outside retail lending areas to match the opportunities in the regions 
in which the bank lends.
    The agencies propose to tailor performance expectations by setting 
performance ranges relative to bank-specific tailored benchmarks. These 
tailored benchmarks are calculated as the average of local market and 
community benchmarks across the country, weighted by the retail lending 
the bank does in each region. Specifically:
    <bullet> For each major product line, the agencies would calculate 
market benchmarks and community benchmarks for the geographic and 
borrower distribution tests for every MSA, and the non-MSA portion of 
every state, in the country. Calculations of these benchmarks would 
follow the method described in Section IX.E.2.
    <bullet> Each MSA and the non-MSA portion of each state is assigned 
a weight, calculated as the percentage, by dollar volume, of the bank's 
outside retail lending that was in that MSA or non-MSA portion of a 
state.
    <bullet> Tailored community benchmarks and tailored market 
benchmarks are then calculated as the weighted average of the community 
benchmarks and market benchmarks in every MSA and the non-MSA portion 
of every state, weighted by the percentage of the bank's outside retail 
lending in that region.
    For example, suppose that 75 percent of a particular bank's 
outside-assessment area retail lending, by dollar amount, occurred in 
an MSA that had a closed-end home mortgage moderate-income borrower 
market benchmark of 10 percent. Suppose that the remaining 25 percent 
of the bank's outside-assessment area retail lending took place in the 
non-MSA portion of a state, in which the same market benchmark was 8 
percent. The bank's tailored market benchmark for closed-end home 
mortgage lending to moderate-income borrowers would then be (0.75 x 
0.1) + (0.25 x 0.08) = 0.095, or 9.5 percent.
    Performance ranges for the bank's outside retail lending area would 
be established following the method described in Section IX.E.2, with 
the tailored community benchmark and the tailored market benchmark 
substituted for the community benchmark and market benchmark. A 
comparison of the outside-assessment area bank metric to these 
performance ranges produces a recommended conclusion for each major 
product line, distribution test, and income level.
    This proposed tailored benchmark approach would set expectations 
for a bank's outside-assessment area retail lending to match the 
opportunities in the markets it lends in. The weighting by the volume 
of the bank's lending ensures that the more of a bank's lending occurs 
in a particular market, the more the agencies' performance expectations 
for the bank mirror opportunities in that market. Markets in which the 
bank did zero lending would get zero weight, and hence have no 
influence on the performance ranges.
    The agencies seek feedback on whether the tailored benchmarks 
described above appropriately set performance standards for outside 
retail lending areas. An alternative proposal would be to create 
nationwide market and community benchmarks that apply to all banks, 
regardless of where their lending is concentrated. These

[[Page 33950]]

nationwide benchmarks could be calculated as the benchmarks described 
in Section IX.E.2, using all census tracts in the nation as the 
geographic base. Another alternative would be to tailor benchmarks 
using weights that are individualized by the dollar amount of lending 
specific to each major product line, rather than the sum of all of a 
bank's outside-assessment area retail lending. For example, if a bank 
did a majority of its outside-assessment area closed-end home mortgage 
lending in MSA A, and a majority of its outside-assessment area small 
business lending in MSA B, the closed-end home mortgage tailored 
benchmarks would be weighted towards the benchmarks from MSA A, while 
the small business tailored benchmarks would be weighted toward MSA B. 
These alternatives trade off the degree of tailoring performance 
expectations to the bank's opportunities against their level of 
complexity, with the agencies' proposed approach striking a balance 
between the two.
2. Creating Recommended Retail Lending Test Conclusions
    Similar to individual assessment areas, the agencies propose to 
calculate a metrics-based recommended conclusion for overall outside-
assessment area retail lending by developing and averaging product line 
scores, following the method described in Sections IX.F and IX.G.
Request for Feedback
    Question 88. Does the tailored benchmark method proposed above for 
setting performance ranges for outside retail lending areas achieve a 
balance between matching expectations to a bank's lending 
opportunities, limiting complexity, and setting appropriate performance 
standards? Should the agencies instead use less tailored benchmarks by 
setting a uniform outside retail lending areas benchmarks for every 
bank? Or should the agencies use a more tailored benchmarks by setting 
weights on geographies by individual product line?

D. Calculating Retail Lending Test Conclusions at the State, Multistate 
MSA, and Institution Level

1. Scoring Performance in Facility-Based Assessment Areas, Retail 
Lending Assessment Areas, and Outside Lending
    Each facility-based assessment area, retail lending assessment 
area, and the outside retail lending area, if applicable, would be 
assigned a Retail Lending Test conclusion. The agencies propose to 
assign a numerical performance score to the bank's performance in each 
of these areas using the following mapping: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); or ``Substantial 
Noncompliance'' (0 points). As described in Section IX.F.1, this 
mapping would provide a distinction between all conclusion categories, 
while recognizing that ``Low Satisfactory'' and ``High Satisfactory'' 
reflect degrees of difference within a more comprehensive 
``Satisfactory'' category.
    To produce Retail Lending Test conclusions at the state, multistate 
MSA, and institution level, the agencies propose to combine the 
performance scores for facility-based assessment areas, retail lending 
assessment areas, and outside retail lending areas, as applicable, 
using a standardized weighted average approach, as described in the 
following sections. The proposed approach would ensure that the bank's 
retail lending performance in every one of its markets would influence 
Retail Lending Test conclusions at the state, multistate MSA, and 
institution level conclusions.
2. State and Multistate MSA Retail Lending Test Conclusions
    The agencies propose to assign Retail Lending Test conclusions for 
states and multistate MSAs based on a weighted average of conclusions 
from facility-based assessment areas and retail lending assessment 
areas within each respective state and multistate MSA. The agencies 
propose that the weights would be calculated as the simple average of:
    <bullet> The dollars of deposits the bank sourced from an 
assessment area, as a percentage of all the bank's deposits sourced 
from facility-based assessment areas or retail lending assessment areas 
in the state or multistate MSA; and
    <bullet> The dollars of retail lending the bank made in an 
assessment area, as a percentage of all the bank's retail loans in 
facility-based assessment areas or retail lending assessment areas in 
the state or multistate MSA.
    The agencies believe that a bank's presence in a particular 
community, and hence the importance of its performance there in an 
overall evaluation of its retail lending, depends on its customer bases 
for both deposits and loans. Basing weights purely on deposits, for 
example, would mean that if a bank did a very large amount of its 
lending in a market from which it drew few deposits, its lending 
performance there would have only a small influence on its overall 
conclusion. In an extreme case, most of a bank's lending might 
effectively get ignored under such a weighting approach. Alternatively, 
basing weights purely on lending would mean that a bank's record of 
serving the credit needs of the communities from which it draws 
deposits would have little bearing on its overall conclusion. For 
example, if a bank failed the retail lending volume screen in a 
facility-based assessment area due to making very few loans there, its 
low level of retail lending would mean that the resulting assessment 
area conclusion carries little weight in its institution-level 
conclusion for the Retail Lending Test. Therefore, the agencies believe 
weighting performance based on a combination of loans and deposits is 
more appropriate.\188\
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    \188\ The agencies propose to also use the same weighting 
methodology discussed above--a simple average of a bank's share of 
deposits and share of lending--to weight facility-based assessment 
area performance, and other geographic areas as applicable, when 
developing state, multistate, and institution conclusions for the 
Retail Services and Products Test, Community Development Financing 
Test, and Community Development Services Test. The details of how 
this weighting methodology is used for these other performance tests 
are discussed in Sections XI, XII, and XIII.
---------------------------------------------------------------------------

    For deposits data, the agencies propose to use the annual average 
amount of a bank's deposits collected from each assessment area 
averaged over the years of the relevant evaluation period, if the bank 
collects and maintains this data. As proposed in Sec.  __.42, 
collecting and maintaining deposits data would be required for large 
banks with assets of over $10 billion. Collecting and maintaining 
deposits data would be optional for small banks that elect evaluation 
under the Retail Lending Test, for intermediate banks, and for large 
banks with assets of $10 billion or less. For any banks evaluated under 
the Retail Lending Test that do not collect deposits data, the agencies 
propose to use the deposits assigned to the banks' branches in each 
assessment area, as reported in the FDIC's Summary of Deposits, 
averaged over the years of the relevant evaluation period.
    Because the FDIC's Summary of Deposits data assigns all deposits to 
branch locations, and all branches would be located in a facility-based 
assessment area, the deposits assigned to retail lending assessment 
area performance scores for banks that do not collect and maintain 
deposits data would always be zero. The weight on the retail lending 
assessment area performance score for such a bank would, therefore, be 
one half of the percentage of dollars of retail lending the bank made 
outside its facility-based assessment areas. For example, if a bank 
conducted 50 percent of the dollar

[[Page 33951]]

amount of its retail lending in a single retail lending assessment area 
and did not collect and maintain deposits data under Sec.  __.42 of the 
proposal, then the weight for that retail lending assessment area would 
be 25 percent. As a result, for a large bank with assets of $10 billion 
or less or an intermediate bank that obtains deposits from outside of 
its facility-based assessment areas, electing to collect and maintain 
deposits data could meaningfully increase the weight placed on the 
bank's performance in its retail lending assessment areas and outside 
retail lending area, as applicable, and decrease the weight placed on 
its facility-based assessment areas. As noted earlier, the agencies 
believe that using an average of a bank's share of lending and share of 
deposits remains a preferable weighting approach to only using a bank's 
share of lending to weight performance across different geographic 
areas, which could result in areas with high amounts of deposits but 
low levels of lending being overlooked in a bank's Retail Lending Test 
conclusion. The agencies seek feedback on the tradeoffs involved with 
tailoring deposits data requirements, particularly regarding the impact 
of using the FDIC's Summary of Deposits data, on the proposed weighting 
methodology and other aspects of the proposal.
    Using the weights described above, a weighted average of the 
performance scores from each assessment area in the state or multistate 
MSA would be calculated, and a corresponding conclusion would be 
assigned by rounding to the nearest point value of a conclusion 
category. For example, a bank with an averaged performance score in a 
particular state of 4.7 would fall between a ``Needs to Improve'' (3) 
and ``Low Satisfactory'' (6). Because the averaged performance score is 
closer to 6 than to 3, the bank would fall into the ``Low 
Satisfactory'' conclusion category.
    Along with the conclusion category, the agencies are proposing to 
report the averaged performance score in the bank's performance 
evaluation. This score would provide more information as to which end 
of the performance range a bank receiving a particular conclusion fell. 
In the example above, the bank with a 4.7 averaged performance score is 
toward the lower end of the ``Low Satisfactory'' range. In contrast, a 
bank with, for example, a 6.3 averaged performance score would be on 
the higher end of the ``Low Satisfactory'' range. Both banks would 
receive the same conclusion, but the second bank's performance was 
stronger. By publishing the averaged performance score, the agencies 
would provide the public with more detailed information about how well 
the bank performed on the Retail Lending Test in each of its states and 
multistate MSAs.
    In the following example of the proposed approach to assigning 
conclusions, suppose a bank had one facility-based assessment area and 
one retail lending assessment area in a state.
    <bullet> In the facility-based assessment area, the bank made $10 
million in retail loans and collected $90 million in deposits, and
    <bullet> In the retail lending assessment area, the bank made $10 
million in retail loans and collected $10 million in deposits.
    <bullet> The bank receives an ``Outstanding'' conclusion (10 
points) in its facility-based assessment area, and
    <bullet> The bank receives a ``Needs to Improve'' conclusion (3 
points) in its retail lending assessment area.
Calculating Weights
[GRAPHIC] [TIFF OMITTED] TP03JN22.003

    Retail Lending Test conclusion for the state: The state average 
performance score would then be (0.7 x 10) + (0.3 x 3) = 7.9. This 
score is closer to the ``High Satisfactory'' value (7 points) than the 
``Outstanding'' value (10) points, so the bank would be within the 
``High Satisfactory'' conclusion category for its Retail Lending Test 
conclusion in the state.
3. Institution Retail Lending Test Conclusions
    The agencies propose to assign institution-level conclusions 
similarly to state and multistate MSA level ratings by taking a 
weighted average of the conclusions from individual assessment areas. 
In addition, the agencies propose that the institution-level weighted 
average for large banks and certain intermediate banks would 
incorporate

[[Page 33952]]

the Retail Lending Test conclusion for outside assessment area lending.
    As described above in Section X.D.1, the agencies propose to assign 
performance scores to each facility-based assessment area and retail 
lending assessment area according to the Retail Lending Test conclusion 
reached in each specific assessment area. The same mapping would be 
used to assign a performance score in an outside retail lending area, 
depending on the conclusion this lending received: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); or ``Substantial 
Noncompliance'' (0 points).
    To develop the Retail Lending Test conclusion for the institution, 
the agencies propose calculating a weighted average of a bank's 
facility-based assessment area, retail lending assessment area, and 
outside retail lending area performance scores. The weights for 
assessment areas and the outside assessment area lending would be 
calculated analogously to the assessment area weights for the state and 
multistate MSA conclusions. Accordingly, the agencies propose to weight 
each assessment area and outside retail lending area performance score 
calculated as the simple average of:
    <bullet> The dollars of deposits the bank sourced from an 
assessment area, or outside retail lending area, as applicable, as a 
percentage of all the bank's deposits; and
    <bullet> The dollars of retail lending the bank made in an 
assessment area, or outside retail lending area, as applicable, as a 
percentage of all the bank's retail loans.
    As under the proposed approach for developing state and multistate 
MSA Retail Lending Test conclusions, the share of deposits used to 
calculate these weights would be assigned to geographies according to 
the reported deposits data for large banks with assets of over $10 
billion, and according to collected deposits data for other banks 
evaluated under the Retail Lending Test that elect to collect and 
maintain the data. For banks that are evaluated under the Retail 
Lending Test that do not collect and maintain deposits data, the FDIC's 
Summary of Deposits data would be used to measure dollars of deposits 
by location. Because the Summary of Deposits data assigns all deposits 
to branch locations, and all branches would be located in a facility-
based assessment area by rule, the deposits assigned to a retail 
lending assessment area and outside retail lending area performance 
scores for banks that do not collect and maintain deposits data would 
always be zero. The weight on the retail lending assessment area and 
outside retail lending area performance scores for such a bank would 
therefore be one half of the percentage of dollars of retail lending 
the bank made outside its facility-based assessment areas. The agencies 
seek feedback on the tradeoffs involved with tailoring deposits data 
requirements, particularly regarding the impact of using the FDIC's 
Summary of Deposits data, on the proposed weighting methodology and 
other aspects of the proposal.
    Using the above weights, a weighted average of the performance 
scores from each assessment area and outside retail lending area, as 
applicable, would be calculated. This averaged performance score would 
also be paired with the appropriate conclusion category (e.g., ``Low 
Satisfactory'') by rounding the performance score to the nearest point 
value of a conclusion category. Just as for Retail Lending Test 
conclusions at the state and multistate MSA level, the agencies are 
proposing to report the average performance score at the institution 
level. This would provide more detailed information about how well the 
bank performed on the Retail Lending Test overall.
    For example, consider the same example bank described above in 
Section X.D.2 with the following performance:
    <bullet> The bank made $5 million in retail loans in its outside 
retail lending area but drew no additional deposits.
    <bullet> The bank received an ``Outstanding'' conclusion (10 
points) for its outside retail lending area.
    As before, under this example, the bank did $10 million in retail 
lending, and collected $90 million in deposits from its facility-based 
assessment area, which received an ``Outstanding'' conclusion (10 
points). The bank also made $10 million in retail loans and collected 
$10 million in deposits from its retail lending assessment area, which 
received a ``Needs to Improve'' (3 points) conclusion.
Calculating Weights

[[Page 33953]]

[GRAPHIC] [TIFF OMITTED] TP03JN22.004

    Retail Lending Test conclusion for the bank: The bank's average 
performance score would then be (0.65 x 10) + (0.25 x 3) + (0.1 x 10) = 
8.25. This score is closer to the ``High Satisfactory'' value (7 
points) than the ``Outstanding'' value (10) points, so the bank falls 
into the ``High Satisfactory'' conclusion category for its institution-
level Retail Lending Test conclusion.
    The agencies seek feedback on whether weighting facility-based 
assessment area, retail lending assessment area, and outside retail 
lending area performance scores by the average of the percentage of a 
bank's retail lending and deposit dollars from each of those 
geographies is the best way to combine local-level retail lending 
performance conclusions to the state, multistate MSA, and institution 
levels.
Request for Feedback
    Question 89. Should assessment area and outside retail lending area 
conclusions be weighted by the average of a bank's percentage of loans 
and deposits there? Is the proposed approach for using FDIC's Summary 
of Deposits data for banks that do not collect and maintain deposits 
data appropriate? Should the agencies use another method for choosing 
weights?

E. Analysis of Proposed Approach Using Historical CRA Performance 
Evaluation Data

    To help inform certain aspects of the proposed Retail Lending Test 
approach, the agencies have analyzed historical bank lending 
performance under the proposed retail lending volume screen and metric-
based performance ranges, using historical CRA performance evaluation 
data in the CRA Analytics Data Tables as well as other historical data. 
Where possible, this analysis approximates the recommended retail 
lending conclusion each assessment area would have received and the 
weights each assessment area would be assigned in computing the 
institution-level Retail Lending Test conclusion. This approximation 
does not take into account aspects of the proposal that would involve 
examiner judgment, such as the additional factors listed in proposed 
Sec.  __.22(e). The agencies also compared historical performance under 
the retail lending metrics across categories of bank asset size, 
assessment area location and type, and time period to evaluate how the 
proposal may affect banks or communities in particular circumstances.
    While the agencies believe this analysis is informative, the 
agencies also recognize its limitations, including the fact that the 
analysis is backwards looking and, therefore, is not a prediction of 
future evaluation results. In addition, there are a number of data 
limitations that impact the analysis and, therefore, should be taken 
into consideration when interpreting the results. These include a 
number of differences between the proposed metrics and the historical 
lending analysis run by the agencies, due largely to data availability. 
For example, small business loans were identified in the analysis based 
on loan amount, as occurs under the status quo, rather than borrower 
revenue size, as is proposed by the agencies. In addition, no data on 
small business lending specifically to borrowers with gross annual 
revenues of $250,000 or less is available. On deposits data, deposit 
locations were approximated by the county of the bank branch they were 
assigned to in the FDIC's Summary of Deposits rather than based on the 
address of the depositor. In addition, the analysis combines all home 
mortgage loans together in a single category as distinctions between 
closed-end and open-end home mortgages were not available until the 
2018 HMDA data. Finally, the analysis is based solely on mortgage and 
small business lending. The estimates shown here, therefore, should be 
understood only as approximations of how banks actually would have 
performed under the proposed retail lending metrics.
    Bank Asset Size. The agencies propose using metrics and performance 
ranges to evaluate large and intermediate banks, with the denominators 
of the bank volume metric

[[Page 33954]]

and distributional bank metrics tailoring the metrics to account for 
institutional size and capacity.
    Table 9 provides an analysis of mostly large bank performance under 
the proposed retail lending volume screen and performance ranges 
approach using existing and available data. The results reflect 
aggregated performance at the institution level, reflecting performance 
across facility-based assessment areas, retail lending assessment 
areas, and outside retail lending areas, as appropriate. The agencies 
used lending, deposits, and demographic data from 2017 through 2019 to 
estimate the percentage of banks whose historical performance in those 
years would have been associated with each Retail Lending Test 
conclusion category from ``Substantial Noncompliance'' to 
``Outstanding.'' For data availability reasons, this analysis is 
restricted to banks that were both CRA and HMDA reporters and is thus 
primarily an analysis of large banks.\189\ Wholesale, limited purpose, 
and strategic plan banks were also excluded from this analysis.
---------------------------------------------------------------------------

    \189\ Some banks voluntarily report CRA data, despite not 
reaching the asset size threshold to be designated a large bank 
under current regulations. These banks were included in the analysis 
of CRA and HMDA reporter banks.
---------------------------------------------------------------------------

    For purposes of this analysis, these banks, which were primarily 
large banks, were divided into three asset size categories: Assets less 
than $10 billion, assets between $10 billion and $50 billion, and 
assets above $50 billion. The various asset size groupings of banks 
appear to have roughly similar performance under the metrics, with the 
majority of banks falling into a ``Satisfactory'' category, and ``Low 
Satisfactory'' being somewhat more common than ``High Satisfactory.'' 
As shown in Table 9, those banks with assets under $10 billion had 
higher frequencies of both ``Outstanding'' and ``Needs to Improve'' 
Retail Lending Test conclusions. This result is due, in part, to these 
banks having fewer assessment areas, so a ``Needs to Improve'' or 
``Outstanding'' performance conclusion in an individual assessment area 
tends to have a greater impact when averaging performances across all 
assessment areas. Larger banks typically have many more assessment 
areas, so very good or very poor performances in a few assessment areas 
can have less impact overall when averaged with stronger performance in 
other assessment areas, leading to more conclusions in the ``Low 
Satisfactory'' or ``High Satisfactory'' categories.

   Table 9 to Section __.22--Distribution of Reporter Banks Estimated Retail Lending Test Conclusions, by Bank
                                                     Assets
----------------------------------------------------------------------------------------------------------------
                                                        <$10B               $10B-$50B               >$50B
                  Bank assets                  -----------------------------------------------------------------
                                                  Freq.     Percent     Freq.     Percent     Freq.     Percent
----------------------------------------------------------------------------------------------------------------
``Substantial Noncompliance''.................          0          0          0          0          0          0
``Needs to Improve''..........................         52         10          6          9          1          4
``Low Satisfactory''..........................        235         46         31         48         15         58
``High Satisfactory''.........................        189         37         24         37         10         38
``Outstanding''...............................         39          8          4          6          0          0
----------------------------------------------------------------------------------------------------------------
Notes: Table 9 shows the estimated distribution of Retail Lending Test conclusions based on agency analysis of
  home mortgage and small business lending, deposits, and demographic data from the CRA Analytics Data Tables,
  over the years 2017-2019. Institution-level conclusions were derived from the weighted average of assessment
  area level recommended conclusions. The boundaries of facility-based assessment areas were estimated using
  reported assessment areas, along with the restrictions that assessment areas must generally lie entirely
  within a single MSA or the non-MSA portion of a single state, and generally consist of (at least portions of)
  a contiguous set of counties. Analysis included banks that were both CRA and HMDA reporters, and excluded
  wholesale, limited purpose, and strategic plan banks. Bank asset categories were assigned using the annual
  average of the prior two years of quarterly assets relative to the exam year. Percentages were rounded to the
  nearest whole number.

    Table 10 reflects performance for small, intermediate, and large 
banks, as defined in the proposal, on aspects of the proposed Retail 
Lending Test approach. The agencies propose to evaluate intermediate 
banks under the same retail lending volume screen, as well as retail 
lending distribution metrics and performance ranges as large banks 
(although with different rules for evaluating lending volume and 
lending outside of facility-based assessment areas). However, the 
agencies propose to continue evaluating small banks under current 
procedures unless they opt into the proposed Retail Lending Test.
    Table 10 provides an analysis of small, intermediate, and large 
bank performance at the institution level under the performance ranges 
portion of the proposed Retail Lending Test. Because the bank volume 
metric could not be calculated for some banks included in this 
analysis, the analysis in Table 10 omits the retail lending volume 
screen for every bank, and simulated conclusions are based solely on 
the geographic and borrower distributions of their retail lending. As 
shown in Table 10, intermediate bank performance under the performance 
ranges appears similar to large bank performance. Small banks were 
notably more likely to end up with either a ``Needs to Improve'' or 
``Outstanding'' conclusion. However, as noted earlier, small banks 
would only be evaluated under the proposed Retail Lending Test at their 
option and could otherwise remain under the status quo small bank 
lending test.

   Table 10 to Section __.22--Distribution of Estimated Retail Lending Conclusions Among Banks by Asset Size,
                                Without Applying the Retail Lending Volume Screen
----------------------------------------------------------------------------------------------------------------
                                                    Assets <$600m       Assets $600M-$2B         Assets >$2B
                                               -----------------------------------------------------------------
                                                  Freq.     Percent     Freq.     Percent     Freq.     Percent
----------------------------------------------------------------------------------------------------------------
``Substantial Noncompliance''.................          1          1          0          0          0          0
``Needs to Improve''..........................         27         14          5          7          3          7
``Low Satisfactory''..........................         48         24         28         38         17         40

[[Page 33955]]

 
``High Satisfactory''.........................         61         31         32         43         18         43
``Outstanding''...............................         61         31          9         12          4         10
----------------------------------------------------------------------------------------------------------------
Notes: Table 10 shows the estimated distribution of Retail Lending Test conclusions based on agency analysis of
  home mortgage and small business lending, deposits, and demographic data from the CRA Analytics Data Tables.
  Institution-level conclusions were derived from the weighted average of assessment area level recommended
  conclusions. The boundaries of facility-based assessment areas for small and intermediate-small banks were
  derived from data collected from the bank's performance evaluation. The boundaries of facility-based
  assessment area for large banks were derived from a combination of the data collected from the bank's
  performance evaluation and its reported assessment area data. Analysis included banks that had a CRA
  examination begin in 2018 or 2019, and excluded wholesale, limited purpose, and strategic plan banks. Bank
  asset categories were assigned using the annual average of the prior two years of quarterly assets relative to
  the examination year. Percentages were rounded to the nearest whole number.

    Assessment Area Location. The agencies propose to use the same 
metrics and performance ranges in different geographic markets, as the 
benchmarks are intended to adjust for differences in lending 
opportunities in different areas. Table 11 reflects an estimate of the 
percentage of bank facility-based assessment area performance broken 
out between assessment areas located in MSAs and assessment areas 
located in non-MSAs. This analysis uses 2017-2019 data for CRA and HMDA 
reporter banks, primarily reflecting large banks. As shown in Table 11, 
bank performance is fairly similar in MSA and non-MSA assessment areas.

Table 11 to Section __.22--Distribution of Reporter Bank Assessment Area
            Estimated Retail Lending Conclusions, by Location
------------------------------------------------------------------------
                                       MSA                 Non-MSA
                             -------------------------------------------
                                Freq.     Percent     Freq.     Percent
------------------------------------------------------------------------
``Substantial                        46          1         33          2
 Noncompliance''............
``Needs to Improve''........        796         16        284         16
``Low Satisfactory''........       1669         33        484         27
``High Satisfactory''.......       1803         35        638         35
``Outstanding''.............        760         15        359         20
------------------------------------------------------------------------
Notes: Table 11 shows the estimated distribution of Retail Lending Test
  conclusions based on agency analysis of home mortgage and small
  business lending, deposits, and demographic data from the CRA
  Analytics Data Tables, over the years 2017-2019. Assessment area-level
  recommended conclusions are shown. The boundaries of assessment areas
  were estimated using reported assessment areas, along with the
  restrictions that assessment areas must generally lie entirely within
  a single MSA or the non-MSA portion of a single state, and generally
  consist of (at least portions of) a contiguous set of counties.
  Analysis included 606 banks that were both CRA and HMDA reporters, and
  excluded wholesale, limited purpose, and strategic plan banks.
  Percentages were rounded to the nearest whole number.

    Retail Lending Assessment Areas and Outside Retail Lending Areas. 
The agencies propose to evaluate the retail lending performance of 
large banks outside of facility-based assessment areas in retail 
lending assessment areas. The agencies also propose to evaluate the 
retail lending of large banks outside of any assessment area (as well 
as that of certain intermediate banks) in the overall outside retail 
lending area. To understand how banks may have performed, historically, 
in these areas, the agencies estimated the distribution of recommended 
Retail Lending Test conclusions that banks reporting both HMDA and CRA 
data would have received in areas they would have been required to 
designate as retail lending assessment areas, as well as in the outside 
retail lending areas. Results using 2017-2019 data are shown in Table 
12. Compared to the facility-based assessment area results shown above, 
these mostly large banks were more likely to receive a ``Needs to 
Improve'' conclusion in retail lending assessment areas and outside 
retail lending areas. Under the proposal, intermediate banks would not 
be required to designate retail lending assessment areas. Additionally, 
an intermediate bank with more than 50 percent of lending outside of 
its facility-based assessment areas would be evaluated on outside 
retail lending area performance under the proposal, while other 
intermediate banks would only be evaluated on facility-based assessment 
area performance.

   Table 12 to Section __.22--Distribution of Estimated Reporter Bank
   Retail Lending Conclusions, in Retail Lending Assessment Areas and
                      Outside Retail Lending Areas
------------------------------------------------------------------------
                                Retail lending AA      Outside retail
                             ----------------------     lending area
                                                   ---------------------
                                Freq.     Percent     Freq.     Percent
------------------------------------------------------------------------
``Substantial                        37          2         11          2
 Noncompliance''............
``Needs to Improve''........        531         32        175         29
``Low Satisfactory''........        646         39        268         45
``High Satisfactory''.......        360         22        129         21

[[Page 33956]]

 
``Outstanding''.............         96          6         21          3
------------------------------------------------------------------------
Notes: Table 12 shows the estimated distribution of Retail Lending Test
  conclusions based on agency analysis of home mortgage and small
  business lending, deposits, and demographic data from the CRA
  Analytics Data Tables, over the years 2017-2019. Assessment area-level
  and outside retail lending area recommended conclusions are shown. The
  boundaries of facility-based assessment areas were estimated using
  reported assessment areas, along with the restrictions that assessment
  areas must generally lie entirely within a single MSA or the non-MSA
  portion of a single state, and generally consist of at least a portion
  of a contiguous set of counties. Analysis included 604 banks engaged
  in retail lending outside any assessment area, and 147 that would have
  been designated based on the proposed retail lending assessment areas
  definition. Sample was limited to banks that were both CRA and HMDA
  reporters, and excluded wholesale, limited purpose, and strategic plan
  banks. Percentages were rounded to the nearest whole number.

    Time Period. The agencies propose using a consistent set of retail 
lending metrics and multipliers over time, although the proposed 
approach is intended to be dynamic and set thresholds that adjust for 
changes in lending opportunities over time. Specifically, by using the 
market volume benchmark and distributional market benchmarks as the 
foundation for setting performance expectations, the agencies intend 
the resulting thresholds to adjust across communities and over time. 
Using further historical data from banks that report both HMDA and CRA 
data, Table 13 reflects an analysis of the percentage of banks that 
would have received a recommended Retail Lending Test conclusion in 
three different time periods: 2005-2007, 2009-2011, and 2017-2019. The 
percentage of banks that would have fallen below a ``Low Satisfactory'' 
is fairly stable over time, suggesting that the metrics are 
appropriately correcting for variation in loan demand over the business 
cycle. Notably, however, there is a clear trend of declining rates of 
``Outstanding'' conclusions, and rising ``Low Satisfactory'' 
conclusions, in a way that does not align with the business cycle. 
Factors that shift the benchmarks relative to the lending by a typical 
bank--for example, if nonbank lenders capture a larger share of home 
mortgage lending to low-income borrowers--can lead to overall shifts in 
measured bank performance over time for reasons other than market 
downturns or changes in the business cycle.

  Table 13 to Section __.22--Distribution of Reporter Bank Estimated Retail Lending Conclusions, by Time Period
----------------------------------------------------------------------------------------------------------------
                                                      2005-2007             2009-2011             2017-2019
                                               -----------------------------------------------------------------
                                                  Freq.     Percent     Freq.     Percent     Freq.     Percent
----------------------------------------------------------------------------------------------------------------
``Substantial Noncompliance''.................          5          1          0          0          0          0
``Needs to Improve''..........................         68          8         93         12         59         10
``Low Satisfactory''..........................        207         24        238         31        281         46
``High Satisfactory''.........................        368         42        289         38        223         37
``Outstanding``...............................        222         26        138         18         43          7
----------------------------------------------------------------------------------------------------------------
Notes: Table 13 shows the estimated distribution of Retail Lending Test conclusions based on agency analysis of
  home mortgage and small business lending, deposits, and demographic data from the CRA Analytics Data Tables,
  over the years 2005-2007, 2009-2011, and 2017-2019. Institution-level conclusions shown were derived from the
  weighted average of assessment area level recommended conclusions. The boundaries of facility-based assessment
  areas were estimated using reported assessment areas, along with the restrictions that assessment areas must
  generally lie entirely within a single MSA or the non-MSA portion of a single state, and generally consist of
  (at least portions of) a contiguous set of counties. Analysis included banks that were both CRA and HMDA
  reporters, and excluded wholesale, limited purpose, and strategic plan banks. Percentages were rounded to the
  nearest whole number.

XI. Retail Services and Products Test

    In Sec.  __.23, the agencies propose a Retail Services and Products 
Test that would evaluate the following for large banks: (i) Delivery 
systems; and (ii) credit and deposit products responsive to low- and 
moderate-income communities' needs. The proposed Retail Services and 
Products Test would use a predominately qualitative approach while 
incorporating quantitative measures as guidelines. The delivery systems 
part of the proposal seeks to achieve a balanced evaluation framework 
that considers a bank's branch availability and services, remote 
service facility availability, and its digital and other delivery 
systems. The credit and deposit products part of the proposal aims to 
evaluate banks' efforts to offer products that are responsive to low- 
and moderate-income communities' needs. Overall, the agencies seek to 
draw on the existing approach to evaluate a bank's retail services, 
while also updating and standardizing the evaluation criteria and 
reflecting the now widespread use of mobile and online banking.
    The agencies propose a tailored approach to the Retail Services and 
Products Test based on a large bank's asset size. For large banks with 
assets of $10 billion or less, the agencies propose making certain 
components optional in order to reduce the data burden of new data 
collection requirements for banks within this asset category. For large 
banks with assets of over $10 billion, the agencies propose requiring 
the full evaluation under the proposed Retail Services and Products 
Test.

A. Overview

1. Current Approach to Retail Services
    The current service test, which only applies to large banks 
(currently defined as having assets of at least $1.384 billion as of 
December 31 of both of the prior two calendar years), establishes four 
criteria for evaluating retail services: (i)

[[Page 33957]]

The distribution of branches among low-, moderate-, middle-, and upper-
income census tracts; (ii) a bank's record of opening and closing 
branches and its effects, particularly on low- and moderate-income 
census tracts or low- and moderate-income individuals; (iii) the 
availability and effectiveness of alternative systems for delivering 
retail banking services (or non-branch delivery systems) in low- and 
moderate-income census tracts and to low- and moderate-income 
individuals; \190\ and (iv) the range of services provided in low-, 
moderate-, middle-, and upper-income census tracts and the degree to 
which the services are tailored to meet the needs of those census 
tracts, including the reasonableness of business hours and services 
offered at branches.\191\
---------------------------------------------------------------------------

    \190\ The agencies' current CRA regulations provide a non-
exhaustive list of alternative systems for delivering retail banking 
services which include: ``ATMs, ATMs not owned or operated by or 
exclusively for the bank, banking by telephone or computer, loan 
production offices, and bank-at-work or bank-by-mail programs.'' See 
12 CFR __.24(d)(3).
    \191\ See 12 CFR __.24(d).
---------------------------------------------------------------------------

    The first two of these evaluation criteria involve reviewing a 
bank's branch locations, primarily from information gathered from a 
bank's public file. First, using varying methods, the agencies evaluate 
the distribution of branches across census tracts of different income 
levels relative to the percentages of census tracts by income level, 
households (or families), businesses and population in the census 
tracts. Next, the agencies evaluate a bank's branch openings and 
closings during the evaluation period relative to its current branch 
distribution and consider if any changes impacted low- or moderate-
income census tracts and accessibility for low- or moderate-income 
individuals.\192\
---------------------------------------------------------------------------

    \192\ See 12 CFR __.24(d)(2); Q&A Sec.  __.24(d)-1.
---------------------------------------------------------------------------

    For the third evaluation criterion, guidance includes a variety of 
factors to aid examiners in determining whether a bank's non-branch 
delivery systems, which includes ATMs, are available and effective in 
providing retail banking services in low- and moderate-income areas and 
to low- and moderate-income individuals.\193\ This includes, for 
example, the ease of access and use, reliability of the system, range 
of services delivered, cost to consumers as compared with the bank's 
other delivery systems, and rate of adoption and use.\194\ Guidance 
also advises examiners to consider any information a bank maintains and 
provides to examiners demonstrating that the bank's alternative 
delivery systems are available to, and used by, low- or moderate-income 
individuals, such as data on customer usage or transactions.\195\ 
Although examiners may consider several factors, evaluations of non-
branch delivery systems generally focus on the distribution of the 
bank's ATMs across low-, moderate-, middle-, and upper-income census 
tracts, and a comparison of that distribution to the percentage of 
census tracts by income level, households (or families), businesses or 
populations across these census tracts, particularly low- and moderate-
income census tracts. Examiners also review the types of services 
offered by a bank's ATMs (i.e., deposit-taking and cash-only) and 
consider other qualitative factors that improve access to ATMs in low- 
and moderate-income census tracts.
---------------------------------------------------------------------------

    \193\ See Q&A Sec.  __.24(d)(3)-1.
    \194\ Id.
    \195\ See Q&A Sec.  __.24(d)(3)-1.
---------------------------------------------------------------------------

    The fourth criterion--the range of services and degree to which the 
services are tailored to meet the needs of those geographies--is the 
primary consideration given to deposit products in the current retail 
service test. Examiners consider information from the bank's public 
file and other information provided by the bank related to the range of 
services generally offered at their branches, such as loan and deposit 
products, and the degree to which services are tailored to meet the 
needs of particular geographies. Current guidance explains that 
examiners will consider retail banking services that improve access to 
financial services or decrease costs for low- or moderate-income 
individuals.\196\ Examiners also review data regarding the costs and 
features of deposit products, account usage and retention, geographic 
location of accountholders, and any other relevant information 
available demonstrating that a bank's services are tailored to meet the 
convenience and needs of its assessment areas, particularly low- and 
moderate-income geographies or low- and moderate-income 
individuals.\197\
---------------------------------------------------------------------------

    \196\ See Q&A Sec.  __.24(a)-1.
    \197\ See Q&A Sec.  __.24(d)(4)-1.
---------------------------------------------------------------------------

2. Stakeholder Feedback
    Delivery Systems. Community and consumer organizations generally 
favored the current evaluation approach to evaluating branch delivery 
systems but have suggested that the agencies place more focus on 
assessing branch closures in low- and moderate-income and other 
underserved areas, and enhanced branch-based services supporting 
financial inclusion. Industry stakeholders expressed support for 
greater flexibility in the analysis (e.g., receiving credit for a 
branch outside of a low- and moderate-income census tract that is 
routinely accessed by low- and moderate-income individuals from outside 
of that tract). While there was divergence among the stakeholders 
regarding whether CRA examinations should credit branch presence and 
activities in middle- and upper-income census tracts, there was 
widespread support that areas without branches should also be defined 
and better reflected in the evaluation, including greater 
identification of how banks are serving these areas.
    Stakeholders generally supported the evaluation of non-branch 
delivery systems but encouraged flexibility and the continued 
development of standards for evaluating and reporting. Industry 
stakeholders opposed the use of quantitative benchmarks to evaluate 
non-branch delivery systems, noting that these services are difficult 
to quantify and that there is lack of consistent available data. They 
instead favor the adoption of a flexible approach with optional data 
reporting and a qualitative review for CRA evaluations. In contrast, 
community and consumer group stakeholders suggested that the framework 
should provide standards for what banks may report to demonstrate the 
effectiveness of their non-branch delivery channels in reaching low- 
and moderate-income consumers. For example, these stakeholders 
suggested using rates of usage of online and mobile services by 
customers grouped by census tract. Overall, stakeholders noted that 
banks would need to provide more data for agencies and the public to 
adequately assess performance of banks' non-branch delivery systems.
    Deposit Products. Stakeholders have broadly acknowledged the 
importance of banks offering low-cost transaction accounts that are 
responsive to the needs of the low- and moderate-income population but 
have had diverging opinions on whether available data could determine 
impact for low- and moderate-income customers. Community and consumer 
groups have supported a separate evaluation of deposit products at the 
assessment area level to ensure banks meet the needs of low- and 
moderate-income consumers. Some industry groups have supported the 
evaluation of deposit products as its own evaluation component. Other 
industry groups have not supported including a component to evaluate a 
bank's deposit products or have indicated support if the evaluation 
component were optional or used as performance context. Industry

[[Page 33958]]

stakeholders were also divided on what level to evaluate deposit 
products with some favoring at the institution-level and others at the 
assessment area level provided it is at the bank's option.
    Stakeholders offered several suggestions concerning the types of 
data that would be beneficial and readily available for determining 
whether deposit products are responsive to the needs of low- and 
moderate-income consumers and used by low- and moderate-income 
consumers. Many stakeholders suggested incorporating data on usage by 
low- and moderate-income customers, such as the number of accounts with 
safe account features opened for low- and moderate-income consumers and 
comparing these numbers to a bank's other offerings.\198\ This approach 
would involve an assessment of the types of products offered, including 
an assessment of the features and the costs. Stakeholders indicated 
that this approach could be accomplished by inquiring whether the bank 
has an account that meets the Bank On National Account Standards from 
the Cities for Financial Empowerment Fund and reviewing that data.\199\ 
Greater consideration for impact of a deposit product on consumers was 
also suggested as measured by whether a consumer graduated from an 
entry-level product or eventually acquired credit or a wealth-building 
product. Lastly, many banks acknowledged the difficulty of measuring 
impact on low- and moderate-income deposit customers because stated 
income data, which would be necessary to determine low- and moderate-
income status, is currently unavailable. Further, while some banks 
indicated such data would be difficult to collect, adding greater 
administrative burden in their view, other banks acknowledged that 
there are existing options to approximate low- and moderate-income 
status, such as using the census tract income level associated with an 
accountholder's address.
---------------------------------------------------------------------------

    \198\ Safe account features are generally understood to mean 
features that conform to the Cities for Financial Empowerment Fund's 
Bank On National Account Standards or the FDIC's Model Safe Accounts 
Template. See Bank On National Account Standards at https://cfefund.org/bank-on-national-account-standards-2021-2022/ and the 
FDIC Model Safe Accounts Template at https://www.fdic.gov/consumers/template/.
    \199\ See Cities for Financial Empowerment Fund, Bank on 
National Account Standards (2021-2022), https://cfefund.org/bank-on-national-account-standards-2021-2022/.
---------------------------------------------------------------------------

B. Delivery Systems Evaluation

    For large banks with assets of over $10 billion, the agencies 
propose evaluating the full breadth of bank delivery systems by 
maintaining an emphasis on branches and increasing the focus on digital 
and other delivery channels. Specifically, the proposed approach for 
delivery systems would evaluate three components of the bank's 
performance: (i) Branch availability and services, (ii) remote service 
facility availability, and (iii) digital and other delivery systems. 
For large banks with assets of $10 billion or less, only the first two 
components would be evaluated, unless the bank requests additional 
consideration of its digital and other delivery systems and collects 
the requisite data. The proposed approach for evaluating a large bank's 
delivery systems would leverage quantitative benchmarks to inform the 
branch and remote service facility availability analysis and provide 
favorable qualitative consideration for branch locations in certain 
geographies. The agencies also propose more fully evaluating digital 
and other delivery systems, as applicable, in recognition of the trend 
toward greater use of online and mobile banking.
1. Branch Availability and Services
    For the branch availability and services component, the agencies 
propose evaluating three factors: Branch distribution, branch openings 
and closings, and banking hours of operation and services responsive to 
low- or moderate-income individuals and in low- or moderate-income 
communities. Local branches remain important to communities for 
accessing credit,\200\ and as such the availability of branches and 
services provided is important for the evaluation of retail services.
---------------------------------------------------------------------------

    \200\ See, e.g., Hoai-Luu Q. Nguyen, ``Are Credit Markets Still 
Local? Evidence from Bank Branch Closings,'' American Economic 
Journal: Applied Economics, 11(1): 1-32 (2019), http://faculty.haas.berkeley.edu/hqn/nguyen_aej_201901.pdf; O. Ergungor, 
``Bank Branch Presence and Access to Credit in Low- to Moderate-
Income Neighborhoods,'' Journal of Money, Credit and Banking, 42(7), 
1321-1349 (2010), https://www.jstor.org/stable/40925690; Robert M. 
Adams, Kenneth P. Brevoort, and John C. Driscoll, ``Is Lending 
Distance Really Changing? Distance Dynamics and Loan Composition in 
Small Business Lending,'' Board, Finance and Economics Discussion 
Series 2021-011 (Feb. 2021), https://doi.org/10.17016/FEDS.2021.011; 
Elliot Anenberg, Andrew C. Chang, Serafin Grundl, Kevin B. Moore, 
and Richard Windle, ``The Branch Puzzle: Why Are there Still Bank 
Branches?,'' Board, FEDS Notes (Aug. 20, 2018), https://doi.org/10.17016/2380-7172.2206.
---------------------------------------------------------------------------

a. Branch Distribution and Use of Benchmarks
    Building on current practice, the agencies propose to evaluate a 
bank's distribution of branches among low-, moderate-, middle-, and 
upper-income census tracts, compared to a series of quantitative 
benchmarks that reflect community and market characteristics. This 
approach would provide a more transparent, comprehensive assessment of 
the physical distribution of branches in facility-based assessment 
areas while maintaining the importance of branch locations in the 
assessment of retail services.
    Building on a practice used currently in some evaluations, the 
agencies propose using data specific to individual, facility-based 
assessment areas, referred to as benchmarks, as points of comparison 
when evaluating a bank's branch distribution among low-, moderate-, 
middle-, and upper income geographies. The benchmarks would be based on 
the distribution of census tracts, households, businesses, and total 
bank branches by census tract income level. Each income level and data 
point (census tracts, households, businesses, and branches) would have 
a benchmark, specific to each assessment area. The benchmarks would be 
used in conjunction with examiner judgment and are intended to promote 
more transparency and consistency in the evaluation process.
    Table 14 describes the proposed community benchmarks and their 
respective data sources. These benchmarks would allow examiners to 
compare a bank's branch distribution to local data to help determine 
whether branches are accessible in low- or moderate-income communities, 
to individuals of different income levels, and to businesses in the 
assessment area. The agencies considered it important to include three 
community benchmarks in order to provide additional context for each 
assessment area. The first proposed benchmark is the percentage of 
census tracts in a facility-based assessment area by income level. This 
benchmark enables the agencies to compare a bank's distribution of 
branches in census tracts of each income level, to the overall 
percentage of those census tracts in the assessment area. For example, 
if 20 percent of a bank's branches are located in low-income census 
tracts in an assessment area, and 10 percent of census tracts in the 
assessment area are low-income, the agencies may consider the bank to 
have a relatively high concentration of branches in low-income census 
tracts.
    The second and third proposed community benchmarks are the 
percentage of households, as well as the percentage of total businesses 
and farms, in the facility-based assessment area by census tract income 
level. The agencies considered these benchmarks to be important 
complements to the first

[[Page 33959]]

benchmark, because households, businesses, and farms reflect a bank's 
potential customer base, and may not be distributed evenly across 
census tracts. For example, an assessment area with a relatively large 
concentration of households and businesses in low-income census tracts 
may have a higher low-income benchmark for households and businesses, 
and a relatively low low-income benchmark for census tracts. The 
agencies would thus consider the levels of all the benchmarks to inform 
a judgment about the bank's branch distribution in the market.

  Table 14 to Section __.23--Community Benchmarks for Retail Services--
                           Branch Distribution
------------------------------------------------------------------------
               Benchmark(s)                          Data source
------------------------------------------------------------------------
Percentage of census tracts in a facility-  American Community Survey
 based assessment area by census tract       (Census).
 income level.
Percentage of households in a facility-     American Community Survey
 based assessment area by census tract       (Census).
 income level.
Percentage of total businesses and farms    Third-party data provider.
 in a facility-based assessment area by
 census tract income level.
------------------------------------------------------------------------

    The agencies are also proposing a new aggregate measurement of 
branch distribution--referred to as a market benchmark--that would 
measure the distribution of all bank branches in the same facility-
based assessment area by census tract income. Table 15 provides an 
overview of the proposed market benchmark and the associated data 
source.

 Table 15 to Section __.23--Market Benchmark for Retail Services--Branch
                              Distribution
------------------------------------------------------------------------
                Benchmark(s)                         Data source
------------------------------------------------------------------------
Percentage of all bank branches \201\ in a   FDIC Summary of Deposits
 facility-based assessment area by census     Survey.
 tract income level.
------------------------------------------------------------------------

    The use of a market benchmark would improve the branch distribution 
analysis in several ways. First, having such data would give examiners 
more information for determining how much opportunity or competition 
exists for providing retail services in census tracts of different 
income levels. Second, examiners would have market data on branch 
dispersion within facility-based assessment areas to identify areas 
with high or low branch concentration relative to community benchmarks. 
For example, if a bank has a branch in a low-income or moderate-income 
census tract where few other lenders have branches, this could indicate 
particularly responsive or meaningful branch activity for the bank.
---------------------------------------------------------------------------

    \201\ The aggregate number of branches in an assessment area 
figure is comprised of full-service and limited-service branch types 
as defined in the FDIC's Summary of Deposits.
---------------------------------------------------------------------------

    Table 16 provides an example of the community and market benchmarks 
that could be used in evaluating a bank's branch distribution.

                                                Table 16 to Section __.23--Geographic Branch Distribution
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Branches                         Community benchmarks                     Market benchmark
                                                 -------------------------------------------------------------------------------------------------------
                                                       Total branches             Census tracts        Households   Businesses  Total branches from FDIC
               Tract income levels               ------------------------------------------------------------------------------  summary of  deposits as
                                                                                                                                      of 6/30/2018
                                                     Number      Percent       Number      Percent      Percent      Percent   -------------------------
                                                                                                                                   Number      Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low.............................................            0          0.0           11          8.5          7.9          5.4            9          4.9
Moderate........................................            2         25.0           30         23.3         25.7         20.1           40         22.0
Middle..........................................            4         50.0           53         41.1         40.0         43.1           91         50.0
Upper...........................................            2         25.0           35         27.1         26.3         31.4           42         23.1
Unknown.........................................            0          0.0            0          0.0          0.0          0.0            0          0.0
                                                 -------------------------------------------------------------------------------------------------------
    Totals......................................            8        100.0          129        100.0        100.0          100          182        100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Along with performance context, examiners would use the bank's 
branch distribution and community benchmarks to draw conclusions on 
whether the bank's branches are accessible in low- and moderate-income 
communities, to individuals of different income levels, and to 
businesses in the assessment area.
    In the example above, the bank has eight total branches in an 
assessment area with none of those branches in low-income census tracts 
and two in moderate-income census tracts. An examiner would compare the 
community benchmarks with the bank's lack of branches in low-income 
census tracts. Specifically, in the example above, 8.5 percent of all 
census tracts are low-income, and 7.9 percent of all households in the 
assessment area are in low-income census tracts. The examiner would 
also compare the bank's lack of branches in low-income census tracts 
with the market benchmark showing that 4.9 percent of branches for all 
banks in the assessment area are in low-income census tracts. These 
benchmarks would highlight that the bank's lack of branches in low-
income census tracts lags the corresponding benchmarks, though the low-
income benchmarks themselves are also low in this example.

[[Page 33960]]

    Similarly, the examiner would also compare the percentage of the 
bank's branches located in moderate-income census tracts in the 
assessment area (25 percent) with the above community benchmarks. For 
example, 25.7 percent of all households are located in moderate-income 
census tracts, and 23.3 percent of all census tracts in the assessment 
area are moderate-income census tracts. The examiner would also compare 
the bank's distribution of branches in moderate-income census tracts 
with the market benchmark showing that 22.0 percent of branches for all 
banks in the assessment area are in moderate-income census tracts. From 
comparing the bank's share of branches in moderate-income census tracts 
to the moderate-income benchmarks, the benchmarks could help inform a 
conclusion that the bank's distribution of branches in moderate-income 
census tracts was strong.
    An examiner could evaluate these data in different ways depending 
on performance context. For example, an examiner could consider 
performance context and the market benchmark in low-income census 
tracts indicating that existing bank branches are adequately serving 
the needs of low-income households. As part of this performance 
context, an examiner might also consider the proximity of the bank's 
branches in moderate-income census tracts to the low-income census 
tracts in the assessment area.
b. Considerations for Branch Availability: Approaches To Designating 
Low Branch Access and Very Low Branch Access Census Tracts
    Delivery Systems in Low and Very Low Branch Access Geographies. The 
agencies propose providing favorable consideration for banks that 
operate branches within or nearby census tracts defined as having low 
or very low branch access. As branches continue to play a critical role 
in meeting the credit needs of low- and moderate-income individuals and 
communities, the agencies consider it important to evaluate the 
accessibility of banking services in a bank's assessment area.\202\
---------------------------------------------------------------------------

    \202\ FDIC, ``How America Banks,'' supra note 145.
---------------------------------------------------------------------------

    The agencies propose defining two categories for census tracts with 
limited access to bank branches: Low branch access and very low branch 
access. A census tract would qualify as low branch access or very low 
branch access based on the number of bank branches, including branches 
of commercial banks, savings and loan associations, and credit unions, 
found within a certain distance of the census tract's center of 
population.\203\ Low branch access census tracts would be those in 
which there is only one branch within this distance or within the 
census tract itself, and very low branch access census tracts would be 
those in which there are zero branches within this distance or within 
the census tract itself. The agencies considered two approaches, one 
proposed (referred to in the SUPPLEMENTARY INFORMATION as the ``fixed 
distance approach'') and one alternative (referred to in the 
SUPPLEMENTARY INFORMATION as the ``local approach''), to determine the 
relevant distance threshold for each census tract. The agencies also 
considered a second alternative which does not set specific geographic 
distances in the identification of areas which may experience limited 
access to branches.
---------------------------------------------------------------------------

    \203\ As used by the U.S. Census Bureau, ``The concept of the 
center of population . . . is that of a balance point. The center of 
population is the point at which an imaginary, weightless, rigid, 
and flat (no elevation effects) surface . . . would balance if 
weights of identical size were placed on it so that each weight 
represented the location of one person''; centers of population are 
periodically calculated for each census tract. See https://www.census.gov/geographies/reference-files/time-series/geo/centers-population.2010.html. Using centers of population, rather than 
geographic centers of census tracts, captures the average distance 
between bank branches and the people at the census-tract level as 
accurately as possible.
---------------------------------------------------------------------------

    Proposed Approach to Low and Very Low Branch Access (Fixed Distance 
Approach). In the proposed approach, a fixed distance threshold would 
be established based on whether the census tract is in an urban, 
suburban, or rural area.\204\ This approach reflects stakeholder 
feedback that distance thresholds for measuring branch access should 
account for variation in spatial density and transit modes across 
different geographies. Recognizing these differences, the agencies 
selected distance thresholds to reflect reasonably expected travel 
distances for urban, suburban, and rural geographies. Urban areas would 
have a distance threshold of two miles, suburban areas would have a 
distance threshold of five miles, and rural areas would have a distance 
threshold of 10 miles.
---------------------------------------------------------------------------

    \204\ The agencies are proposing that ``urban areas'' would 
refer to census tracts located primarily within the principal city 
components of MSAs. Under the proposal, ``suburban areas'' would 
refer to census tracts located primarily outside of the principal 
city components of MSAs and ``rural areas'' would refer to census 
tracts located in non-MSAs. Principal cities are defined by the U.S. 
Office of Management and Budget, ``2020 Standards for Delineating 
Core Based Statistical Areas'': ``The principal city (or cities) of 
a CBSA will include: (a) The largest incorporated place with a 2020 
Census population of at least 10,000 in the CBSA or, if no 
incorporated place of at least 10,000 population is present in the 
CBSA, the largest incorporated place or census designated place in 
the CBSA; and (b) Any additional incorporated place or census 
designated place with a 2020 Census population of at least 250,000 
or in which 100,000 or more persons work; and (c) Any additional 
incorporated place or census designated place with a 2020 Census 
population of at least 50,000, but less than 250,000, and in which 
the number of workers working in the place meets or exceeds the 
number of workers living in the place; and (d) Any additional 
incorporated place or census designated place with a 2020 Census 
population of at least 10,000, but less than 50,000, and at least 
one-third the population size of the largest place, and in which the 
number of workers working in the place meets or exceeds the number 
of workers living in the place.'' 86 FR 37770, 37776 (July 16, 
2021).
---------------------------------------------------------------------------

    Alternative Approach to Low and Very Low Branch Access (Local 
Approach). In the alternative approach, a separate local area would be 
identified for each set of central counties of a metropolitan area and 
metropolitan division, the outlying counties of each metropolitan area 
and metropolitan division, and the nonmetropolitan counties of each 
state. Each of these areas are defined by the Office of Management and 
Budget through its delineations of metropolitan areas. This would 
result in the identification of over 650 distinct local areas. For each 
area, a locally-determined distance threshold would be computed based 
on the distance at which 90 percent of the local area's population 
encounters the nearest bank branch, traveling from the population 
center of their census tract. As a result, this alternative approach 
would determine the distance thresholds for defining low and very low 
branch access census tracts relative to local variation in population 
density and land-use patterns. The distance thresholds in this approach 
would also adjust over time as branches open and close. For example, a 
new branch opening in an area, and existing branches remaining open, 
may result in the distance thresholds that apply to all census tracts 
in the area becoming smaller. The agencies could update the local 
distances and identification of low branch access and very low branch 
access census tracts on a regular basis, such as annually, or every 
five years (along with the updates to low- and moderate-income census 
tract designations).
    Using the current distribution of branches, the locally-determined 
distances identified using this approach vary from under one mile for a 
number of local areas with more dense concentrations of residents and 
bank branches to over ten miles for areas with more sparse 
distributions of residents and bank branches. Around two-thirds of 
local areas have locally-determined distances between one and five 
miles, which includes several of the nonmetropolitan areas of states. 
Over four-fifths of the metropolitan areas of

[[Page 33961]]

states have distances between five and ten miles.
    While the proposed (fixed distance) and alternative (local) 
approaches would determine distance thresholds in different ways, both 
approaches would determine whether a census tract is a low or very low 
branch access census tract by assessing whether the census tract has 
either one or zero branches within the applicable distance threshold.
    Illustration of Proposed and Alternative Approaches. In Figure 2, a 
case study of the Atlanta-Sandy Springs-Alpharetta, GA MSA highlights 
the areas of low and very low branch access identified by the proposed 
(fixed distance) approach on the left, and the areas identified by the 
alternative (local) approach on the right. There are distinct 
differences between the two approaches.
[GRAPHIC] [TIFF OMITTED] TP03JN22.005

    First, the fixed distance approach would encompass a varying 
portion of each region's population because branch and population 
densities vary across the country. In the case study above, 3.9 percent 
of the population lives in very low branch access census tracts, and an 
additional 2.6 percent live in low branch access census tracts. These 
areas are determined by two different distance thresholds: Two miles 
for census tracts primarily located in the principal cities of the MSA 
and five miles for census tracts outside of the principal cities in the 
MSA. For principal-city census tracts, 2.9 percent of the population 
lives in very low branch access census tracts and 3.0 percent lives in 
low branch access tracts. For census tracts outside the principal 
cities, 4.0 percent of the population lives in very low branch access 
census tracts and 2.5 percent lives in low branch access census tracts. 
These values vary across metropolitan areas and rural regions.
    The alternative (local) approach would encompass a similar portion 
of each local area's population in very low branch access census tracts 
by design. In the illustrated case, the distance threshold for the 
central counties of the MSA is 2.77 miles, and the distance threshold 
for the outlying counties of the MSA is 6.1 miles. For census tracts in 
the central counties, 8.0 percent of the population lives in very low 
branch access census tracts and 5.9 percent lives in low branch access 
census tracts. For census tracts in outlying counties, 9.3 percent of 
the population lives in very low branch access census tracts and 11.8 
percent lives in low branch access census tracts. By using the local 
distribution of bank branches to construct the distance threshold, 
nearly one tenth of each area's population would be considered to live 
in very low branch access census tracts using this approach.
    Second, the geographic areas over which thresholds are applied 
differ between the two approaches. In the illustrated case, the fixed 
distance approach applies the urban threshold of 2 miles in principal-
city census tracts, which encompass 12.3 percent of the MSA population, 
and the suburban threshold of 5 miles in non-principal-city census 
tracts, which encompass 87.7 percent of the MSA population. The local 
area approach applies a locally-determined threshold of 2.77 miles to 
the central counties of the MSA, which encompass 91.3 percent of the 
MSA population, and 6.1 miles in outlying counties, which encompass 8.7 
percent of the MSA population in the case study. These patterns differ 
across MSAs and metropolitan divisions.
    Table 17 below highlights information about areas across the United 
States identified as low and very low branch access under the proposed 
and alternative definitions.

[[Page 33962]]



  Table 17 to Section __.23--Coverage of Low and Very Low Branch Access
                              Census Tracts
------------------------------------------------------------------------
                                 Fixed distance        Local approach
                                    approach       ---------------------
                             ----------------------
         Description           Very low     Low      Very low     Low
                                branch     branch     branch     branch
                                access     access     access     access
------------------------------------------------------------------------
Percentage of U.S.                  3.1        3.2        8.0        8.6
 population.................
------------------------------------------------------------------------
By census tract geography type--nationwide
------------------------------------------------------------------------
Percentage of urban/central         1.8        2.1        8.0        7.9
 county census tract
 population.................
Percentage of suburban/             4.1        3.7        8.6       12.7
 outlying county census
 tract population...........
Percentage of rural                 2.6        3.7        7.7       10.1
 nonmetropolitan census
 tract population...........
------------------------------------------------------------------------
By census tract income level--nationwide
------------------------------------------------------------------------
Percentage of low-income            3.2        3.3        7.1        8.1
 census tract population....
Percentage of moderate-             3.5        3.6        8.2        8.9
 income census tract
 population.................
Percentage of middle-income         3.5        3.6        8.7        9.3
 census tract population....
Percentage of upper-income          3.2        3.2        9.1        9.3
 census tract population....
------------------------------------------------------------------------
Source: Agencies' calculations using S&P Global Intelligence, SNL
  Banking Analytics; U.S. Census Bureau American Community Survey 5-year
  estimates (2015-2019); OMB Files (Sept. 2018).
Notes: (1) Census tracts are defined as either having low or very low
  branch access.
(2) Percentages indicate the share of the population meeting the
  condition indicated in the column.
(3) The Fixed Distance Approach and Local Approach use different
  strategies to divide metropolitan census tracts into categories: The
  Fixed Distance Approach identifies urban and suburban census tracts
  based on whether they are primarily inside or outside of principal
  cities; the Local Approach divides census tracts on the basis of
  whether they are in central or outlying counties of the metropolitan
  area.

    Under the proposed (fixed distance) approach, 3.1 percent of the 
U.S. population lives in census tracts that are found to have very low 
branch access; another 3.2 percent of the population lives in census 
tracts that are found to have low branch access. Across geography 
types, concentrations of very low branch access census tracts are 
heaviest in suburban areas, in which 4.1 percent of the population 
lives in a very low branch access census tract, and are lowest in urban 
areas, where 1.8 percent of the population lives in a very low branch 
access census tract.
    Under the alternative (local) approach, geographic and population 
coverage is broader: 8.0 percent of the U.S. population lives in census 
tracts that are found to have very low branch access, while another 8.6 
percent of the population lives in census tracts that are found to have 
low branch access. Across geography types, concentrations of low branch 
access census tracts are heaviest in outlying counties of metropolitan 
areas, where 12.7 percent of the population lives in a low branch 
access census tract, and lowest in central counties of metropolitan 
areas, where 7.9 percent of the population lives in a low branch access 
census tract. Table 17 also shows the percentage of the population, by 
census tract income level, living in a low or very low branch access 
census tract under fixed distance and local approaches, respectively.
    In general, defining a broader set of areas as low and very low 
branch access creates more opportunities for banks to receive 
qualitative consideration for branching activities. On the other hand, 
tailoring the areas considered low and very low branch access directs 
banks to focus more closely on the areas in greatest need of branch 
access.
    Both the proposed and the alternative approaches are intended to 
address challenges that low- and moderate-income individuals and 
businesses can face in accessing retail products and services in 
communities that have few or no bank branches. The agencies propose 
providing the following scenarios with favorable consideration: (i) A 
bank opens a branch that alleviates one or more census tracts' very low 
branch access status; or (ii) a bank maintains a branch in one or more 
census tracts' low branch access status. In addition, the agencies 
propose assessing whether a bank provides effective alternatives for 
reaching low- and moderate-income individuals, communities and 
businesses when closing a branch that would lead to one or more census 
tracts being designated low or very low branch access.
    Qualitative Approach to Evaluating Areas with Few or No Branches. 
Under a second, more qualitative alternative approach, the agencies 
would not define ``low branch access census tract,'' ``very low branch 
access census tract,'' or any similar term. Instead, in addition to 
considering the bank's branch distribution metrics compared to 
benchmarks and record of opening and closing branches for each 
facility-based assessment area, the agencies would undertake a 
qualitative consideration of certain factors related to low- and 
moderate-income census tracts with few or no branches. These factors 
may include considering the availability of a bank's branches; the 
bank's actions to maintain branches; the bank's actions to otherwise 
deliver banking services; and specific and concrete action by a bank to 
open branches in these areas. The agencies could also consider these 
factors, as appropriate, in: (i) Middle- and upper-income census tracts 
in which branches deliver services to low- or moderate-income 
individuals; (ii) distressed or underserved nonmetropolitan middle-
income census tracts; (iii) distressed or underserved nonmetropolitan 
middle-income census tracts with few or no branches; and (iv) Native 
Land Areas. These additional geographic designations are further 
discussed below in Section XI.B.1.c.
    The qualitative alternative is intended to address the same 
challenges as the proposed approach and the first alternative 
presented, without invoking specific distance thresholds. One benefit 
of this exclusively qualitative alternative is that it would provide 
the agencies with broad flexibility to consider a bank's actions to 
improve access to banking services in areas with limited branch access. 
However, because this second alternative does not clearly identify 
where banks would receive consideration, it leaves considerable 
discretion with the agencies' examiners.

[[Page 33963]]

c. Considerations for Branch Availability: Other Geographic 
Designations
    In addition to designating low branch access census tracts and very 
low branch access census tracts, the agencies propose providing 
qualitative consideration for operating branches in other geographic 
areas as well. These areas would be favorably considered when 
evaluating overall accessibility of delivery systems, including to low- 
and moderate-income populations.
    The agencies propose qualitatively considering retail branching in 
middle- and upper income census tracts if a bank can demonstrate that 
branch locations in these geographies deliver services to low- or 
moderate-income individuals. Low- and moderate-income families having 
access to retail services wherever they reside is integral to their 
financial well-being. While stakeholder feedback has varied on whether 
to provide qualitative consideration for branch presence and activities 
in middle- and upper-income census tracts, stakeholders generally 
suggested that the agencies should consider factors such as the 
geographic location of the branches and data provided by the bank to 
demonstrate low- or moderate-income usage of these branches.
    In addition, the agencies are proposing to provide qualitative 
consideration for banks that operate branches in distressed or 
underserved nonmetropolitan middle-income geographies. The agencies 
have previously used the distressed and underserved definitions to 
qualify certain community development activities and have not used 
these definitions for purposes of evaluating a bank's retail services. 
As proposed, a geography is defined as a distressed nonmetropolitan 
middle-income area geography if it exhibits certain economic conditions 
such as high unemployment, excessive poverty rates, or severe 
population loss. Similarly, as proposed, a geography is defined as an 
underserved nonmetropolitan area if, due to its population size and 
density, securing financing for community needs is challenging. 
Residents, businesses, and farms in these geographies may have limited 
access to financial services given the economic characteristics of 
these areas. Additionally, in some of these areas there are few or no 
low- and moderate-income census tracts, and considering branch 
availability in distressed or underserved census tracts could provide 
examiners with additional insight into the bank's branch availability.
    Lastly, the agencies propose providing positive qualitative 
consideration if banks operate branches in Native Land Areas as defined 
in proposed Sec.  __.12. The agencies recognize that branch access is 
limited for many Native communities,\205\ and consider it appropriate 
to emphasize bank placement of branches and remote service facilities 
in Native Land Areas.
---------------------------------------------------------------------------

    \205\ See Miriam Jorgensen and Randall K.Q. Akee, ``Access to 
Capital and Credit in Native Communities: A Data Review, Native 
Nations Institute (Feb. 2017), https://www.novoco.com/sites/default/files/atoms/files/nni_find_access_to_capital_and_credit_in_native_communities_020117.pdf.
---------------------------------------------------------------------------

d. Branch Openings and Closings
    In reviewing a bank's branch availability, the agencies propose 
reviewing a bank's record of opening and closing branch offices in 
facility-based assessment areas since the previous examination. This 
would build on current practice in which the evaluation includes an 
assessment of whether branch openings and closings improved or 
adversely affected the accessibility of its delivery systems, 
particularly to low- and moderate-income census tracts and low- and 
moderate-income individuals or whether alternative delivery systems are 
effective in providing needed services to low- and moderate-income 
census tracts and individuals.
e. Branch Hours of Operation and Services
    As part of the third factor of branch availability and services, 
the agencies propose evaluating the reasonableness of branch hours in 
low- and moderate-income census tracts compared to middle- and upper-
income census tracts, including whether branches offer extended and 
weekend hours; and the range of services provided at branches in low-, 
moderate-, middle-, and upper-income census tracts. Regarding the range 
of services, this includes services provided at branch locations 
discrete from the credit and deposit products discussed below in 
Section XI.C. that improve access to financial services or decrease 
costs for low- or moderate-income individuals. Examples of such 
services include, but are not limited to:
    <bullet> Extended business hours, including weekends, evenings, or 
by appointment;
    <bullet> Providing bilingual/translation services;
    <bullet> Free or low-cost check cashing services, including 
government and payroll check cashing services;
    <bullet> Reasonably priced international remittance services; and
    <bullet> Electronic benefit transfer accounts
    This part of the proposal would focus on the range of services 
exclusively offered in branch settings and represents a change in 
current practice for two reasons. First, current guidance looks at the 
range of services in its totality by the bank and does not distinguish 
between services offered in branches or via an alternative delivery 
system.\206\ Second, the agencies propose separately evaluating the 
availability of deposit accounts, whereas in current practice the 
availability of low-cost deposit products is considered as part of the 
evaluation of a bank's range of services. The proposed approach focuses 
on the importance of branch-based services by directing examiners to 
conduct a more focused examination of whether services offered in 
branches are tailored to meet the particular needs of low- and 
moderate-income individuals in a bank's facility-based assessment 
areas.
---------------------------------------------------------------------------

    \206\ See Q&A Sec.  __.24(d)(4)-1.
---------------------------------------------------------------------------

    In addition to the examples listed, the agencies seek feedback on 
whether there are other branch-based services that could be considered 
as responsive to low- and moderate-income needs.
2. Remote Service Facility Availability
    The agencies propose evaluating remote service facility \207\ 
availability as the second component of the delivery system evaluation. 
Under current guidance,\208\ remote service facility availability is 
qualitatively evaluated as one of several non-branch delivery systems, 
so it can be unclear how much consideration and weight is given to a 
bank's remote service facility availability, its placement of various 
types of remote service facilities or its partnerships to improve 
access to remote service facilities in low- and moderate-income census 
tracts. The agencies' proposal would evaluate remote service facilities 
separately from digital and other delivery systems in order to focus on 
the availability of these facilities and leverage community benchmarks 
in the evaluation.
---------------------------------------------------------------------------

    \207\ In proposed Sec.  __.12 remote service facility means an 
automated, virtually staffed, or unstaffed banking facility owned or 
operated by, or operated exclusively for, the bank, such as an ATM, 
interactive teller machine, cash dispensing machine, or other remote 
electronic facility at which deposits are received, cash dispersed, 
or money lent.
    \208\ See Q&A Sec.  __.24(d)(3)-1.
---------------------------------------------------------------------------

    The agencies propose introducing three data points in the remote 
service facility availability analysis that would complement a 
qualitative evaluation. Like the branch distribution analysis, these 
data points, referred to as benchmarks, would be specific to 
individual, facility-based assessment

[[Page 33964]]

areas and used as points of comparison when evaluating a bank's remote 
service facility availability among low-, moderate-, middle-, and upper 
income census tracts. The evaluation would also include an assessment 
of remote service facilities in low- and moderate-income census tracts 
and changes to the placement of remote service facilities since the 
previous examination.
    Table 18 below describes the three proposed community benchmarks 
and their respective data sources. The use of benchmarks would allow 
for comparison of a bank's remote service facility availability to 
local data (i.e., percentage of census tracts, households, and total 
businesses) to help determine whether remote service facilities are 
accessible in low- or moderate-income communities, to individuals of 
different income levels, and to businesses or farms in the assessment 
area.

  Table 18 to Section __.23--Community Benchmarks for Retail Services--
                  Remote Service Facility Availability
------------------------------------------------------------------------
                Benchmark(s)                         Data source
------------------------------------------------------------------------
Percentage of census tracts in a facility-   American Community Survey
 based assessment area by census tract        (Census).
 income level.
Percentage of households in a facility-      American Community Survey
 based assessment area by census tract        (Census).
 income level.
Percentage of total businesses and farms in  Third-party data provider.
 a facility-based assessment area by census
 tract income level.
------------------------------------------------------------------------

    In addition to using the community benchmarks, the agencies propose 
evaluating bank remote service facility partnerships with retailers for 
expanded remote service facility access and participation in remote 
service facility fee-waiver alliances for out-of-network usage. These 
types of partnerships may contribute to expanded access to financial 
services and may assist with lowering access costs, which can be 
particularly important for a bank's low- and moderate-income 
individuals.
3. Digital and Other Delivery Systems
    The agencies propose to evaluate the availability and 
responsiveness of a bank's digital delivery systems (e.g., mobile and 
online banking services) and other delivery systems (e.g., telephone 
banking, bank-by-mail, bank-at-work programs), including to low- and 
moderate-income individuals. This component of the delivery system 
evaluation would be required for large banks with assets of over $10 
billion, and would be optional for large banks with assets of $10 
billion or less in order to tailor the approach for banks that may have 
less capacity to meet new data collection requirements. The agencies 
seek feedback on whether the proposed approach appropriately tailors 
the evaluation for large banks with assets of $10 billion or less.
    The agencies believe that it is important to evaluate a bank's 
retail banking services and products comprehensively and recognize that 
banks deliver services beyond branch and remote service facilities. 
According to the 2019 FDIC Survey of Household Use of Banking and 
Financial Services, the primary method that banked households used to 
access their accounts was through digital delivery systems, 
representing 34.0 percent and 22.8 percent for mobile banking and 
online banking, respectively.\209\ The usage of online and mobile 
banking delivery systems is expected to continue to grow. These trends 
support renewed focus on the evaluation of digital and other delivery 
systems while also recognizing that many consumers continue to rely on 
branches.
---------------------------------------------------------------------------

    \209\ See FDIC, ``How America Banks,'' supra note 145.
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    Current guidance states that the agencies evaluate the availability 
and effectiveness of alternative systems for delivering retail banking 
services, which is defined to include the use of ATMs.\210\ The 
agencies propose using the word ``responsiveness'' instead of 
``effectiveness'' in order to use more consistent terminology 
throughout the regulation, and the agencies believe the meaning of both 
terms are comparable. To reflect more updated terminology, the agencies 
propose using the term ``digital and other delivery systems'' instead 
of ``alternative systems'' or ``non-branch delivery systems.'' 
Additionally, under the proposal, the digital and other delivery 
systems component would not include an evaluation of ATMs or other 
remote service facilities, since the agencies propose a separate review 
of remote service facilities for all large banks.
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    \210\ See Q&A Sec.  __.24(d)(3)-1.
---------------------------------------------------------------------------

    The agencies propose using three factors to evaluate the 
availability and responsiveness of a bank's digital and other delivery 
systems: (i) Digital activity by individuals in low-, moderate-, 
middle-, and upper-income census tracts, (ii) the range of digital and 
other delivery systems, and (iii) the bank's strategy and initiatives 
to serve low- and moderate-income individuals with digital and other 
delivery systems. The proposed factors would promote improved clarity 
and consistency in evaluating whether a bank's digital and other 
delivery systems are available and responsive in providing financial 
services to low- and moderate-income geographies and individuals.
    With respect to the first factor, the agencies would measure 
digital activity by individuals in low-, moderate-, middle-, and upper-
income census tracts, and proposed Sec.  __.23 provides examples of 
data that could be used to inform this analysis. Specifically, the 
examples in proposed Sec.  __.23 include the number of checking and 
savings accounts opened digitally, and accountholder usage data by type 
of digital and other delivery system. The agencies propose evaluating 
this data using census tract income level, which is an approach 
sometimes used in current practice, since banks have stated that they 
do not routinely collect customer income data at account opening. These 
data points would help the agencies better understand how banks 
continue to serve their communities as technology and bank business 
models evolve.
    With respect to the second and third factors, the agencies would 
qualitatively consider the range of a bank's digital and other delivery 
systems, including but not limited to online banking, mobile banking, 
and telephone banking. In addition, the agencies would consider a 
bank's strategies and initiatives to meet low- and moderate-income 
consumer needs through digital and other delivery systems, such as 
marketing and outreach activities to increase uptake of these channels 
by low- and moderate-income individuals or partnerships with community-
based organizations serving targeted populations.
    The agencies are also considering appropriate comparators to help 
examiners assess the degree to which a bank is reaching consumers in 
low- or moderate-income census tracts through

[[Page 33965]]

digital and other delivery systems. For example, the agencies are 
considering a comparator evaluating the proportion of a bank's deposit 
accounts opened through online and mobile banking channels in low- or 
moderate-income census tracts. The agencies also seek feedback on 
whether a standardized template with defined data fields would capture 
alternative delivery systems more consistently.
Request for Feedback
    Question 90. Should the agencies use the percentage of families and 
total population in an assessment area by census tract income level in 
addition to the other comparators listed (i.e., census tracts, 
households, and businesses) for the assessment of branches and remote 
service facilities?
    Question 91. Are there other alternative approaches or definitions 
the agencies should consider in designating places with limited branch 
access for communities, such as branch distance thresholds determined 
by census tract population densities, commuting patterns or some other 
metric? For example, should the agencies not divide geographies and use 
the more flexible, second alternative approach?
    Question 92. How should geographies be divided to appropriately 
identify different distance thresholds? Should they be divided 
according to those in the proposed approach of urban, suburban, and 
rural areas; those in the alternative approach of central counties, 
outlying counties, and nonmetropolitan counties; or some other 
delineation?
    Question 93. How narrowly should designations of low branch access 
and very low branch access be tailored so that banks may target 
additional retail services appropriately?
    Question 94. Is a fixed distance standard that allows the 
concentration of low and very low branch access areas to vary across 
regions, such as that in the proposed approach, or a locally-determined 
distance threshold that identifies a similar concentration of low and 
very low branch access areas within each local area, such as that in 
the alternative approach, most appropriate when identifying areas with 
limited branch access?
    Question 95. Should the agencies take into consideration credit 
union locations in any of the proposed approaches, or should the 
analysis be based solely on the distribution of bank branches? For 
example, in the proposed or local approach, having a credit union 
within the relevant distance of a census tract population center would 
mean that the census tract would not be a very low branch access census 
tract (if there were no bank branch present).
    Question 96. If the local approach were adopted, how frequently 
should the local distances be updated?
    Question 97. What other branch-based services could be considered 
as responsive to low- and moderate-income needs?
    Question 98. Should branches in distressed or underserved middle-
income nonmetropolitan census tracts receive qualitative consideration, 
without documenting that the branch provides services to low- or 
moderate-income individuals?
    Question 99. Should the agencies provide favorable qualitative 
consideration for retail branching in middle-income and upper-income 
census tracts if a bank can demonstrate that branch locations in these 
geographies deliver services to low- or moderate-income individuals? 
What information should banks provide to demonstrate such service to 
low- or moderate-income individuals?
    Question 100. How could the agencies further define ways to 
evaluate the digital activity by individuals in low-, moderate-, 
middle-, and upper-income census tracts, as part of a bank's digital 
and other delivery systems evaluation?
    Question 101. Should affordability be one of the factors in 
evaluating digital and other delivery systems? If so, what data should 
the agencies consider?
    Question 102. Are there comparators that the agencies should 
consider to assess the degree to which a bank is reaching individuals 
in low- or moderate-income census tracts through digital and other 
delivery systems?
    Question 103. Should the evaluation of digital and other delivery 
systems be optional for banks with assets of $10 billion or less as 
proposed, or should this component be required for these banks? 
Alternatively, should the agencies maintain current evaluation 
standards for alternative delivery systems for banks within this tier?

D. Credit and Deposit Products Evaluation

    The agencies propose a second part of the Retail Services and 
Products Test that would focus on the availability of credit and 
deposit products and the extent to which these products are responsive 
to the needs of low- and moderate-income individuals, small businesses, 
and small farms, as applicable. Evaluating credit and deposit products 
would incorporate important qualitative factors that capture a bank's 
commitment to serving low- and moderate-income individuals, small 
businesses, and small farms.
    Under the proposal, the agencies would separately evaluate: (i) The 
responsiveness of credit products and programs to the needs of low- and 
moderate-income individuals, small businesses, and small farms; and 
(ii) deposit products responsive to the needs of low- and moderate-
income individuals. Both the credit product and deposit product 
components would be assessed at the institution level and would be 
required for large banks with assets of over $10 billion. For banks 
with assets of $10 billion or less, only the first component--the 
responsiveness of credit products and programs--would be required. For 
large banks with assets of $10 billion or less, the deposit product 
component would not be required.
1. Responsiveness of Credit Products and Programs to the Needs of Low- 
and Moderate-Income Individuals, Small Businesses, and Small Farms
    The agencies propose evaluating the responsiveness of a large 
bank's credit products and programs to the needs of low- and moderate-
income individuals (including through low-cost education loans),\211\ 
small businesses, and small farms under the Retail Services and 
Products Test. The agencies recognize that credit needs vary from 
community to community and that bank retail lending products and 
programs, as a result, can vary to meet these different needs. To that 
end, the proposal does not provide a specific list of retail lending 
products and programs that qualify under this provision. The agencies 
believe that such an approach could have the unintended consequence of 
constraining bank efforts to meet the credit needs of its communities.
---------------------------------------------------------------------------

    \211\ 12 U.S.C. 2903(d).
---------------------------------------------------------------------------

    Instead, the proposal states that responsive credit products and 
programs provided in a safe and sound manner may include, but are not 
limited to, the following three categories: (i) Credit products and 
programs that facilitate mortgage and consumer lending for low- or 
moderate-income borrowers in a safe and sound manner; (ii) Credit 
products and programs that meet the needs of small businesses and small 
farms, including to the smallest businesses and smallest farms, in a 
safe and sound manner; and (iii) Credit products and programs that are 
conducted in cooperation with MDIs, WDIs, LICUs,\212\ or Treasury 
Department-certified CDFIs in a safe and sound manner.
---------------------------------------------------------------------------

    \212\ This is consistent with 12 U.S.C. 2903(b).
---------------------------------------------------------------------------

    The proposal focuses on evaluating the responsiveness of a bank's 
retail

[[Page 33966]]

lending products and programs. The agencies intend for this evaluation 
to emphasize the impact of the product or program in helping to meet 
the credit needs of low- and moderate-income individuals, small 
businesses, and small farms. The current regulation provides 
consideration for a bank's use of innovative or flexible lending 
practices in a safe and sound manner to address the credit needs of 
low- and moderate-income individuals or geographies.\213\ The agencies 
believe that using responsiveness as part of the proposed evaluation 
standard instead of innovative and flexible would better capture the 
focus on community credit needs, though these terms are often used 
interchangeably. The agencies also believe that using the term 
responsiveness would also help improve consistency of terminology 
throughout the proposed regulation. In addition, the agencies recognize 
that examples of innovative and flexible retail lending products under 
existing guidance may also meet the responsiveness standard under this 
proposal.
---------------------------------------------------------------------------

    \213\ 12 CFR __.22(b)(5).
---------------------------------------------------------------------------

    The agencies propose considering responsive retail lending products 
and programs under the Retail Services and Products Test, rather than 
the Retail Lending Test, for several reasons. First, the proposed 
approach combines the review of responsive credit products and 
responsive deposit products into the same test. This is a change from 
the current regulations, which consider innovative and flexible retail 
lending practices under the lending test and deposit products under the 
service test. The agencies' proposal intends to provide a more holistic 
evaluation of credit and deposit products, which work in tandem to 
facilitate credit access for low- and moderate-income individuals. 
Second, the agencies considered that it may be preferable to pair a 
qualitative evaluation of the responsiveness of a bank's retail lending 
products and programs with other qualitative criteria under the Retail 
Services and Products Test rather than include it as part of the more 
metrics-based Retail Lending Test. The agencies seek feedback on 
whether decoupling qualitative consideration of retail lending credit 
products and programs from the Retail Lending Test is appropriate, and 
if not, how should the agencies incorporate qualitative performance 
into a metrics-driven approach for retail lending.
    To qualify for qualitative consideration under the proposal, the 
agencies would consider relevant information about the retail lending 
products and programs, including information provided by the bank and 
from the public. Additionally, banks would have to demonstrate that 
their products or programs are provided in a safe and sound manner.
    Credit Products and Programs that Facilitate Home Mortgage and 
Consumer Lending for Low- and Moderate-Income Borrowers. The proposal 
includes credit products and programs that facilitate mortgage and 
consumer lending targeted to low- or moderate-income borrowers as one 
category of responsive credit products or programs. Specific examples 
of responsive credit products or programs that could be considered 
under this category are described below.
    First, small-dollar mortgages could be an example of a responsive 
home mortgage product in this category. Small-dollar mortgages are 
generally considered to be in the amount of $100,000 or less, although 
the agencies recognize that home prices can vary across different 
communities.\214\ The agencies believe that small-dollar mortgages for 
lower-value properties can often be challenging for consumers to 
obtain, in part because originating these loans generally generates 
less revenue for a bank than originating larger loans. At the same 
time, small-dollar mortgages are especially important for low- and 
moderate-income first-time homebuyers, who may not be able to afford a 
down payment or monthly payments for a more expensive home. In 
addition, access to small-dollar mortgages is vital for individuals in 
areas where housing prices are generally lower, including many rural 
communities.
---------------------------------------------------------------------------

    \214\ See, e.g., Alanna McCargo, Bing Bai, Taz George, and Sarah 
Strochak, ``Small-Dollar Mortgages for Single-Family Residential 
Properties,'' Research Report, Urban Institute (April 2018), https://www.urban.org/sites/default/files/publication/98261/small_dollar_mortgages_for_single_family_residential_properties_2.pdf
.
---------------------------------------------------------------------------

    Second, consumer lending programs that utilize alternative credit 
histories in a manner that would benefit low- or moderate-income 
individuals, consistent with safe and sound underwriting practices, 
could be an example of a responsive credit product or program in this 
category. The agencies understand that low- or moderate-income 
individuals with limited conventional credit histories can face 
challenges in obtaining access to credit. For individuals who do not 
qualify for credit based on the use of conventional credit reports, 
alternative credit history with rent and utility payments, for example, 
may supplement an assessment of their credit profile. Under current 
guidance, the use of alternative credit histories, consistent with safe 
and sound lending practices, may be considered as an innovative or 
flexible lending practice.\215\
---------------------------------------------------------------------------

    \215\ See Q&A Sec.  __.22(b)(5)-1.
---------------------------------------------------------------------------

    The agencies seek feedback on whether the regulation should list 
special purpose credit programs as an example of a responsive credit 
product or program that facilitates mortgage and consumer lending 
targeted to low- or moderate-income borrowers. Under ECOA and 
Regulation B, financial institutions can establish special purpose 
credit programs to meet special social needs.\216\
---------------------------------------------------------------------------

    \216\ 15 U.S.C. 1691(c).
---------------------------------------------------------------------------

    Credit Products and Programs that Meet Credit Needs of Small 
Businesses and Small Farms. The proposal includes credit products and 
programs that meet the needs of small businesses and small farms, 
including the smallest businesses and smallest farms, as another 
category of responsive credit products or programs. These credit 
product and programs might include microloans (such as loans of $50,000 
or less), loans to businesses with gross annual revenues of $250,000 or 
less, and patient capital to entrepreneurs through longer-term loans.
    Currently, the agencies consider lending practices in a safe and 
sound manner to address the credit needs of low- and moderate-income 
individuals or geographies, but the current regulation does not 
specifically mention the credit needs of small businesses and small 
farms. To recognize the unique credit needs of small businesses, 
including smaller businesses and smaller farms, and to align with the 
consideration of small business lending in other parts of the 
regulation, the agencies propose to specifically create this category 
focused on products and practices meeting the credit needs of small 
businesses and small farms.
    Credit Products and Programs that are Conducted in Cooperation with 
MDIs, WDIs, LICUs, and Treasury Department-certified CDFIs. Finally, 
the proposal includes credit products and programs that are conducted 
in cooperation with MDIs, WDIs, LICUs, and Treasury Department-
certified CDFIs as category of responsive credit products and 
programs.\217\ \218\ Under this category, the agencies would consider, 
for example, home mortgage loans and small

[[Page 33967]]

business loans that banks purchase from MDIs, WDIs, LICUs, and Treasury 
Department-certified CDFIs. Bank purchases can provide necessary 
liquidity to these lenders and extend their capability to originate 
loans to low- and moderate-income individuals, low- and moderate-income 
areas, and to small businesses and farms. The agencies recognize the 
importance of supporting these institutions in their efforts to provide 
access to credit and other financial services in traditionally 
underserved communities.\219\
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    \217\ This is consistent with 12 U.S.C. 2903(b).
    \218\ See Investing in the Future of Mission-Driven Banks: A 
Guide to Facilitating New Partnerships, FDIC, Washington, DC (Oct. 
2020), https://www.fdic.gov/mdi. For printable version, https://www.fdic.gov/regulations/resources/minority/mission-driven/guide.pdf.
    \219\ See FDIC, ``2019 Minority Depository Institutions: 
Structure, Performance, and Social Impact'' (2019), https://www.fdic.gov/regulations/resources/minority/2019-mdi-study/full.pdf.
---------------------------------------------------------------------------

    The agencies seek feedback on whether there are other categories of 
responsive credit products and programs, offered in a safe and sound 
manner, that the agencies should take into consideration when deciding 
whether to give qualitative consideration to credit products and 
programs.
2. Deposit Products Responsive to the Needs of Low- and Moderate-Income 
Individuals
    The agencies considered several factors that suggest an emphasis on 
deposit products would be appropriate. Deposit products play a critical 
role in providing an entry point to the banking system for low- and 
moderate-income individuals.\220\ Having a bank account provides the 
means to receive, transact, and safely save funds; it is also a pathway 
for a bank customer to establish an ongoing relationship with a bank. 
Moreover, a bank account provides the cash flow data that some 
financial companies use to underwrite credit.\221\ For these reasons, 
the agencies propose modernizing the existing evaluation of a bank's 
products and services by adding a more explicit focus on the financial 
inclusion potential of these products and by adding specific measures 
for evaluation, such as availability and usage.
---------------------------------------------------------------------------

    \220\ See, e.g., Ryan M. Goodstein, FDIC, Alicia Lloro, Board, 
Sherrie L. Rhine, FDIC, and Jeffrey M. Weinstein, FDIC, Journal of 
Consumer Affairs 55, ``What accounts for racial and ethnic 
differences in credit use?'' (2021); National Survey of Unbanked and 
Underbanked Households, 2017 FDIC Survey (October 2018); Michael 
Barr, University of Michigan Law School, Jane K. Dokko, Board, and 
Benjamin J. Keys, University of Michigan, ``And Banking for All?,'' 
Board, FEDS Series, Working Paper No. 2009-34 (2009), https://www.federalreserve.gov/pubs/feds/2009/200934/200934pap.pdf.
    \221\ See, e.g., Kelly Thompson Cochran, Federal Reserve Bank of 
San Francisco, ``The Next Frontier: Expanding Credit Inclusion with 
New Data and Analytical Techniques,'' Federal Reserve Bank of San 
Francisco, Community Development Publications (Aug. 19, 2021), 
https://www.frbsf.org/community-development/publications/community-development-investment-review/2021/august/the-next-frontier-expanding-credit-inclusion-with-new-data-and-analytical-techniques/; 
CFPB, ``CFPB Data Point: Becoming Credit Visible,'' The CFPB Office 
of Research (June 2017), https://files.consumerfinance.gov/f/documents/BecomingCreditVisible_Data_Point_Final.pdf.
---------------------------------------------------------------------------

    For large banks with assets of over $10 billion, the agencies would 
evaluate the availability and usage of a bank's deposit products 
responsive to the needs of low- and moderate-income individuals. This 
evaluation would be optional for large banks with assets of $10 billion 
or less.
a. Availability of Deposit Products Responsive to the Needs of Low- and 
Moderate-Income Individuals
    In evaluating the availability of deposit products responsive to 
the needs of low- and moderate-income individuals, the agencies would 
evaluate whether the bank offers deposit products that have features 
and cost characteristics including but not limited to deposit products 
with the following types of features, consistent with safe and sound 
operations: (i) Low-cost features, (ii) features facilitating broad 
functionality and accessibility, and (iii) features facilitating 
inclusivity of access.
    First, deposit products with low-cost features would be considered 
responsive deposit products. Examples of deposit products with low-cost 
features include but are not limited to: (i) Accounts with no overdraft 
or insufficient fund fees, (ii) accounts with no or low minimum opening 
balance, (iii) accounts with no or low monthly maintenance fees, and 
(iv) free or low-cost checking and bill payment services. These 
examples are consistent with current guidance, which includes low-cost 
transaction accounts among the examples of services that improve access 
to financial services and decrease costs for low- and moderate-income 
individuals.\222\ Moreover, cost issues remain a prevalent reason cited 
by unbanked individuals as to why they do not have a bank account.\223\
---------------------------------------------------------------------------

    \222\ See Q&A Sec.  __.24(a)-1.
    \223\ See FDIC, ``How America Banks,'' supra note 145.
---------------------------------------------------------------------------

    Second, deposit products with features facilitating broad 
functionality and accessibility would be considered responsive deposit 
products. Examples of deposit products with such features could include 
deposit products with in-network ATM access, debit cards for point-of-
sale and bill payments, and immediate access to funds for customers 
cashing government, payroll, or bank-issued checks. The ability to 
conduct transactions and access funds in a timely manner is highly 
relevant for lower-income individuals or unbanked and underserved 
individuals, who otherwise might acquire financial services at a higher 
cost from non-bank sources.
    Third, deposit products with features facilitating inclusive access 
by persons without banking or credit histories, or with adverse banking 
histories, would be considered responsive deposit products. Regarding 
this proposal, the agencies have considered research indicating that 
former bank account problems remain barriers for consumers who are 
unbanked.\224\
---------------------------------------------------------------------------

    \224\ See id.
---------------------------------------------------------------------------

    The agencies propose taking these three types of features into 
consideration when evaluating whether a particular deposit product has 
met the ``responsiveness to low- and moderate-income needs'' 
standard.\225\ The agencies seek feedback on the appropriateness of the 
features proposed to describe whether a deposit product is responsive 
to low- and moderate-income individuals. Additionally, to inform the 
assessment of the availability of responsive deposit products, the 
agencies are considering reviewing the locations where the responsive 
account can be acquired and assessing whether there is variation in the 
terms or features across facility-based assessment areas that would 
disadvantage low- and moderate-income individuals. The agencies seek 
feedback on whether to include in the evaluation a review of the 
locations where the responsive deposit product is made available.
---------------------------------------------------------------------------

    \225\ Product examples that meet the responsiveness standard 
include accounts certified by the Cities for Financial Empowerment 
as meeting the Bank On National Account standard, and ``second-
chance accounts.'' Savings accounts targeted towards low- or 
moderate-income individuals such as Individual Development Accounts, 
are another example of a product that would be considered 
responsive.
---------------------------------------------------------------------------

b. Usage of Deposit Products Responsive to the Needs of Low- and 
Moderate-Income Individuals
    The agencies also propose evaluating usage of responsive deposit 
products by considering, for example: (i) The number of responsive 
accounts opened and closed during each year of the evaluation period in 
low-, moderate-, middle-, and upper-income census tracts, respectively; 
(ii) the percentage of total responsive deposit accounts compared to 
total deposit accounts for each year of the evaluation period; and 
(iii) marketing, partnerships, and other activities that the bank has 
undertaken to promote awareness and use of responsive deposit accounts 
by low- and moderate-income individuals.

[[Page 33968]]

    In evaluating the usage of responsive deposit accounts, proposed 
Sec.  __.23 provides as an example the number of responsive deposit 
accounts opened and closed, which would involve a bank providing the 
total number of responsive accounts opened and closed during each year 
of the evaluation period, aggregated by census tract income level 
(e.g., all low-income census tracts in the bank's facility-based 
assessment areas). This information would be an approximate indicator 
of the extent to which the needs in low- or moderate-income areas are 
being met. Data on number of account openings could be used to measure 
the penetration of the responsive product in low- or moderate-income 
areas. The number of account closings, on the other hand, could reveal 
whether the product is actually meeting the needs of consumers. Account 
openings and closings data, when paired together, would better indicate 
the responsiveness of these accounts to consumers' needs, and the 
bank's effectiveness in meeting consumers' needs, than either of those 
numbers would indicate on their own.
    Relatedly, the agencies also propose to consider the share of a 
bank's total account activity represented by responsive deposit 
products. This would be accomplished by comparing at the end of each 
year of the evaluation period, the total number of active responsive 
deposit accounts to all active consumer deposit accounts offered by the 
bank. The comparison is intended to give a sense of the magnitude of 
the commitment to broadening the customer base to include low- and 
moderate-income individuals.
    The agencies also propose considering outreach activity undertaken 
to promote awareness and use of responsive deposit accounts by low- and 
moderate-income individuals. Bank outreach may contribute to the 
successful take-up of a deposit product targeted to low- and moderate-
income individuals. Therefore, the agencies propose giving qualitative 
consideration to marketing, partnerships, and other activities to 
attract low- and moderate-income individuals.
Request for Feedback
    Question 104. Are there additional categories of responsive credit 
products and programs that should be included in the regulation for 
qualitative consideration?
    Question 105. Should the agencies provide more specific guidance 
regarding what credit products and programs may be considered 
especially responsive, or is it preferable to provide general criteria 
so as not to discourage a bank from pursuing impactful and responsive 
activities that may deviate from the specific examples?
    Question 106. Should special purpose credit programs meeting the 
credit needs of a bank's assessment areas be included in the regulation 
as an example of loan product or program that facilitates home mortgage 
and consumer lending for low- and moderate-income individuals?
    Question 107. Are the features of cost, functionality, and 
inclusion of access appropriate for establishing whether a deposit 
product is responsive to the needs of low- and moderate-income 
individuals? What other features or characteristics should be 
considered? Should a minimum number of features be met in order to be 
considered `responsive'?
    Question 108. The agencies wish to encourage retail banking 
activities that may increase access to credit. Aside from deposit 
accounts, are there other products or services that may increase credit 
access?
    Question 109. Are the proposed usage factors appropriate for an 
evaluation of responsive deposit products? Should the agencies consider 
the total number of active responsive deposit products relative to all 
active consumer deposit accounts offered by the bank?
    Question 110. Should the agencies take other information into 
consideration when evaluating the responsiveness of a bank's deposit 
products, such as the location where the responsive deposit products 
are made available?
    Question 111. Should large banks with assets of $10 billion or less 
have the option of a responsive deposit products evaluation, as 
proposed, or should this component be required, as it is for large 
banks with assets of over $10 billion?

E. Retail Services and Products Test Performance Conclusions and 
Ratings

1. Facility-Based Assessment Area Retail Services and Products Test 
Conclusion
    The agencies propose reaching a single Retail Services and Products 
Test conclusion for large banks in each of their facility-based 
assessment areas. For all large banks, the facility-based assessment 
area conclusions would be based on two of the three delivery systems 
components: (i) Branch availability and services, and (ii) remote 
services facilities availability. The agencies believe an assessment 
area level evaluation would be appropriate for branches and remote 
service facilities because their physical presence would have an impact 
on the availability of retail banking services to low- and moderate-
income individuals.
    For large banks with assets of over $10 billion, the agencies 
propose evaluating at the institution level a bank's digital and other 
delivery systems, and then integrating this into the delivery systems 
conclusion, as explained below. The agencies also propose evaluating a 
bank's credit and deposit products at the institution level and would 
be considered alongside the delivery systems conclusion when deriving 
an overall institution conclusion on the Retail Services and Products 
Test, as described further below. Large banks with assets of $10 
billion or less would be evaluated only on credit products at the 
institution level unless they elect to have digital and other delivery 
systems and deposit products considered.
    The evaluation of branch and remote service facility availability 
as proposed would remain qualitative with community and market 
benchmarks (as described in Section XI.C.) used to inform the 
conclusions along with performance context for each facility-based 
assessment area. Based on an assessment of the evaluation criteria 
associated with branch availability, branch-based services, and remote 
services facility availability, the bank would receive a conclusion 
with assigned point values as follows: ``Outstanding'' (10 points); 
``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); 
``Needs to Improve'' (3 points) or ``Substantial Noncompliance'' (0 
points).\226\
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    \226\ See Section IX.F for discussion of the proposed point 
scale.
---------------------------------------------------------------------------

2. State and Multistate MSA Retail Services and Products Test 
Conclusions
    State and multistate MSA level conclusions for the Retail Services 
and Products Test would be based exclusively on the bank's performance 
in its facility-based assessment areas and would involve averaging a 
bank's conclusions across its facility-based assessment areas in each 
state and multistate MSA. The point value assigned to each assessment 
area conclusion would be weighted by its average share of loans and 
share of deposits of the bank within the assessment area, out of all 
the bank's retail loans and deposits in facility-based assessment areas 
in the state or multistate MSA area, as applicable, to derive a state 
level score. Similar to the proposed weighting approach for assigning 
Retail Lending Test

[[Page 33969]]

conclusions, deposits would be based on collected and maintained 
deposits data for banks that collect this data, and on the FDIC's 
Summary of Deposits for banks that do not collect deposits data. The 
state level score is then rounded to the nearest conclusion category 
point value to determine the Retail Services and Products Test 
conclusion for the state or multistate MSA.
3. Retail Services and Products Test Institution Conclusion
    The agencies propose assigning a Retail Services and Products Test 
conclusion for the institution based on the conclusions reached for 
both parts of the test: Delivery systems and credit and deposit 
products.
    Delivery Systems Conclusion. A bank's delivery systems conclusion 
would be based on the conclusions for each of the three proposed parts 
of the delivery systems evaluation, as applicable: Branch availability 
and services, remote services facilities availability, and digital and 
other delivery systems. As noted earlier, the first two parts of the 
evaluation would apply for all large banks at the facility-based 
assessment area and aggregated to form a branch and remote service 
facilities subcomponent conclusion at the institution level. For large 
banks with assets of over $10 billion and large banks with assets of 
$10 billion or less electing to have digital and other delivery systems 
considered, the agencies propose evaluating digital and other delivery 
systems at the institution level, as the features of this component are 
not place-based and extend beyond facility-based assessment areas. For 
large banks with assets of $10 billion or less that do not elect to 
have their digital and other delivery systems considered, the 
institution-level delivery systems conclusion would be based 
exclusively on the evaluation of such bank's branch availability and 
services and remote services facility availability.
    The agencies however seek feedback on whether the evaluation of 
digital and other delivery systems should occur at the assessment area 
level, rather than as proposed, and what approach the agencies should 
employ to determine how much weight this part of delivery systems 
represent given the various bank business models.
    The agencies propose to derive the institution delivery systems 
conclusion by considering the conclusions on each of the three parts of 
the delivery system evaluation and allowing for examiner discretion to 
determine the appropriate weight that should be given to each part. 
This proposed approach for deriving delivery system conclusions is 
intended to allow for the agencies to take into account the unique 
business models and strategies of different institutions. For example, 
if a majority of the bank's new deposit accounts are opened via digital 
channels during the evaluation period, then the agencies may give more 
weight to the digital and other delivery systems conclusion. The 
agencies also seek feedback on more quantitative and standardized 
approaches to weighting the three parts of the delivery systems 
evaluation.
    Credit and Deposit Products Conclusion. A bank's credit and deposit 
products conclusion would be based on the conclusions for the 
applicable parts of the credit and deposit products evaluation: (i) The 
responsiveness of credit products and programs, and (ii) deposit 
products responsive to the needs of low- and moderate-income 
individuals. As noted earlier, the first part of the evaluation applies 
for all large banks at the institution level. For large banks with 
assets of over $10 billion and for large banks with assets of $10 
billion or less electing to have their responsive deposit products 
considered, the agencies propose evaluating the bank's deposit products 
at the institution level. For large banks with assets of $10 billion or 
less that do not elect to have their responsive deposit products 
considered, the institution-level credit and deposit products 
conclusion would be based exclusively on a bank's responsiveness of 
credit products and programs to the needs of low- and moderate-income 
individuals, small businesses, and small farms.
    The agencies consider it appropriate to conduct an overall 
assessment of credit and deposit product offerings at the institution 
level, since products are often available across a wide range of a 
bank's footprint. Considering performance context, examiners would 
reach a conclusion at the institution level for the credit and deposit 
products evaluation of: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs to 
Improve'' (3 points) or ``Substantial Noncompliance'' (0 points).
    The agencies propose to allow for examiner judgment to determine 
the appropriate weighting of credit products and deposit products for 
purposes of assigning the institution credit and deposit products 
conclusion. The agencies considered that a flexible approach would 
allow for tailoring based on local community credit needs, and on bank 
business model and strategy. For example, if the bank had several 
assessment areas with relatively high unbanked populations, and in 
these markets the bank offered several responsive deposit products, the 
agencies may apply a greater weight to the bank's deposit product 
conclusion. The agencies seek feedback on alternative approaches, such 
as assigning equal weights to both components.
    Combined Conclusion. The agencies propose to derive the combined 
conclusion for the Retail Services and Products Test based on 
consideration of the bank's conclusions under the delivery systems 
evaluation and the credit and deposit products evaluation, as 
applicable. The agencies propose that examiner judgment would be used 
to determine the appropriate weight between these two parts of the 
Retail Services and Products Test, in recognition of the importance of 
local community credit needs and bank business model and strategy in 
determining the amount of emphasis to give delivery systems and credit 
and deposit products, respectively. Based on this consideration, the 
agencies would arrive at an institution-level conclusion on the Retail 
Services and Products Test. This conclusion would be translated into a 
performance score using the following mapping: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); or ``Substantial 
Noncompliance'' (0 points).
    For example, assume at the institution level a bank receives a 
conclusion of ``Low-Satisfactory'' for its delivery systems conclusion 
and a conclusion of ``High Satisfactory'' for its credit and deposit 
products conclusion. If due to, for example, the bank's branch 
expansion during the evaluation period, the agencies weight delivery 
systems more heavily, then the agencies may assign an overall 
conclusion of ``Low Satisfactory'' on the Retail Services and Products 
Test, which would correspond to an institution performance score of 6.
    The agencies seek feedback on whether the two parts of the Retail 
Services and Products Test should receive a fixed equal weighting, or 
should the weighting vary by community credit needs and bank business 
model and strategy. The agencies also seek feedback on whether to 
assign a conclusion for the credit and deposit products evaluation, or 
whether to consider the performance solely to upgrade the delivery 
systems conclusion.
Request for Feedback
    Question 112. For all large banks, the agencies propose to evaluate 
the bank's

[[Page 33970]]

delivery systems (branches and remote service facilities) at the 
assessment area level, and the digital and other delivery systems at 
the institution level. Is this appropriate, or should both 
subcomponents be evaluated at the same level, and if so, which level?
    Question 113. The agencies propose weighting the digital and other 
delivery systems component relative to the physical delivery systems 
according to the bank's business model, as demonstrated by the share of 
consumer accounts opened digitally. Is this an appropriate approach, or 
is there an alternative that could be implemented consistently? Or, 
should the weighting be determined based on performance context?
    Question 114. How should the agencies weight the two subcomponents 
of the credit and deposit products evaluation? Should the two 
subcomponents receive equal weighting, or should examiner judgment and 
performance context determine the relative weighting?
    Question 115. Should the credit and deposit products evaluation 
receive its own conclusion that is combined with the delivery systems 
evaluation for an overall institution conclusion? Or should favorable 
performance on the credit and deposit products evaluation be used 
solely to upgrade the delivery systems conclusion? For large banks with 
assets of $10 billion or less that elect to be evaluated on their 
digital delivery systems and deposit products, how should their 
performance in these areas be considered when determining the bank's 
overall Retail Services and Products Test conclusion?
    Question 116. Should each part of the Retail Services and Products 
Test receive equal weighting to derive the institution conclusion, or 
should the weighting vary by a bank's business model and other 
performance context?

XII. Community Development Financing Test

    In Sec.  __.24, the agencies propose a new Community Development 
Financing Test that would apply to large banks and any intermediate 
bank that opts to be evaluated under this test. The agencies would 
evaluate wholesale and limited purpose banks under a modified version 
of this test, as discussed in Sec.  __.26.
    The Community Development Financing Test would consist of a 
community development financing metric and benchmarks and an impact 
review. These components would be assessed at the facility-based 
assessment area, state, multistate MSA, and institution levels, and 
would inform conclusions at each of those levels. The Community 
Development Financing Test would not be assessed for retail lending 
assessment areas.
    The bank community development financing metrics would measure the 
dollar value of a bank's community development loans \227\ and 
community development investments \228\ together, relative to the 
bank's capacity, as reflected by the dollar value of deposits. The 
agencies are proposing to use the term ``community development 
investment'' in place of the current term ``qualifying investment'' for 
clarity and consistency purposes. The proposed benchmarks would reflect 
local context, including the amount of community development financing 
activities by other banks in the assessment area, and would be used in 
conjunction with the metrics to assess the bank's performance. The 
metrics and benchmarks would be consistent across banks and agencies 
and would provide additional clarity about the evaluation approach.
---------------------------------------------------------------------------

    \227\ See proposed Sec.  __.12.
    \228\ Id.
---------------------------------------------------------------------------

    The impact review would evaluate the impact and responsiveness of a 
bank's community development loan and community development investment 
activities through the application of a series of specific qualitative 
factors described in more detail in Section V. The impact review would 
provide appropriate recognition under the Community Development 
Financing Test of activities that are considered to be especially 
impactful and responsive to community needs, including activities that 
may be relatively small in dollar amounts.

A. Background

1. Current Approach To Evaluating Community Development Financing
    Under current CRA regulations and examination procedures, community 
development financing activities are assessed differently based on the 
asset size and business model of a bank. For small banks, community 
development investment activities are reviewed only at a bank's option 
for consideration for an ``Outstanding'' rating for the institution 
overall.\229\ For intermediate small banks and wholesale and limited 
purpose banks, community development loans, qualified investments, and 
community development services are considered together under one 
community development test.\230\
---------------------------------------------------------------------------

    \229\ See Appendix A to part __--Ratings; Q&A Sec.  __.26(d)-1.
    \230\ 12 CFR __.25(c) and 12 CFR __.26(c).
---------------------------------------------------------------------------

    For large banks, community development loans are considered as part 
of the lending test together with retail loans, while qualified 
investments are considered separately in the investment test.\231\ A 
large bank receives consideration for both the number and dollar amount 
of community development loans originated and qualified investments 
made during the evaluation period, as well as the remaining book value 
of qualified investments made during a prior evaluation period. Banks 
do not receive consideration for community development loans that 
remain on a bank's balance sheet from a prior review period. The 
agencies also consider qualitative factors including the innovativeness 
and complexity of community development loans and the innovativeness of 
qualified investments, how responsive the bank has been to community 
needs in its assessment areas, and the degree of leadership a bank 
exhibits through its activities. The agencies assign conclusions at the 
assessment area level based on both the number and dollar amount of 
activities and the qualitative factors.
---------------------------------------------------------------------------

    \231\ 12 CFR __.22 and 12 CFR __.23.
---------------------------------------------------------------------------

    The current approach emphasizes qualifying activities that have a 
purpose, mandate, or function of serving one or more of a bank's 
assessment areas, but also allows for flexibility in the geographic 
scope and focus of activities, subject to certain conditions. A 
qualifying activity that specifically serves an assessment area 
receives consideration, as does a qualifying activity that serves a 
broader statewide or regional area containing one or more of a bank's 
assessment areas.\232\ For a bank with a nationwide footprint, this 
could include qualifying activities that are nationwide in scope.\233\ 
In addition, if a bank has met the community development needs of an 
assessment area, it may also receive consideration for a qualifying 
activity within a broader statewide or regional area that does not 
benefit its assessment area.\234\
---------------------------------------------------------------------------

    \232\ 12 CFR __.12(h)(2)(ii); see also Q&A Sec.  __.12(h)-6.
    \233\ Q&A Sec.  __.23(a)-2.
    \234\ Q&A Sec.  __.12(h)-6.
---------------------------------------------------------------------------

2. Stakeholder Feedback on Evaluation of Community Development Loans 
and Investments
    Many stakeholders have suggested using standard metrics to assess 
community development financing activities in order to establish 
consistent treatment of community development loans and qualifying 
investments and to achieve an appropriate balance between

[[Page 33971]]

emphasizing activities that serve assessment areas while also allowing 
banks the option to pursue activities beyond their assessment areas.
    Stakeholders have noted that the largely qualitative nature of the 
current approach to evaluating community development financing results 
in uncertainty and inconsistency in the application of performance 
standards and procedures. For example, the agencies do not currently 
provide guidance on how the volume of a bank's community development 
financing activity will be measured, and what benchmarks may be used to 
compare bank performance. In response, stakeholders have expressed 
support for using standard metrics to measure the amount of activities 
a bank has conducted, and to measure the level of impact and 
responsiveness of those activities.
    Stakeholders have also emphasized the importance of maintaining a 
degree of examiner judgment in evaluating community development 
financing activities to appropriately consider the impact of the 
activities and their responsiveness to community needs. Moreover, some 
stakeholders shared that any new metrics to evaluate performance should 
be introduced gradually and informed by data and analysis.
    Some stakeholders have noted concerns with inconsistent treatment 
of community development loans and qualified investments under the 
current approach. First, the consideration of community development 
loans and qualified investments under separate tests for large banks 
may affect a bank's preference of whether to seek out opportunities to 
lend or invest. For example, a bank seeking to improve its investment 
test performance may prefer to invest in a qualifying community 
development fund for the purpose of receiving CRA credit instead of 
seeking out opportunities to lend a comparable dollar amount. 
Stakeholders have noted that the current practice of counting community 
development loans originated during the evaluation period, but not 
those held on balance sheet from prior evaluation periods, is 
inconsistent with the treatment of qualifying investments, and can 
discourage longer-term loans that stakeholders have cited as highly 
responsive.
    Stakeholders have also expressed concerns about the current 
approach to considering community development activities that are not 
clearly tied to one or more of a bank's assessment areas. Banks 
indicate that there is inconsistency and a lack of clarity regarding 
how these activities are considered, particularly those that do not 
have a purpose, mandate, or function of serving an assessment area. 
This uncertainty does not encourage community development lending and 
investment in areas with few bank assessment areas. Stakeholders have 
indicated that reforms to the CRA regulations should appropriately 
balance community development in broader geographies with a clear 
emphasis on activities within assessment areas.

B. Combined Consideration of Community Development Loans and 
Investments

    The agencies propose to evaluate community development loans and 
investments together in the community development financing metric, in 
contrast to the current approach for large banks that evaluates 
community development loans and investments separately. The proposed 
approach seeks to simplify the evaluation while addressing concerns 
from some stakeholders that the current approach favors one form of 
financing over another. Combining consideration of community 
development loans and investments into a single test would allow banks 
to engage in the activity best suited to their expertise and that is 
most needed for the community development project that the bank is 
financing. The agencies recognize that some stakeholders have expressed 
concerns that combining loans and investments would result in less 
emphasis on investment activities than the current approach, which 
evaluates investments separately. However, investments would be 
included in the proposed community development financing metric, and 
the agencies believe that the proposed metric appropriately measures 
both community development loans and community development investments. 
The impact and responsiveness of loans and investments would also be 
considered as part of a bank's impact review.

C. Allocation of Community Development Financing Activities

    The agencies propose an approach to consistently allocate the 
dollar value of community development financing activities for the 
purpose of calculating metrics and benchmarks. The proposed approach 
accounts for the geographies served by a bank's activities and provides 
certainty that qualifying activities benefiting geographies outside of 
facility-based assessment areas would receive consideration.
    Under the proposed approach, the dollar value of activities would 
be allocated to one or more counties, states, or to the institution 
level, depending on the geographic scope of the activity. At the 
assessment area level, the dollar value of activities assigned to the 
counties within the assessment area would count towards the bank 
assessment area community development financing metric and would inform 
assessment area conclusions. At the state level, the dollar value of 
activities assigned to the state and to any counties within the state 
would count towards the bank state community development financing 
metric. At the multistate MSA level, the dollar value of activities 
assigned to the multistate MSA and to any counties within the 
multistate MSA would count towards the bank multistate MSA community 
development financing metric. At the institution level, the dollar 
value of all a bank's qualifying activities--those allocated to 
counties, states, and to the institution--would count towards the bank 
nationwide community development financing metric.
    This approach allows for metrics that measure performance at the 
different levels and is intended to support a balance between 
emphasizing facility-based assessment area performance and considering 
activities that benefit geographies outside of those assessment areas. 
The approach emphasizes facility-based assessment area performance 
because it allows the agencies to measure the amount of qualifying 
activities that specifically serve the assessment area, distinguished 
from those that serve a broader geography or that primarily serve other 
areas. At the same time, all qualifying activities would be considered 
in the nationwide metric, providing additional certainty and 
flexibility relative to the current approach, and allowing banks the 
opportunity to conduct impactful and responsive activities in areas 
that may have few assessment areas.
    The agencies propose two options for allocating the dollar value of 
an activity that serves multiple counties, but not an entire statewide 
area. First, a bank may provide documentation specifying the locations 
and amounts of funds deployed for a qualifying activity, such as an 
affordable housing project funded by the bank's investment in a multi-
county housing fund. The dollar value of the activity would then be 
allocated based on the proportion of funds associated with each 
location. If the bank was unable to identify specific locations, and 
did not provide documentation about the specific locations and amounts 
of funds deployed, the dollar value of the activity

[[Page 33972]]

would be allocated across the counties served, proportionate to the 
percentage distribution of low- and moderate-income families across 
those counties. The use of demographic data for allocating the dollar 
value of activities would provide certainty and consistency compared to 
the current approach and would reflect the population served by 
qualifying activities. The agencies seek feedback on other data points 
that could be used for allocating activities that may more 
appropriately reflect the population served by some activities, such as 
total population, or number of small businesses.
    For an activity that serves an entire statewide area, the activity 
would be allocated to the state level, and not to specific counties 
within the state. If the activity serves one or more statewide areas or 
portions of a multistate MSA applicable to the bank, it would be 
allocated proportionate to the percentage distribution of all low- and 
moderate-income families in the states and portions of those states in 
a bank's multistate MSA, in each relevant state and multistate MSA. 
Alternatively, the value of the activity could be allocated to specific 
states or multistate MSAs based on documentation provided by the bank 
as described above. For an activity that is nationwide in scope, the 
activity would be allocated to the institution level and not to 
specific states or counties.
Request for Feedback
    Question 117. Should activities that cannot be allocated to a 
specific county or state be considered at the highest level (at the 
state or institution level, as appropriate) instead of allocated to 
multiple counties or states based upon the distribution of all low- and 
moderate-income families across the counties or states?
    Question 118. What methodology should be used to allocate the 
dollar value of activities to specific counties for activities that 
serve multiple counties? For example, should the agencies use the 
distribution of all low- and moderate-income families across the 
applicable counties? Or, should the agencies use an alternative 
approach, such as the distribution of the total population across the 
applicable counties? Should the agencies consider other measures that 
would reflect economic development activities that benefit small 
businesses and small farms or use a standardized approach to allocate 
activities?

D. Facility-Based Assessment Area Community Development Financing 
Evaluation

1. Bank Assessment Area Community Development Financing Metric
    The agencies propose to measure the dollar amount of a bank's 
qualifying community development financing activities compared to its 
deposits, defined in Sec.  __.12 and discussed in Section XIX, within 
each facility-based assessment area. The agencies also propose using 
benchmarks for the community development financing metric for the 
purposes of informing assessments of bank performance. While the 
community development financing framework would continue to rely on 
examiner judgment to assess the volume of activities, the use of 
uniform metrics and benchmarks is intended to improve the consistency 
and clarity of evaluations relative to the current approach.
    The bank assessment area community development financing metric 
would be the ratio of a bank's community development financing dollars 
(the numerator) relative to the dollar value of the deposits (the 
denominator) within a facility-based assessment area. For example, if a 
bank has maintained an average of $1 million in deposits from an 
assessment area and has conducted an average of $20,000 annually in 
qualifying community development financing activities in that 
assessment area, its bank assessment area community development 
financing metric would be 2.0 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.006

    The numerator of the bank assessment area community development 
financing metric would be a bank's annual average of dollars of 
community development financing activity loaned or invested in an 
assessment area. This includes the annual average of community 
development loans and community development investments originated or 
purchased over the course of the evaluation period. It also includes 
the annual quarterly average value of community development loans and 
community development investments originated or purchased in a prior 
year that remained on a bank's balance sheet on the last day of each 
quarter of the year during the evaluation period. For example, a 
community development loan that is originated in the first year of an 
evaluation period, and maintained on balance sheet through the end of 
the third year of the evaluation period, would count towards the annual 
average that is computed for the numerator three times: The origination 
value in year one, and the annual quarterly average value remaining on 
balance sheet in years two and three.
    The agencies propose to count both new and prior activities 
remaining on the bank's balance sheet in the numerator of the metric in 
order to emphasize the provision of long-term capital. Under the 
current approach, community development loans are credited based on the 
origination balance value and the remaining balance sheet value of 
longer-term loans is not considered, unless the loans are renewed or 
refinanced. However, under the proposed approach, the outstanding 
balance of a loan or investment counts towards the bank's metric on an 
annual basis, which makes long-term financing beneficial to a bank's 
metric.
    Activities that the agencies consider to be conducted purely for 
the purpose of artificially increasing a bank's metric, such as 
purchasing and then subsequently reselling a large investment in a 
short time frame near the end of an evaluation period, may result in 
quantitative adjustments to the bank's metric to discount activities. 
The agencies believe that the ability of examiners to discount such 
activities under specific circumstances supports the integrity of the 
metrics and examination process.
    The proposed denominator of the metric would be a bank's annual 
average dollar amount of deposits sourced from an assessment area 
during the evaluation period. As proposed in Sec.  __.42, collecting 
and maintaining

[[Page 33973]]

deposits data would be required for large banks with assets of over $10 
billion, and would be optional for large banks with assets of $10 
billion or less and for intermediate banks that opt into the Community 
Development Financing Test. Banks that collect and maintain deposits 
data under proposed Sec.  __.42 would compute the average deposits 
(calculated based on average daily balances as provided in statements 
such as monthly or quarterly statements, as applicable) for depositors 
located in the assessment area. An annual average would then be 
computed across the years of the evaluation period. For banks that do 
not collect and maintain deposits data under proposed Sec.  __.42, the 
FDIC's Summary of Deposits data would be used, in order to tailor data 
requirements for these banks.
    The agencies believe that this denominator is an indicator of a 
bank's financial capacity to conduct community development financing 
activity since deposits are a major source of bank funding for loans 
and investments. The agencies consider that the greater a bank's volume 
of deposits, the greater that bank's capacity and CRA obligation to 
lend and invest becomes.\235\ Therefore, the proposed approach for the 
bank assessment area community development financing metric would 
establish a proportionately greater obligation to serve an assessment 
area for banks with a greater presence in that market. Stakeholders 
have also noted that deposits reflect a bank's financial capacity and 
align with the intent of CRA that encourages banks to help meet the 
credit needs of their communities.
---------------------------------------------------------------------------

    \235\ See 12 U.S.C. 2901; Section I of this SUPPLEMENTARY 
INFORMATION.
---------------------------------------------------------------------------

    An alternative considered by the agencies is to base the 
denominator of the metric on the share of the bank's depositors 
residing in the assessment area. The denominator would be calculated by 
multiplying the bank's institution level deposits by the percentage of 
the bank's depositors that reside in an assessment area. For example, 
under this alternative, if the bank has a total of $100,000,000 in 
deposits, and one percent of the bank's depositors reside in a given 
assessment area, then the denominator for that assessment area's metric 
would be $100,000,000 x .01 = $1,000,000. This alternative approach 
would have the objective of more evenly allocating a bank's CRA 
obligations across markets, including those less affluent markets in 
which the bank's depositors hold relatively small amounts of deposits, 
because deposits would be allocated to assessment areas proportionate 
to the number of depositors. The agencies have considered that this 
option would require all large banks and intermediate banks that decide 
to opt into the Community Development Financing Test to collect and 
maintain the number of depositors residing in each of their assessment 
areas and in other geographies, because existing data, such as the 
FDIC's Summary of Deposits data, does not include this information for 
individual banks.
2. Benchmarks
    The agencies propose establishing one local and one national 
benchmark for each facility-based assessment area. To help inform 
facility-based assessment area conclusions, the agencies would compare 
the bank assessment area community development financing metric to both 
(i) an assessment area community development financing benchmark (local 
benchmark) and, as applicable, (ii) a metropolitan or a nonmetropolitan 
nationwide community development financing benchmark (nationwide 
benchmark). These benchmarks would enable the agencies to compare an 
individual bank's community development financing performance to other 
banks in a clear and consistent manner. Both benchmarks would be based 
on the aggregate amount of community development financing activity and 
the aggregate amounts of deposits in the bank's assessment area or 
nationwide, among all large banks.
    The aggregate amounts of deposits for these benchmarks would be 
based on reported deposits data for large banks with assets of over $10 
billion, and on the FDIC's Summary of Deposits data for large banks 
with assets of $10 billion or less, using the deposits assigned to 
branches located in each assessment area for which the benchmark is 
calculated.
    As with the proposed market volume benchmark used in the proposed 
Retail Lending Test and discussed in Section IX, the agencies seek 
feedback on the proposed approach to using the FDIC's Summary of 
Deposits data for calculating community development financing 
benchmarks, the tradeoffs of the proposed approach, and on potential 
alternatives to the proposed approach.
    The use of both local and nationwide benchmarks would provide the 
agencies, banks, and the public with additional context about the local 
level of community development activity that can help to interpret and 
set goals for performance. For example, a bank whose metric falls short 
of the local benchmark in an assessment area where the local benchmark 
is much lower than the nationwide benchmark could be considered to have 
conducted a relatively low volume of activities. The nationwide 
benchmarks also provide a baseline for evaluating the level of a 
particular bank's community development activity in an assessment area 
with few or no other large banks from which to calculate a local 
benchmark.
    The benchmarks would be made publicly available (e.g., in 
dashboards) and updated annually in order to provide the most 
transparency and clarity to allow banks and the public to track these 
benchmarks.
    Assessment Area Community Development Financing Benchmark. As 
proposed, the numerator for the assessment area community development 
financing benchmark would be the annual average dollar amount of all 
large banks' qualifying community development financing activities 
(including both the annual average of originations and the annual 
quarterly average balance sheet holdings, as described above) in the 
assessment area during the evaluation period. The denominator for the 
assessment area community development financing benchmark would be the 
annual average of the total dollar amount of all deposits held by large 
banks in the assessment area. Under the proposal, the deposits in the 
facility-based assessment area would be the sum of: (i) The annual 
average of deposits in counties in the facility-based assessment area 
reported by all large banks with assets of over $10 billion over the 
evaluation period, as reported under proposed Sec.  __.42; and (ii) the 
annual average of deposits assigned to branches in the facility-based 
assessment area by all large banks with assets of $10 billion or less, 
according to the FDIC's Summary of Deposits, over the evaluation 
period.

[[Page 33974]]

[GRAPHIC] [TIFF OMITTED] TP03JN22.007

    The assessment area community development financing benchmark would 
reflect local conditions that vary across assessment areas, such as the 
level of competition from other banks and the availability of community 
development opportunities, which may contribute to differences in the 
level of community development activity across communities and within a 
community across time. The agencies consider that using a standard 
local benchmark would improve the consistency of the current evaluation 
approach, which does not include consistent data points that reflect 
local levels of qualifying activities.
    Metropolitan and Nonmetropolitan Nationwide Community Development 
Financing Benchmarks. The agencies propose to develop a separate 
nationwide community development financing benchmark for all 
metropolitan areas and all nonmetropolitan areas, respectively. One of 
these nationwide benchmarks would be applied to each assessment area, 
depending on whether the assessment area was located in a metropolitan 
area or a nonmetropolitan area. Based on the agencies' analysis, the 
ratio of banks' community development loans and qualifying investments 
to deposits is higher in metropolitan assessment areas than in 
nonmetropolitan assessment areas.\236\ Setting the nationwide benchmark 
separately for metropolitan and nonmetropolitan areas is intended to 
help account for differences in the level of community development 
opportunities in these areas.
---------------------------------------------------------------------------

    \236\ The analysis used a sample of 5,735 assessment areas from 
large retail bank performance evaluation records from 2005 to 2017 
in the Board's CRA Analytics Data Tables, which note the dollar 
amount of current period community development loan originations as 
well as current period and prior period qualifying investments in 
each assessment area. The total dollar amount of activities was 
divided by the length in years of each examination evaluation 
period, to produce an annual average for each assessment area 
evaluation. The FDIC Summary of Deposits data was used to identify 
the dollar amount of deposits associated with the corresponding 
bank's branches in the assessment area, which is the best available 
approach for estimating the amount of deposits associated with each 
of a bank's assessment areas. The aggregate ratio of annualized 
dollars of community development activities to dollars of deposits 
was computed separately for all metropolitan assessment areas and 
all nonmetropolitan assessment areas in the sample, respectively. 
Under this analysis, the metropolitan ratio was 1.4 percent, and the 
nonmetropolitan ratio was 0.9 percent, based on exams from 2014 to 
2017. The metropolitan ratio remained significantly larger than the 
nonmetropolitan ratio when limiting the sample to only full-scope 
examinations, across different periods of the sample, and when 
computing the median ratio of all examinations, rather than a mean.
---------------------------------------------------------------------------

    The numerator for the nationwide community development financing 
benchmarks would be the annual average of the total dollar amount of 
all large banks' qualifying community development financing activities 
(in either metropolitan or nonmetropolitan areas, depending on the 
assessment area), and the denominator would be the annual average of 
the dollar amount of deposits (again, either in metropolitan or 
nonmetropolitan areas). Under the proposal, the deposits in the 
metropolitan or nonmetropolitan areas would be the sum of: (i) The 
annual average of deposits in counties in the metropolitan or 
nonmetropolitan areas reported by all large banks with assets of over 
$10 billion over the evaluation period (as reported under proposed 
Sec.  __.42; and (ii) the annual average of deposits assigned to 
branches in the metropolitan or nonmetropolitan areas by all large 
banks with assets of $10 billion or less, according to the FDIC's 
Summary of Deposits, over the evaluation period.
[GRAPHIC] [TIFF OMITTED] TP03JN22.008

    Timing of Benchmark Data. In order to provide greater clarity to 
banks and communities regarding the benchmarks that would be used for 
each evaluation period, the agencies are considering whether the 
benchmarks should be calculated and fixed based on community 
development financing and deposits data that is available at least one 
year in advance of the end of the evaluation period. For example, for 
an evaluation period ending in January of 2025, the agencies could 
determine the benchmarks for that evaluation period using data over a 
three-year timeframe spanning from 2021 to 2023. This alternative would 
provide additional certainty that the benchmarks that a bank would be 
compared to would not change in the final year of an evaluation period. 
However, the agencies considered that under this alternative, the 
benchmarks that a bank is compared to may not as fully reflect the 
credit needs and opportunities in the assessment area to the same 
degree, especially if there are significant changes in community 
development opportunities during the final year of the evaluation 
period.
3. Impact Review
    To complement the community development financing metrics and 
benchmarks, the agencies propose to evaluate the impact and 
responsiveness of a bank's community development activities. The 
qualitative evaluation would draw on the impact criteria defined in 
Sec.  __.15, and on any other information that the agencies consider to 
determine how the bank's activities

[[Page 33975]]

responded to community development needs and opportunities. This 
approach would advance the CRA's purpose by ensuring a strong emphasis 
on impact and responsiveness in meeting community credit needs; would 
increase consistency in the evaluation of qualitative factors relative 
to the current approach by creating clear criteria; and would foster 
transparency for banks and the public by providing information about 
the type and purpose of activities considered to be particularly 
impactful or responsive.
    The consideration of qualitative factors as a supplement to the 
dollar-based metrics aligns with the CRA's purpose of strengthening 
low- and moderate-income communities by more fully accounting for 
factors that may reflect the overall impact of an activity. First, a 
qualitative review can consider the responsiveness of activities to 
local context, including community development needs and opportunities 
that vary from one community to another. Banks and their community 
partners may make great effort to design an activity to reflect this 
context, and to address specific credit needs of the community, which 
can further the activity's impact. Second, the qualitative evaluation 
is important for emphasizing relatively small-dollar activities that 
nonetheless have a significant positive impact on the communities 
served. For example, qualifying contributions and activities that 
support organizations that provide assistance to small businesses tend 
to have small dollar balances relative to loans to larger businesses, 
but are critically important for addressing small business credit 
needs. Third, the qualitative evaluation can emphasize activities that 
serve low- and moderate-income populations and census tracts that have 
especially high community development needs, which often entail greater 
complexity and effort on the part of the bank. This emphasis helps to 
encourage community development activities that reach a broad range of 
low- and moderate-income communities, including those that are more 
challenging to serve. Finally, the qualitative review can emphasize 
specific categories of activities aligned with the CRA's purpose of 
strengthening credit access for a bank's communities, including low- 
and moderate-income communities, such as activities that support 
specified mission-driven financial institutions.
    To promote greater consistency and transparency in the evaluation 
approach, the agencies would examine the extent to which a bank's 
activities meet the impact factors defined in Sec.  __.15 based on 
information provided by the bank, local community data, community 
feedback, and other performance context information.
    Given the current lack of data, the agencies propose that this 
process would initially be primarily qualitative in nature. The 
agencies would consider the percentage of the bank's qualifying 
activities that meet each impact factor but would not use multipliers 
or specific thresholds to directly tie the impact review factors to 
specific conclusions. A more significant volume of activities that 
align with the impact review factors would positively impact 
conclusions. In the future, when additional community development data 
is reported and analyzed, the agencies would consider quantitative 
approaches to evaluate impact and responsiveness.
4. Facility-Based Assessment Area Conclusions
    The agencies propose to assign a Community Development Financing 
Test conclusion in a facility-based assessment area by considering the 
bank assessment area community development financing metric relative to 
the local and nationwide benchmarks, in conjunction with the impact 
review of the bank's activities. Based on an assessment of these 
factors, the bank would receive a conclusion of ``Outstanding,'' ``High 
Satisfactory,'' ``Low Satisfactory,'' ``Needs to Improve,'' or 
``Substantial Noncompliance.''
    The agencies also considered approaches that would automatically 
combine the metric, benchmarks, and impact review to assign conclusions 
in a standardized way. However, the CRA community development financing 
data that is currently available is not sufficient to determine an 
approach that includes specific thresholds and weights for different 
components. Instead, the agencies propose that the approach for 
combining these standardized factors would initially rely on examiners' 
judgment. Eventually, analysis of community development data collected 
under the new rule may allow for developing additional quantitative 
procedures for determining conclusions. For example, the agencies could 
use community development financing data to determine thresholds for 
the bank assessment area community development financing metric and 
impact criteria that correspond to each conclusion category.
Request for Feedback
    Question 119. The agencies are seeking feedback on alternatives to 
determining the denominator of the bank assessment area community 
development financing metric. What are the benefits and drawbacks, 
including data challenges, of implementing an alternative approach that 
bases the denominator of the metric on the share of bank depositors 
residing in the assessment area (described above) in contrast to the 
proposed approach of relying on dollar amounts of deposits?
    Question 120. For large banks with assets of $10 billion or less, 
under the proposed Community Development Financing Test, is it 
appropriate to use the FDIC's Summary of Deposits data instead of 
deposits data that is required to be collected and maintained by the 
bank to tailor new data requirements, or would it be preferable to 
require collected deposits data for all large banks?
    Question 121. What is the appropriate method to using the local and 
nationwide benchmarks to assess performance? Should the agencies rely 
on examiner judgment on how to weigh the comparison of the two 
benchmarks, or should there be additional structure, such as 
calculating an average of the two benchmarks, or taking the minimum, or 
the maximum, of the two benchmarks?
    Question 122. What other considerations should the agencies take to 
ensure greater clarity and consistency regarding the calculation of 
benchmarks? Should the benchmarks be calculated from data that is 
available prior to the end of the evaluation period, or is it 
preferable to align the benchmark data with the beginning and end of 
the evaluation period?

E. State Community Development Financing Evaluation

    To evaluate a bank's state community development financing 
performance, the agencies propose to consider a weighted average of the 
bank's performance in facility-based assessment areas within the state 
area, as well as the bank's performance on a statewide basis, via a 
statewide score. The statewide score would account for the totality of 
the bank's activities in the state--combining activities that are 
inside and outside of facility-based assessment areas--relative to the 
bank's total deposits across the state. The combination of these two 
components would emphasize facility-based assessment area performance, 
while still allowing banks the option to conduct and receive 
consideration for activities outside of facility-based assessment areas 
in the state.

[[Page 33976]]

1. Weighted Average of Assessment Area Performance
    The agencies propose averaging a bank's Community Development 
Financing Test conclusions across its facility-based assessment areas 
in each state, as one component of the bank's Community Development 
Financing Test conclusion at the state level. The conclusion assigned 
to each assessment area would be mapped to a point value, consistent 
with the approach explained for assigning Retail Lending Test 
conclusions: ``Outstanding'' (10 points); ``High Satisfactory'' (7 
points); ``Low Satisfactory'' (6 points); ``Needs to Improve'' (3 
points); ``Substantial Noncompliance'' (0 points).\237\ This resulting 
score for each assessment area would be assigned a weight, calculated 
as the average of the percentage of retail loans, and the percentage of 
deposits of the bank associated with the assessment area (both measured 
in dollars), out of all of the bank's retail loans and deposits in 
facility-based assessment areas in the state. Similar to the proposed 
weighting approach for assigning Retail Lending Test conclusions, 
deposits would be based on collected and maintained deposits data for 
banks that collect this data, and on the FDIC's Summary of Deposits for 
banks that do not collect deposits data. Using these weights and 
scores, the weighted average of the assessment area scores would then 
be taken and used as one component in determining the state-level 
conclusion.
---------------------------------------------------------------------------

    \237\ See Section IX.F for discussion of the proposed point 
scale.
---------------------------------------------------------------------------

    The proposed approach would ensure that performance in all 
facility-based assessment areas is incorporated into the state 
conclusion, proportionate to the bank's amount of business activity in 
each assessment area. Incorporating conclusions for all assessment 
areas into the state conclusion creates a clear emphasis on assessment 
area performance, including smaller markets.
2. Statewide Score
    Examiners would also assign a statewide score for each state in 
which a bank delineates a facility-based assessment area. The statewide 
score would be assigned based on a bank state community development 
financing metric and benchmark, and a statewide impact review.
a. Bank State Community Development Financing Metric
    The bank state community development financing metric would be 
calculated using the same formula as the bank assessment area community 
development financing metric and would include all of a bank's 
community development activities and deposits in the state area (based 
on either collected deposits data, or Summary of Deposits data, as 
applicable), without distinguishing between those inside or outside of 
the bank's assessment areas.
    For example, if a bank has conducted an annual average of $200,000 
in qualifying community development financing activities and has an 
annual average of $10 million in deposits associated with a state 
during an evaluation period, the bank state community development 
financing metric for that evaluation period would be 2.0 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.008

    The inclusion of all activities and deposits reflects the 
expectation that a bank conduct a volume of activities that is 
commensurate with its total capacity in a state. In addition, this 
metric provides the option for, but would not require, banks to conduct 
and receive consideration for activities outside of assessment areas, 
but within the states that include those facility-based assessment 
areas. The metric would not distinguish between activity conducted 
inside and outside the assessment area. If a bank conducted sufficient 
activity within its facility-based assessment areas in the state 
compared to the state benchmarks, activity outside of the bank's 
assessment areas would not be needed. However, if a bank is unable to 
conduct sufficient activity within the assessment areas due to lack of 
opportunity or high competition, the metric allows for the bank to 
conduct activity within the state but outside of the assessment area 
and receive consideration.
b. State Community Development Financing Benchmarks
    Similar to the assessment area approach described above, the 
agencies propose establishing benchmarks that would allow examiners to 
compare a bank's performance to other banks in comparable areas. These 
benchmarks would include: (i) A statewide benchmark for the state area 
called the state community development financing benchmark; and (ii) a 
benchmark that is tailored to each bank's facility-based assessment 
areas called the state weighted assessment area community development 
financing benchmark. The use of two benchmarks would provide examiners 
with additional context and points of comparison on which to base the 
statewide score. For example, for a bank that collects deposits or 
conducts activities outside of its assessment areas in a state, the 
agencies may rely primarily on the state community development 
financing benchmark. In contrast, for a bank that collects deposits and 
conducts activities primarily within its assessment areas, the agencies 
may rely more heavily on the state weighted assessment area community 
development financing

[[Page 33977]]

benchmark, which is tailored to the bank's assessment areas to account 
for the level of competition and amount of opportunities in those 
areas.
    The first benchmark, the state community development financing 
benchmark, would be defined similarly to the local benchmark used for 
the assessment area evaluation and it would include all activities and 
deposits across the entire state area. The numerator would include the 
dollars of community development loans and investments by all large 
banks across the state, and the denominator would include the dollars 
of deposits held by all large banks across the state Under the 
proposal, the deposits in the state would be the sum of: (i) The annual 
average of deposits in counties in the state reported by all large 
banks with assets of over $10 billion over the evaluation period (as 
reported under proposed Sec.  __.42); and (ii) the annual average of 
deposits assigned to branches in the state by all large banks with 
assets of $10 billion or less, according to the FDIC's Summary of 
Deposits, over the evaluation period.
    The state weighted assessment area community development financing 
benchmark would be defined as the weighted average of assessment area 
community development financing benchmarks across all of the bank's 
facility-based assessment areas in the state. Each local benchmark 
would be weighted based on the assessment area's percentage of retail 
loans and percentage of deposits (both measured in dollars) within the 
facility-based assessment areas of the state, the same weighting 
approach as described for the weighted average of the bank's facility-
based assessment area conclusions.
c. Impact Review
    The agencies propose to evaluate the impact and responsiveness of a 
bank's community development activities for each state at a statewide 
level, using the same impact review approach as described previously 
for facility-based assessment areas. This impact review would encompass 
all activities in the state, including those inside and outside of 
assessment areas. Examiners would consider the extent to which the 
bank's activities met the criteria, based on information provided by 
the bank, local community data, community feedback, and other 
performance context information.
d. Statewide Score Assignment
    The agencies would assign a statewide score corresponding to the 
conclusion categories described above: ``Outstanding'' (10 points); 
``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); 
``Needs to Improve'' (3 points); ``Substantial Noncompliance'' (0 
points). The statewide score would reflect a comparison of the bank 
state community development financing metric to the state community 
development financing benchmark and the state weighted average 
community development financing benchmark, as well as the impact review 
of the bank's activities.
3. State Community Development Financing Test Conclusion
    The bank's weighted average assessment area performance score would 
be averaged with its statewide score to achieve a state performance 
score for the state, with weights on both components tailored to 
reflect the bank's business model. The amount of weight applied to the 
facility-based assessment area performance and to the statewide 
performance would depend on the bank's percentage of deposits (based on 
collected deposits data and on Summary of Deposits data, as applicable) 
and retail loans in the state that are within its facility-based 
assessment areas.
    The agencies propose to tailor the weighting of the average 
assessment area performance and the statewide score to the individual 
bank's business model, while still preserving the option for every bank 
to be meaningfully credited for activities outside of its facility-
based assessment areas. For a bank that does most of its retail lending 
and deposit collection within its facility-based assessment areas, for 
example, the agencies view those facility-based assessment areas as the 
primary community a bank serves. The agencies therefore believe that 
the average assessment area performance deserves a higher weight in the 
combined state performance score.
    To ensure that any activities that a bank undertakes outside of its 
facility-based assessment areas also are meaningfully credited as well, 
the agencies propose to give equal weight to the average assessment 
area performance and statewide score for banks whose business model is 
strongly branch based. Because activities that serve facility-based 
assessment areas would contribute both to the statewide score as well 
as in the weighted average of facility-based assessment area 
conclusions, weighting these two components equally effectively gives a 
higher weight to assessment area performance.
    On the other extreme, for banks whose retail lending and deposit 
collection occurs almost entirely outside of their facility-based 
assessment areas (such as primarily online lenders), those assessment 
areas largely do not represent the overall community the bank serves. 
The agencies therefore propose to weight the statewide score more 
heavily than the weighted average assessment area performance score for 
such a bank. Banks with business models in between these two extremes 
would use weights that are correspondingly in between.
    Specifically, to determine the relative weighting as described in 
Table 19 below, the agencies propose to use the simple average of:
    <bullet> The percentage of a bank's retail loans in a state, by 
dollar volume, that the bank made in its facility-based assessment 
areas in that state, and
    <bullet> The percentage of a bank's deposits from a state, by 
dollar volume, that the bank sourced from its facility-based assessment 
areas in that state

   Table 19 to Section __.24--Proposed Weights for Combined Community
           Development Financing Test State Performance Score
------------------------------------------------------------------------
                                           Weight on
Average of percentage of retail loans       average          Weight on
   and deposits from facility-based     assessment area      statewide
           assessment areas               performance       score  (%)
                                           score  (%)
------------------------------------------------------------------------
80% or greater.......................                 50              50
Less than 80%, greater than or equal                  40              60
 to 60%..............................
Less than 60%, greater than or equal                  30              70
 to 40%..............................
Less than 40%, greater than or equal                  20              80
 to 20%..............................

[[Page 33978]]

 
Less than 20%........................                 10              90
------------------------------------------------------------------------

    Banks that have a low percentage of deposits and retail loans 
within their facility-based assessment areas would have a stronger 
emphasis on their statewide score than on their weighted average of 
facility-based assessment area conclusions. Conversely, banks that have 
a high percentage of deposits and retail loans within their facility-
based assessment areas would have approximately equal weight on their 
statewide score and their weighted average of facility-based assessment 
area conclusions. The state performance score is then rounded to the 
nearest point value corresponding to a conclusion category: 
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory'' (6 points); ``Needs to Improve'' (3 points); 
``Substantial Noncompliance'' (0 points) to derive the State Community 
Development Financing Test Conclusion.
    Taking into account both the bank's assessment area performance and 
its statewide performance would build off of the current approach to 
considering activities in broader statewide and regional areas and aims 
to achieve a balance of objectives. First, considering assessment area 
performance encourages banks to serve the communities where they have a 
physical presence, and where their knowledge of local community 
development needs and opportunities is often strongest. Second, 
considering statewide performance allows banks the option to also 
pursue impactful community development opportunities that may be 
located partially or entirely outside of their facility-based 
assessment areas, without requiring them to do so. Third, because 
assessment area activities are considered in the statewide score as 
well, the approach gives greater emphasis to activities within 
facility-based assessment areas than to activities outside of 
assessment areas, but the amount of weight is tailored to each bank's 
business model in the state. As a result, banks that are primarily 
branch-based would be encouraged to focus on serving their facility-
based assessment areas, while banks that have few loans and deposits in 
facility-based assessment areas, such as banks that operate primarily 
through online delivery channels, are evaluated mostly on a statewide 
basis.
    As discussed in Section X, the percentage of deposits assigned to 
facility-based assessment areas for banks that do not collect and 
maintain deposits data would always be 100 percent, because Summary of 
Deposits data attributes all deposits to bank branches. The average of 
the percentage of retail loans and deposits in facility-based 
assessment areas for such a bank would therefore not account for the 
bank's depositors that are located outside of its facility-based 
assessment areas. This would generally result in a higher weight on the 
bank's assessment area performance score, and may provide less of an 
incentive for certain banks to conduct community development financing 
activities outside of their facility-based assessment areas.

F. Multistate MSA Community Development Financing Test Conclusions

    The agencies propose to assign Community Development Financing Test 
conclusions for multistate MSAs in which a bank has branches in two or 
more states of the multistate MSA.\238\ If the bank has delineated an 
entire multistate MSA as a single facility-based assessment area, the 
conclusion for the assessment area and for the multistate MSA would be 
the same.
---------------------------------------------------------------------------

    \238\ See proposed Sec. Sec.  __.12, __.28(c)(2).
---------------------------------------------------------------------------

    If the bank delineates only part of a multistate MSA as a facility-
based assessment area, or delineates multiple facility-based assessment 
areas within a multistate MSA, then the agencies would employ the same 
approach as for assigning conclusions for state areas, with the same 
components as the state evaluation, applied to the geography of the 
multistate MSA. The multistate MSA conclusion would reflect a weighted 
average of facility-based assessment area conclusions within the 
multistate MSA, and would also reflect: (i) A bank multistate MSA 
community development financing metric; (ii) a multistate MSA community 
development financing benchmark; (iii) a multistate MSA weighted 
assessment area community development financing benchmark; and (iv) an 
impact review.
2. Institution Community Development Financing Test Evaluation
    The agencies propose to assign Community Development Financing Test 
conclusions for the institution level using a similar approach to that 
for assigning conclusions for state areas. The approach would use a 
combination of a weighted average of facility-based assessment area 
conclusions nationwide, and a nationwide score that reflects: (i) A 
bank nationwide community development financing metric; (ii) a 
nationwide community development financing benchmark; (iii) a 
nationwide weighted assessment area community development financing 
benchmark; and (iv) an impact review.
1. Weighted Average of Assessment Area Performance
    The agencies propose averaging a bank's Community Development 
Financing Test conclusions across all of its facility-based assessment 
areas as one component of the bank's Community Development Financing 
Test conclusion at the institution level. As with the state evaluation 
approach, this is intended to emphasize facility-based assessment area 
performance by directly linking assessment area conclusions to the 
institution conclusion. The conclusion assigned to each assessment area 
would be mapped to a point value as follows: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); ``Substantial Noncompliance'' 
(0 points). This resulting score for each assessment area would be 
assigned a weight, calculated as the average of the percentage of 
retail loans, and the percentage of deposits of the bank within the 
assessment area (both measured in dollars), out of all of the bank's 
retail loans and deposits in facility-based assessment areas (based

[[Page 33979]]

on collected deposits data and on Summary of Deposits data, as 
applicable). Using these weights and scores, the weighted average of 
the assessment area scores would then be taken and used in determining 
the institution-level conclusion. The weighted average approach ensures 
that performance in each facility-based assessment area is incorporated 
into the institution conclusion, with greater emphasis given to areas 
where the bank is most active.
2. Nationwide Score
    Examiners would assign a nationwide score for the institution, 
based on a bank nationwide community development financing metric and 
benchmarks, and a nationwide impact review.
a. Bank Nationwide Community Development Financing Metric
    The bank nationwide community development financing metric would be 
calculated using the same formula for the state metrics, including all 
of a bank's community development activities and deposits in the 
numerator and denominator, respectively.
b. Nationwide Community Development Financing Benchmarks
    The agencies propose establishing benchmarks that would allow 
examiners to compare a bank's performance to other banks in comparable 
areas. These benchmarks would include a single nationwide benchmark 
applied to all banks called the nationwide community development 
financing benchmark, and one benchmark that is tailored to each bank's 
facility-based assessment areas called the nationwide weighted 
assessment area community development financing benchmark. The use of 
two benchmarks is intended to provide additional context and points of 
comparison in order to develop the nationwide score. For example, for a 
bank that primarily collects deposits or conducts activities outside of 
its facility-based assessment areas, the agencies may rely heavily on a 
comparison of the bank nationwide community development financing 
metric to the nationwide community development financing benchmark. In 
contrast, for a bank that collects deposits and conducts activities 
primarily within its assessment areas, the agencies may rely more 
heavily on a comparison of the bank nationwide community development 
financing metric to the nationwide weighted assessment area community 
development financing benchmark, which is tailored to the bank's 
assessment areas.
    The nationwide benchmarks would be defined analogously to the 
statewide benchmarks. The nationwide community development financing 
benchmark takes all community development financing activities reported 
by large banks in the numerator, and all deposits of those banks in the 
denominator. Under the proposal, the deposits in the nationwide area 
would be the sum of: (i) The annual average of deposits in counties in 
the nationwide area reported by all large banks with assets of over $10 
billion over the evaluation period (as reported under proposed Sec.  
__.42); and (ii) the annual average of deposits assigned to branches in 
the nationwide area by all large banks with assets of $10 billion or 
less, according to the FDIC's Summary of Deposits, over the evaluation 
period.
    The nationwide weighted assessment area community development 
financing benchmark would be defined as the weighted average of the 
assessment area community development financing benchmarks across all 
of the bank's facility-based assessment areas and would be weighted 
based on the assessment area's percentage of retail loans and 
percentage of deposits (both measured in dollars) within the facility-
based assessment areas of the state using the same weighting approach 
as described for the weighted average of the bank's facility-based 
assessment area conclusions.
c. Impact Review
    Similar to the proposed statewide approach, the agencies propose to 
evaluate the impact and responsiveness of a bank's community 
development activities at an institution level, using the same impact 
review approach as described above for facility-based assessment areas 
and states. The agencies propose to conduct a bank level impact review 
in order to assess the impact and responsiveness of all of an 
institution's qualifying activities, including those inside and outside 
of facility-based assessment areas. The agencies consider this to be 
especially important for the evaluation of a bank that elects to 
conduct activities that serve areas outside of its facility-based 
assessment areas, so that the impact and responsiveness of those 
activities is considered. As described above, the agencies would 
consider the impact and responsiveness of the bank's activities to 
community needs, and would consider the impact review factors, among 
other information.
d. Nationwide Score Assignment
    The agencies would assign a nationwide score that reflects the 
bank's overall volume of qualifying activities and overall impact and 
responsiveness of activities, corresponding to the conclusion 
categories as follows: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs to 
Improve'' (3 points); ``Substantial Noncompliance'' (0 points). The 
nationwide score would reflect a comparison of the bank nationwide 
community development financing metric to the nationwide and weighted 
assessment area benchmarks, as well as the impact review of the bank's 
activities.
3. Institution Community Development Financing Test Conclusion
    The bank's weighted average assessment area performance score would 
be averaged with its nationwide score to produce an institution 
performance score, with weights on both components tailored to reflect 
the bank's business model. As in the calculation of the state 
performance score, the amount of weight applied to the facility-based 
assessment area performance and to the nationwide performance would 
depend on the bank's percentage of deposits and retail loans that are 
within its facility-based assessment areas. Equivalent weights to those 
proposed for calculating the combined state performance score would be 
used, to tailor the weighting to the bank's business model while still 
allowing all banks to receive meaningful credit for activities outside 
their facility-based assessment areas. The proposed weights are 
described in Table 20 below:

[[Page 33980]]



   Table 20 to Section __.24--Proposed Weights for Combined Community
            Development Financing Test Bank Performance Score
------------------------------------------------------------------------
                                           Weight on
Average of percentage of retail loans       average          Weight on
   and deposits from facility-based     assessment area     nationwide
           assessment areas            performance score    score  (%)
                                               (%)
------------------------------------------------------------------------
80% or greater.......................                 50              50
Less than 80%, greater than or equal                  40              60
 to 60%..............................
Less than 60%, greater than or equal                  30              70
 to 40%..............................
Less than 40%, greater than or equal                  20              80
 to 20%..............................
Less than 20%........................                 10              90
------------------------------------------------------------------------

    The weighting approach is intended to achieve the same balance as 
the state weighting approach by emphasizing facility-based assessment 
area performance, allowing flexibility to receive consideration for 
activities outside of facility-based assessment areas, and tailoring 
the amount of weight on facility-based assessment area performance to 
bank business model. Banks that have a low percentage of deposits and 
retail loans within their facility-based assessment areas would have a 
stronger emphasis on their nationwide score than on their weighted 
average of facility-based assessment area conclusions. Conversely, 
banks that have a high percentage of deposits and retail loans within 
their facility-based assessment areas would have approximately equal 
weight on their nationwide score and on their weighted average of 
facility-based assessment area conclusions. The institution performance 
score is then rounded to the nearest point value corresponding to a 
conclusion category: ``Outstanding'' (10 points); ``High Satisfactory'' 
(7 points); ``Low Satisfactory'' (6 points); ``Needs to Improve'' (3 
points); ``Substantial Noncompliance'' (0 points) to derive the 
Institution Community Development Financing Test conclusion.
    As discussed above, the agencies have considered that the FDIC's 
Summary of Deposits data may not reflect a bank's distribution of 
depositors inside and outside of its facility-based assessment areas, 
and that the use of this data may result in a greater weight on the 
bank's assessment area performance score. As a result, this approach 
may place less emphasis on community development financing activities 
outside of a bank's facility-based assessment areas. The agencies seek 
feedback on the tradeoffs of the proposed approach. On the one hand, 
the proposed approach seeks to limit new data requirements for large 
banks with assets of $10 billion or less. On the other hand, the use of 
the FDIC's Summary of Deposits data impacts the proposed weighting 
methodology and other aspects of the proposed approach. The agencies 
seek feedback on an alternative approach of requiring large banks with 
assets of $10 billion or less to collect and maintain deposits data.
Request for Feedback
    Question 123. When calculating the weighted average of facility-
based assessment area conclusions and assessment area community 
development financing benchmarks, is it appropriate to weight 
assessment area metrics and benchmarks by the average share of loans 
and deposits, as proposed?
    Question 124. Is the proposed use of the FDIC's Summary of Deposits 
data for banks that do not collect and maintain deposits data 
appropriate, or should all large banks be required to collect and 
maintain deposits data, which would enable the metrics and benchmarks 
to be based on collected deposits data for all large banks?
    Question 125. Considering current data limitations, what approaches 
would further enhance the clarity and consistency of the proposed 
approach for assigning community development financing conclusions, 
such as assigning separate conclusions for the metric and benchmarks 
component and the impact review component? To calculate an average of 
the conclusions on the two components, what would be the appropriate 
weighting for the metric and benchmarks component, and for the impact 
review component? For instance, should both components be weighted 
equally, or should the metric and benchmarks be weighted more than 
impact review component?
    Question 126. How can the agencies encourage greater consistency 
and clarity for the impact review of bank activities? Should the 
agencies consider publishing standard metrics in performance 
evaluations, such as the percentage of a bank's activities that meet 
one or more impact criteria?

XIII. Community Development Services Test

    The agencies propose a Community Development Services Test that 
would apply to large banks. Separately assessing a bank's community 
development services and assigning a Community Development Services 
Test conclusion would underscore the importance of these activities for 
fostering partnerships among different stakeholders, building capacity, 
and creating the conditions for effective community development, 
including in rural areas.

A. Background

1. Current Approach for Evaluating Community Development Services
    Community development services generally include activities such as 
service on boards of directors for community development organizations 
or on loan committees for CDFIs, financial literacy activities 
targeting low- or moderate-income individuals, and technical assistance 
for small businesses. Current guidance advises that community 
development services should be tied to either financial services or to 
a bank employee's professional expertise (e.g., human resources, 
legal). Under the current regulation, community development services 
are evaluated for large banks as part of the service test, along with 
retail services. For intermediate small banks and wholesale and limited 
purpose banks, community development services are considered along with 
community development loans and qualified investments under one 
community development test. Community development services are 
generally not considered for small banks.
    Examiners consider the extent to which a bank provides community 
development services, as well as the innovativeness and responsiveness 
of the activities. Examiners may consider a variety of measures, such 
as: (i) The number of low- and moderate-income

[[Page 33981]]

participants; (ii) the number of organizations served; (iii) the number 
of sessions sponsored; and (iv) the bank staff hours dedicated. 
Additionally, the Interagency Questions and Answers provide some 
guidance on the qualitative evaluation of community development 
services, including whether the service activity required special 
expertise and effort on the part of the bank, the impact of a 
particular activity on community needs, and the benefits received by a 
community.\239\
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    \239\ See Q&A Sec.  __.24(e)-2.
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2. Stakeholder Feedback
    Currently, community development services are qualitatively 
reviewed, with limited use of metrics. Both industry and community 
stakeholders have acknowledged the value of community development 
services in establishing the partnerships needed to build capacity and 
foster the growth of the community development ecosystem. Stakeholders 
generally agree that developing quantitative metrics coupled with a 
strong qualitative analysis would enhance the community development 
evaluation process but have recognized certain tradeoffs. Some 
stakeholders note that the use of a consistent metric, such as service 
hours per employee would be beneficial. However, other stakeholders 
have noted that quantitative metrics alone cannot adequately capture 
the impact and importance of community development services, and the 
impact of these services on a community is often more than the value of 
the employee's time.

B. Defining Community Development Service Activities

    In Sec.  __.25, the agencies propose to retain the current 
definition of community development services to include activities that 
have a primary purpose of community development and are related to the 
provision of financial services. In addition, activities that reflect 
other areas of expertise of a bank's employees, such as human 
resources, information technology, and legal services would also be 
considered to be related to the provision of financial services. 
Generally, community development services activities would be 
considered when performed by members of a bank's board or employees of 
the bank.
    The agencies also propose that in nonmetropolitan areas, banks may 
receive community development services consideration for volunteer 
activities that meet an identified community development need, even if 
unrelated to the provision of financial services. The agencies 
recognize that banks operating in nonmetropolitan areas may have fewer 
opportunities to provide community development services related to the 
provision of financial services than in metropolitan areas but may have 
ample opportunities to volunteer for activities that meet a community 
development need not tied to the provision of financial services. The 
agencies propose that examples of qualifying activities in 
nonmetropolitan areas include, but are not limited to, (i) assisting an 
affordable housing organization to construct homes; (ii) volunteering 
to serve food at a soup kitchen, at a homeless shelter, or at a shelter 
for victims of domestic violence; or (iii) organizing and volunteering 
at a clothing drive or a food drive for a community service 
organization.

C. Community Development Services Test Evaluation

    The agencies propose that the evaluation of community development 
services would assess a bank's record of helping to meet the community 
development services needs in the bank's facility-based assessment 
areas, states, multistate MSAs, and nationwide areas. The evaluation 
would include a review of the extent to which the bank provides 
community development services, as well as the impact and 
responsiveness of these activities to community needs. For large banks 
with average assets of over $10 billion, the evaluation would also use 
a standard metric based on a bank's community development service hours 
relative to its full-time equivalent employees in each facility-based 
assessment area.
1. Qualitative Review for the Community Development Services Test
    For all large banks, the agencies are proposing a qualitative 
review of (i) the extent to which a bank provides community development 
services and (ii) the impact and responsiveness of these activities. 
The review would include consideration of any relevant information 
provided by the bank, including any information required to be 
collected under proposed Sec.  __.42, as applicable. Under the 
proposal, this review may include consideration of one or more of the 
following types of information: (i) The total number of community 
development service hours; (ii) the number and type of community 
development service activities; (iii) for nonmetropolitan areas, the 
number of activities related to the provision of financial services; 
(iv) the number and proportion of community development service hours 
completed by, respectively, executive and other employees of the bank; 
(v) the number of low- or moderate-income participants, organizations 
served, sessions sponsored; or (vi) other evidence that the bank's 
community development services benefit low- or moderate-income 
individuals or are otherwise responsive to a community development 
need. In addition, the evaluation would include a review of the impact 
and responsiveness of the bank's community development service 
activities, drawing on the applicable impact review criteria defined in 
proposed Sec.  __.15, and other information provided by the bank to 
help demonstrate the responsiveness of these activities.
    The agencies' proposed approach of a qualitative assessment that 
incorporates different types of information provided by a large bank is 
responsive to feedback from stakeholders that it can be difficult to 
measure the impact of community development service activities with a 
quantitative analysis. However, integrating the types of information 
currently used to evaluate community development services into the 
regulation would help to standardize the criteria that inform the 
qualitative review of community development services, which would 
provide more consistency and transparency in the evaluation compared to 
the current approach.
2. Bank Assessment Area Community Development Service Hours Metric
    For large banks with average assets of over $10 billion, the 
agencies propose to include a standard quantitative measure to inform 
the evaluation of a bank's community development services. The proposed 
metric would be used in conjunction with the qualitative evaluation 
framework the agencies propose to use for all large banks. Under the 
proposal, the bank assessment area community development service hours 
metric, would measure a bank's total hours of community development 
services activity in a facility-based assessment area during the 
evaluation period, divided by the total full-time equivalent employees 
in the facility-based assessment area. As a result, this metric would 
calculate the average number of community development service hours per 
full-time equivalent employee. Large banks with average assets of over 
$10 billion would collect community development services data, 
including the hours of community development service activities and 
full-time equivalent employees for each facility-based assessment area. 
This metric would provide a more transparent measure to consistently

[[Page 33982]]

evaluate the extent to which these banks provide community development 
services activities.
    The agencies considered whether the bank assessment area community 
development service hours metric should be used for all large banks, 
instead of only those with average assets of over $10 billion. However, 
the agencies believe that the approach of using the metric only for 
banks with average assets of over $10 billion appropriately tailors the 
proposal. These banks are more likely to engage in a higher volume of 
community development services activities across more facility-based 
assessment areas, and the use of a metric will help provide greater 
consistency for these evaluations. Additionally, the proposed tailoring 
would not establish community development services data requirements 
for large banks with average assets of $10 billion or less. The 
agencies believe community development services activities for these 
banks can be evaluated effectively with a qualitative review of the 
relevant information provided by a bank, in a format of the bank's 
choosing, as takes place under the status quo.
    The agencies seek feedback on whether the bank assessment area 
community development service hours metric should, instead, be 
incorporated into the evaluation of community development services for 
all large banks, and whether the benefit of consistency provided by the 
use of the metric outweighs the additional data collection requirements 
for large banks with average assets of $10 billion or less.
3. Facility-Based Assessment Area Community Development Services Test 
Conclusion
    The agencies propose that the evaluation of community development 
services in facility-based assessment areas for all large banks would 
remain qualitative, as described above. For large banks with assets of 
over $10 billion, the bank assessment area community development 
service hours metric would also be used to inform the conclusions for 
each facility-based assessment area. Based on an assessment of all 
applicable factors, the bank would receive a conclusion of 
``Outstanding,'' ``High Satisfactory,'' ``Low Satisfactory,'' ``Needs 
to Improve,'' or ``Substantial Noncompliance.''
    While the bank assessment area community development service hours 
metric would be included for large banks with average assets of over 
$10 billion in each facility-based assessment area, the agencies are 
not proposing the use of additional benchmarks to standardize the 
quantitative review for these banks. In the future, analysis of 
community development service hours data collected under the new rule 
may allow for developing additional quantitative procedures for 
determining conclusions. For example, the agencies could use community 
development services data to develop appropriate benchmarks and 
thresholds for the bank assessment area community development service 
hours metric that correspond to each conclusion category.
4. State Community Development Services Test Conclusion
    State level conclusions for the Community Development Services Test 
would be based on two components: A bank's performance in its facility-
based assessment areas, and an evaluation of its community development 
services outside its facility-based assessment areas, but within the 
state. As described in proposed appendix C, the first component would 
be calculated by averaging a bank's Community Development Services Test 
conclusions across its facility-based assessment areas in each state. 
The conclusion assigned to each assessment area would be assigned a 
point value as follows: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs to 
Improve'' (3 points); ``Substantial Noncompliance'' (0 points).\240\ To 
derive a state level score, the point value assigned for each 
assessment area conclusion would be weighted by a bank's average share 
of loans and share of deposits within the assessment area, out of all 
of the bank's loans and deposits in facility-based assessment areas in 
the state (based on collected deposits data and on Summary of Deposits 
data, as applicable).
---------------------------------------------------------------------------

    \240\ See Section IX.F for discussion of the proposed point 
scale.
---------------------------------------------------------------------------

    The second component of the state Community Development Services 
Test conclusion would be the evaluation of all community development 
service activities outside the bank's facility-based assessment areas 
and within the state. This component of the evaluation would include an 
analysis of information including, but not limited to, the number and 
hours of community development service activities, as well as the 
impact and responsiveness of these activities as previously described. 
To assign a final state conclusion, examiners would determine if the 
score derived from the weighted average of the facility-based 
assessment area performance should be adjusted upward based on an 
evaluation of the significance and impact of outside assessment area 
activities. The inclusion of both the facility-based assessment area 
component and the outside facility-based assessment area component is 
intended to emphasize bank performance within facility-based assessment 
areas, while also providing certainty that qualifying activities in 
other areas would also be considered to inform the conclusions.
5. Multistate MSA Community Development Services Test Conclusion
    The agencies propose to assign Community Development Services Test 
conclusions for multistate MSAs in which a bank has a facility-based 
assessment area and branches in at least two states. The agencies would 
employ the same approach as for assigning conclusions for a state, 
using a combination of a weighted average of facility-based assessment 
area conclusions, and a qualitative review of the bank's community 
development service activities that occurred outside the facility-based 
assessment area, but within the multistate MSA.
6. Institution Community Development Services Test Conclusion
    The agencies propose to assign a Community Development Services 
Test conclusion for the institution using the same approach as for 
assigning conclusions for a state. The approach would use a combination 
of a weighted average of facility-based assessment area conclusions 
nationwide and a qualitative review of all community development 
services that occurred outside the bank's facility-based assessment 
areas and within the nationwide area, to determine if the weighted 
average of the facility-based assessment area performance should be 
adjusted upward based on an evaluation of the significance and impact 
of outside assessment area activities. The inclusion of these two 
components is intended to achieve a balance of emphasis on facility-
based assessment area performance and certainty that activities in 
other areas would also be considered.
Request for Feedback
    Question 127. Should volunteer activities unrelated to the 
provision of financial services be considered in all areas or just in 
nonmetropolitan areas?
    Question 128. For large banks with average assets of over $10 
billion, does the benefit of using a metric of community development 
service hours per full time employee outweigh the burden of collecting 
and reporting additional data points? Should the

[[Page 33983]]

agencies consider other quantitative measures? Should the agencies 
consider using this metric for all large banks, including those with 
average assets of $10 billion or less, which would require that all 
large banks collect and report these data?
    Question 129. How should the agencies define a full-time equivalent 
employee? Should this include bank executives and staff? For banks with 
average assets of over $10 billion, should the agencies consider an 
additional metric of community development service hours per executive 
to provide greater clarity in the evaluation of community development 
services?
    Question 130. Once community development services data is 
available, should benchmarks and thresholds for the bank assessment 
area community development services hours metric be developed? Under 
such an approach, how should the metric and qualitative components be 
combined to derive Community Development Services Test conclusions?

XIV. Wholesale and Limited Purpose Banks

    The agencies propose that wholesale and limited purpose banks would 
be evaluated under a modified Community Development Financing Test, 
which would include an institution level metric that measures a bank's 
volume of activities relative to its capacity. The agencies also 
propose giving wholesale and limited purpose banks the option to have 
community development service activities that would qualify under the 
Community Development Services Test (as described in Section XIII) 
considered qualitatively for a possible adjustment of an overall 
institution rating from ``Satisfactory'' to ``Outstanding.''
    The proposed Community Development Financing Test for Wholesale or 
Limited Purpose Banks is intended to account for banks with unique 
business models. Consistent with the current CRA regulations, a bank 
would have to apply and be approved by its banking regulator to be 
designated as a wholesale or limited purpose bank. Under proposed Sec.  
__.12 a wholesale bank would be defined as a bank that is not in the 
business of extending home mortgage, small business, small farm, or 
consumer loans to retail customers. A limited purpose bank would be 
defined under proposed Sec.  __.12 as a bank that offers only a narrow 
retail product line (such as credit cards, other revolving consumer 
credit plans, other consumer loans, or other non-reported commercial 
and farm loans) to a regional or broader market and for which a 
designation as a limited purpose bank is in effect, in accordance with 
Sec.  __.26.

A. Background

1. Current Evaluation Framework for Wholesale and Limited Purpose Banks
    For wholesale and limited purpose banks, community development 
loans, qualified investments, and community development services are 
currently considered under one community development test. 
Consideration is given to the number and dollar amount of community 
development loans, qualified investments, and community development 
services, both inside and outside assessment areas if the needs of the 
assessment areas are adequately addressed. Examiners also consider 
qualitative factors, including the innovativeness or complexity of 
these activities, how responsive the bank has been to community 
development needs in its assessment areas, and the extent to which 
investments are not routinely provided by private investors. The 
evaluation of qualitative factors is currently based on information 
that a bank provides on the impact of its activities, along with an 
examiner review of performance context, which includes community needs 
and opportunities.
2. Stakeholder Feedback
    Stakeholders have expressed support for keeping the wholesale and 
limited purpose bank designations. Stakeholders have also supported 
applying a modified Community Development Financing Test for these 
types of banks given their unique business models. These stakeholders 
have indicated that as an alternative to deposits, total assets or Tier 
1 Capital could be a more appropriate measure of the capacity of a 
wholesale or limited purpose bank to engage in community development 
financing because banks designated as wholesale or limited purpose may 
have a smaller deposit base than banks without such a designation.

B. Community Development Financing Test for Wholesale or Limited 
Purpose Banks

    The agencies propose to evaluate wholesale and limited purpose 
banks under a Community Development Financing Test, with modifications 
from the Community Development Financing Test that would apply to other 
large banks, as described in Section XII. The Community Development 
Financing Test for Wholesale or Limited Purpose Banks would employ 
qualitative and quantitative factors similar to current examination 
procedures at the assessment area, state, and multistate MSA levels. At 
the institution level, the evaluation would also employ a wholesale and 
limited purpose bank community development financing metric as a 
standard measurement of a bank's volume of activities relative to its 
capacity.
    To compute the wholesale or limited purpose bank community 
development financing metric, the agencies would divide the annual 
average of the bank's nationwide community development financing 
activity by the quarterly average of the bank's total assets for the 
same years in which the annual average of the bank's activity is 
calculated. The annual average of community development financing 
activity would be calculated identically to the proposed metric for 
large banks, including both new activities and balance sheet holdings 
originated in a previous year. Because bank assets are used in the 
denominator and cannot be easily apportioned to assessment areas, 
multistate MSAs, or states, the proposed wholesale or limited purpose 
bank community development financing metric would be calculated only at 
the institution level.
    By using assets as the denominator of the metric, the proposed 
metric for wholesale and limited purpose banks differs from the 
proposed community development financing metrics for large banks, which 
uses deposits as the denominator. This difference is intended to 
account for the unique business models of wholesale and limited purpose 
banks, which may not collect retail deposits. This approach was also 
informed by stakeholder feedback that assets are a better measure of 
the capacity of wholesale and limited purpose banks to make community 
development loans and investments.

C. Conclusions for Wholesale and Limited Purpose Bank Evaluations

1. Facility-Based Assessment Area Conclusions
    The agencies propose that community development financing 
performance of a wholesale or limited purpose bank in a facility-based 
assessment area be based on consideration of the dollar value of a 
bank's community development loans and investments that serve the 
facility-based assessment area and a review of the impact of the bank's 
activities in the facility-based assessment area under Sec.  __.15. 
Examiners would review both to establish conclusions. The agencies are 
proposing to evaluate the volume, impact, and responsiveness of

[[Page 33984]]

community development financing activities, without a corresponding 
benchmark, given the business model of these banks and the proposed 
composition of the wholesale or limited purpose bank community 
development financing metric using assets as the denominator.
    The agencies acknowledge that the proposed approach for evaluating 
community development financing activities at the assessment area level 
for wholesale and limited purpose banks may not provide the consistent 
standards achieved with the metrics-based approach for large banks. The 
agencies seek feedback on whether there are other ways to measure 
performance in facility-based assessment areas in order to bring 
greater consistency to the assessment area level evaluation, including 
whether a bank assessment area community development financing metric 
and corresponding benchmarks would be an appropriate.
2. State Conclusions
    The agencies propose a similar approach for evaluating the 
community development financing performance of a wholesale or limited 
purpose bank at the state level. Conclusions would be based on 
consideration of the dollar value of a bank's community development 
loans and investments that serve the entire state and a review of the 
impact of the bank's activities in the state under Sec.  __.15, and 
consideration of performance in any facility-based assessment areas in 
the state. Examiners would review all components to establish 
conclusions. Similar to the discussion above, the agencies seek 
feedback on alternative approaches to provide more consistency to the 
state level performance evaluation.
3. Multistate MSA Conclusions
    The agencies propose that conclusions would also be assigned for 
the Community Development Financing Test in each multistate MSA, as 
applicable. The agencies would employ the same approach used for 
assigning conclusions at the state level, using a combination of the 
dollar value of the bank's community development financing activities 
that serve the multistate MSA, an impact review of these activities, 
and performance in any facility-based assessment areas in the 
multistate MSA.
4. Institution Conclusions
    The agencies propose that conclusions for a wholesale or limited 
purpose bank's Community Development Financing Test would be based on 
consideration of the wholesale or limited purpose bank community 
development financing metric, a review of the impact of the bank's 
nationwide activities, and the bank's performance in its facility-based 
assessment areas.
    This approach is intended to achieve a number of objectives. First, 
the use of the metric for the institution evaluation would help to 
ensure that wholesale and limited purpose banks are conducting a volume 
of activity that is commensurate with their overall capacity. Second, 
the institution level impact review would ensure a bank's activities 
are responsive to community needs. Finally, performance in all of a 
bank's facility-based assessment areas would be considered, in order to 
ensure that the bank has met local community needs within these areas.
    In addition, as indicated in the discussion of Sec.  __.21 (Section 
VII), the agencies propose that wholesale and limited purpose banks 
would have the option to request consideration for community 
development service activities that would qualify under the Community 
Development Services Test (as described in Section XIII). These 
activities would be considered qualitatively for possible adjustment of 
an overall institution rating from ``Satisfactory'' to ``Outstanding.''
    The agencies seek feedback on whether a benchmark should be 
established for comparing community development financing performance 
of wholesale and limited purpose banks to other banks at the 
institution level. Specifically, the agencies are considering two 
options for a benchmark. First, the agencies could use the nationwide 
community development financing benchmark used to evaluate performance 
of large banks. This option would promote consistency in performance 
expectations across all bank types. Alternatively, the agencies could 
develop a nationwide community development financing benchmark tailored 
specifically to wholesale and limited purpose banks based on the 
aggregate community development financing activity and aggregate assets 
of all wholesale and limited purpose banks.
Request for Feedback
    Question 131. How could the agencies provide more certainty in the 
evaluation of community development financing at the facility-based 
assessment area level? Should a bank assessment area community 
development financing metric be used to measure the amount of community 
development financing activities relative to a bank's capacity? If so, 
what is the appropriate denominator?
    Question 132. Should a benchmark be established to evaluate 
community development financing performance for wholesale and limited 
purpose banks at the institution level? If so, should the nationwide 
community development financing benchmark for all large banks be used, 
or should the benchmark be tailored specifically to wholesale and 
limited purpose banks?
    Question 133. For wholesale and limited purpose banks that wish to 
receive consideration for community development services, should these 
banks be required to opt into the proposed Community Development 
Services Test, or should they have the option to submit services to be 
reviewed on a qualitative basis at the institution level, without 
having to opt into the Community Development Services Test?

XV. Strategic Plans

    The agencies propose to retain the strategic plan option as an 
alternative method for evaluation under the CRA. Banks that elect to be 
evaluated under a CRA strategic plan would continue to be required to 
request approval for the plan from the appropriate Federal banking 
agency. A bank's election for the strategic plan option would not 
affect the bank' obligation, if any, to report data as required by 
Sec.  __.42. The agencies also propose to introduce more specific 
criteria to ensure that all banks are meeting their CRA obligation to 
serve low- and moderate-income individuals and communities. This 
approach is intended to ensure that banks have a strong justification 
for why a strategic plan is necessary for their business model and 
strategy, and that banks evaluated under a strategic plan incorporate 
how the bank's retail lending and other activities help to meet the 
credit needs of low- and moderate-income individuals and communities 
whenever possible.
    Under the proposal, a bank that elects evaluation under a CRA 
strategic plan would be required to include relevant activities of its 
bank subsidiaries and may continue to include relevant activities of 
other affiliates. A bank would continue to seek input from members of 
the public in its facility-based assessment areas covered by the plan 
and submit the plan for publication on its respective regulatory 
agency's website as well as publish the draft plan on their own website 
if the bank has a website. In addition, the agencies would require 
banks that elect strategic plan evaluation to provide a justification 
for why the applicable performance tests and standards are not 
appropriate for the bank.

[[Page 33985]]

A. Current Approach to Strategic Plans

    Currently, the strategic plan option is available to all types of 
banks, although it has been used mainly by non-traditional banks \241\ 
and banks that make a substantial portion of their loans beyond their 
branch-based assessment areas. The strategic plan option is intended to 
provide banks flexibility in meeting their CRA obligations in a manner 
that is responsive to community needs and opportunities and appropriate 
considering their capacities, business strategies, and expertise.
---------------------------------------------------------------------------

    \241\ For this purpose, non-traditional banks are those that do 
not extend retail loans (small business, small farm, home mortgage 
loans, and consumer loans) as major product lines or deliver banking 
services principally from branches.
---------------------------------------------------------------------------

    Banks that elect to be examined under strategic plans have a great 
deal of latitude in designing their strategic plans but are subject to 
several key requirements. Banks must seek approval from their 
regulatory agency and solicit community feedback prior to submitting a 
strategic plan for regulatory approval.\242\ In addition, they are 
required to delineate assessment areas in the same manner as non-
strategic plan banks, and large banks that elect to be evaluated under 
an approved strategic plan continue to be obligated to report relevant 
lending data.\243\
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    \242\ 12 CFR __.27(d) and (e).
    \243\ 12 CFR __.27(b).
---------------------------------------------------------------------------

    Banks must include measurable goals for helping to meet the credit 
needs in each assessment area, particularly the needs of low- and 
moderate-income census tracts and low- and moderate-income individuals, 
but they have flexibility in setting these goals. The current CRA 
regulations state that a bank's plan shall address all three 
performance categories (lending, investment, and services), but the 
regulation also provides flexibility for a bank to choose a different 
emphasis as long as the plan is responsive to the characteristics and 
credit needs of its assessment areas and takes into consideration 
public comment and the bank's capacity and constraints, product 
offerings, and business strategy.\244\
---------------------------------------------------------------------------

    \244\ 12 CFR __.27(f)(1).
---------------------------------------------------------------------------

    When reviewing a strategic plan, the agencies consider the public's 
involvement in formulating the plan, any written public comments on the 
plan, and the bank's response to any public comments.\245\ A bank's 
engagement with its community is vital to the strategic plan process to 
develop the requisite information about community needs.
---------------------------------------------------------------------------

    \245\ 12 CFR __.27(g)(2).
---------------------------------------------------------------------------

B. Stakeholder Feedback on Strategic Plans

    Stakeholders have expressed that the strategic plan option should 
not be used to lower performance expectations for any type of bank and 
that there should be parity between strategic plan banks and 
traditional banks. Some stakeholders believe the key goal should be 
consistency and that the strategic plan option should be reserved for 
those few banks that are not able to successfully be evaluated under 
the otherwise applicable performance standards because of their 
business model. Other stakeholders have expressed that the CRA 
regulation should not force banks to change their business model and 
that the strategic plan option should be available for banks with 
business models that would not perform well under the otherwise 
applicable performance standards. For example, these stakeholders have 
indicated that banks that are not able to meet the credit needs of low- 
and moderate-income individuals or very small businesses through retail 
lending should have the option to meet those needs through other means, 
such as by supporting organizations or programs that serve those 
constituents through community development financing or community 
development services.
    Stakeholders have indicated that the current assessment area 
requirements for strategic plans are too confining. As stated 
previously, many banks that elect the strategic plan option choose this 
option because they operate in larger geographic areas than their 
branch-based assessment areas. For example, some banks operate in 
several states, or even nationwide, but have much smaller assessment 
areas that surround their single headquarters or their limited number 
of branches. In these situations, there has been a disconnect with 
plans that cover geographic areas that are much smaller than the 
broader areas in which the bank operates. Stakeholders were generally 
supportive of banks sharing their draft strategic plans through digital 
platforms to increase public participation. Some commented that the 
role of the public input process should be better defined, specifically 
the extent to which a bank is required to respond to public comments 
from outside of its community.
    Overall stakeholders were supportive of the agencies providing 
guidelines regarding what constitutes a material change that would 
require an amendment to a bank's CRA strategic plan. There were 
differences among stakeholders as to what the impact of a material 
change would be and wanted to distinguish the impact of a minor change 
versus a major change. For example, these stakeholders suggest minor 
changes should only require agency approval while a major change would 
require public comment in addition to agency approval. Stakeholders 
generally agreed that a non-exhaustive list of examples of what 
constitutes a material change would be helpful.

C. Strategic Plan Improvements

    In Sec.  __.27, the agencies propose a number of provisions to 
provide more clarity about establishing strategic plans, the measurable 
goals established, and where performance is evaluated. The agencies 
also propose provisions to address concerns about parity expressed by 
some stakeholders as well as how to make it easier for the public to 
engage in the development of CRA strategic plans.
    Establishing goals. The agencies propose that banks would 
incorporate performance standards and metrics appropriate for their 
size in setting their goals, to the extent that such performance 
standards are appropriate given the bank's capacity and constraints, 
product offerings, and business strategy. Banks would be given 
flexibility to set different metrics from those that would otherwise be 
applicable if a bank is substantially engaged in activities outside of 
the scope of the standard performance tests. For example, banks that do 
not extend home mortgage, small business, small farm, or automobile 
loans would not be expected to incorporate performance standards and 
metrics relevant to the Retail Lending Test in their plans. If a bank 
presents metrics or goals that are different from the otherwise 
applicable standards and metrics, the agencies would consider whether 
those metrics or goals are responsive to the characteristics and credit 
needs of its assessment areas and consider public comment and the 
bank's capacity and constraints. In addition, if a bank specifies goals 
that are different from the otherwise applicable performance tests and 
standards, the bank would be required to explain why those goals are 
appropriate.
    Assessment Areas. The agencies propose that banks electing to be 
evaluated under a strategic plan should be required to delineate 
assessment areas in the same manner as non-strategic plan banks. The 
agencies believe the proposed approach to assessment areas for large 
banks is flexible enough such that no additional tailoring is necessary 
for establishing the assessment areas for large banks that

[[Page 33986]]

are evaluated under an approved strategic plan. In addition to 
facility-based assessment areas, large banks electing to be evaluated 
under a strategic plan would be required to delineate retail lending 
assessment areas, consistent with the proposed approach specified in 
Sec.  __.17. The proposed CRA regulation would also allow for the 
consideration of retail lending and community development financing 
activities outside of assessment areas, which would allow banks 
electing to be evaluated under a strategic plan to establish goals for 
such activities. The agencies believe the proposal would provide parity 
among banks and address the disconnect between plan goals covering 
geographic areas that are much smaller than a bank's actual business 
footprint.
    Plan Goals. The proposed rules would require strategic plans to 
include goals for each retail lending major product line, including 
those of a bank's subsidiaries. Banks currently have great latitude in 
designating plan goals, but it is not always clear what type of loans 
should be included in a strategic plan, or whether the activities of a 
bank's subsidiaries must be included in its strategic plan. The 
proposal would require evaluation of each major product line, including 
those of a bank's subsidiaries under the proposed Retail Lending Test 
that would be applied to non-strategic plan banks. To provide greater 
clarity and to ensure strategic plan banks are held to the same level 
of standards as non-strategic plan banks, the agencies' proposed rule 
would require plans to include relevant activity of a bank's 
subsidiaries as well as include goals for each major product line.
    Encourage Public Participation. To encourage increased public 
participation, the agencies propose making CRA strategic plans as 
widely available and as easy to locate as possible by requiring banks 
to post draft CRA strategic plans on the appropriate Federal banking 
agency's website and the bank's website. If the bank does not maintain 
a website, the bank would be required to publish notice of the draft 
plan in at least one print newspaper or digital publication of general 
circulation in each facility-based assessment area covered by the plan 
(or for military banks in at least one print newspaper or digital 
publication of general circulation targeted to the members of the 
military) for a period of at least 30 days. The agencies also propose 
that a draft plan should include an electronic means by which, and a 
postal address where, members of the public can submit comments on the 
bank's plan. The proposal would require that, during the period of 
formal public comment, a bank would have to make copies of the draft 
plan available for review at no cost at all offices of the bank in any 
facility-based assessment area covered by the plan and provide copies 
of the draft plan upon request for a reasonable fee to cover copying 
and mailing, if applicable. In evaluating CRA strategic plans for the 
appropriateness of a bank's goals, the agencies rely heavily on the 
public input process to ensure plan goals align with and are responsive 
to community credit needs, particularly those for low- and moderate-
income individuals and low- and moderate-income communities. Although 
banks are currently required to seek public input by publishing their 
draft plans in local newspapers, the plans rarely garner public 
comments through this method. The proposal aims to allow for greater 
public input.
    The agencies propose to clarify how banks can demonstrate they have 
meaningfully engaged with their community in drafting their CRA 
strategic plans by clarifying expectations for the information 
submitted with the plan. Specific information would include what 
organizations or members of the public the bank engaged with in 
drafting their plan and a description of the process used to publicize 
its draft CRA strategic plan. In addition, the bank would provide 
information regarding the various methods employed to engage community 
stakeholders, including, but not limited to, establishing an advisory 
board comprised of local stakeholders, convening public meetings, or 
conducting community outreach sessions to gather public comments and 
recommendations about the local credit needs. The information would 
also include a comprehensive list of the comments and recommendations 
it received and the institution's response to this information.
    Strategic Plan Amendments. The agencies propose to clarify what 
constitutes a material change in circumstance so a bank would know when 
it must amend its strategic plan under Sec.  __.27. The current CRA 
regulations specify that a bank may request an amendment to its plan if 
the plan goals are no longer appropriate due to a material change in 
circumstance. The agencies note that in certain circumstances, a plan's 
goals may no longer be appropriate because a bank's capacity has 
diminished, rendering the bank unable to meet the plan's goals. 
Conversely, a bank's capacity could increase and, therefore, would be 
underperforming compared to peer banks if it were to remain operating 
under the original strategic plan. The current regulation allows 
reliance on performance context to determine whether a bank has 
substantially met its plan goals.
    The agencies propose to revise the CRA regulation to be more 
transparent about when plan amendments would be required. The agencies 
propose that during the term of a plan, a bank must amend its plan 
goals if a material change in circumstances impedes its ability to 
substantially meet approved plan goals, such as financial constraints 
caused by significant events that impact the local or national economy; 
or significantly increases its financial capacity and ability, such as 
through a merger or consolidation, to engage in retail lending, retail 
services, community development financing, or community development 
services activities referenced in an approved plan. A bank that 
requests an amendment to a plan in the absence of a material change in 
circumstances must provide an explanation regarding why it is necessary 
and appropriate to amend its plan goals.
Request for Feedback
    Question 134. Should the strategic plan option continue to be 
available to all banks, or do changes in the proposed regulation's 
assessment area provisions and the metrics approach reduce the need for 
the strategic plan option for banks with specialized business 
strategies?
    Question 135. Large banks electing to be evaluated under a 
strategic plan would have activities outside of facility-based 
assessment areas considered through retail lending assessment areas and 
then outside retail lending assessment areas. Should small and 
intermediate banks electing to be evaluated under a strategic plan be 
allowed to delineate the same types of assessment areas? What criteria 
should there be for choosing additional assessment areas? Could such 
banks have the ability to incorporate goals for facility-based 
assessment areas and goals for outside of assessment areas?
    Question 136. In assessing performance under a strategic plan, the 
agencies determine whether a bank has ``substantially met'' its plan 
goals. Should the agencies continue to maintain the substantially met 
criteria? If so, should it be defined and how? For example, as a 
percentage (e.g., 95 percent) of each measurable goal included in the 
plan, the percentage of goals met, or a combination of how many goals 
were not met and by how much?

[[Page 33987]]

    Question 137. The agencies are considering announcing pending 
strategic plans using the same means used to announce upcoming 
examination schedules or completed CRA examinations and CRA ratings. 
What are the potential advantages or disadvantages to making the draft 
plans available on the regulators' websites?
    Question 138. In addition to posting draft plans on a bank's 
website and the appropriate Federal banking agency's website, should 
approved strategic plans also be posted on a bank's website and the 
appropriate Federal banking agency's website?

XVI. Assigned Conclusions and Ratings

    The agencies propose updating how conclusions and ratings, as 
described below, are assigned at the state, multistate MSA, and 
institution levels using a consistent, quantifiable approach. This 
proposed approach is intended to increase transparency and provide 
clarity on the assessment of a bank's overall CRA performance.
    As an initial matter, the proposal would distinguish between 
conclusions--which generally refers to the bank's performance on a 
particular test at the assessment area, state, multistate MSA, or 
institution level \246\--and ratings--which refers to a bank's overall 
CRA performance across tests at the state, multistate MSA, and 
institution levels. With respect to conclusions, the agencies propose 
maintaining five categories of performance test conclusions, as 
described in Sec.  __.28, that splits the category of ``Satisfactory'' 
into ``High Satisfactory'' and ``Low Satisfactory'' to better 
differentiate between very good performance and performance on the 
lower end of the satisfactory range for each test-specific conclusion. 
With respect to ratings, the agencies would continue to use the four 
categories--``Outstanding,'' ``Satisfactory,'' ``Needs to Improve,'' 
and ``Substantial Noncompliance''--as prescribed in the statute.\247\
---------------------------------------------------------------------------

    \246\ In addition, as stated in proposed appendix D and 
discussed in Section XVI.C, the agencies would establish, for large 
banks only, an overall retail lending assessment area conclusion 
reflecting performance on the Retail Lending Test and an overall 
facility-based assessment area conclusion reflecting performance on 
all four performance tests applicable to large banks.
    \247\ 12 U.S.C. 2906(b)(2).
---------------------------------------------------------------------------

    The proposed ratings approach would combine a bank's conclusions, 
as described in proposed appendix C, for each applicable test according 
to a specified set of weights tailored to large banks, intermediate 
banks, and wholesale and limited purpose banks. The proposal would 
apply this weighting approach for ratings at the state, multistate MSA, 
and institution level as described in proposed appendix D. In addition, 
the agencies propose additional provisions intended to emphasize a 
bank's retail lending performance and the importance of assessing how a 
bank meets the credit needs of all the communities it serves without 
overlooking smaller or less populated assessment areas as specified in 
proposed appendix D.
    For small banks evaluated under the small bank performance 
standards, the agencies would assign lending evaluation conclusions of 
``Outstanding,'' ``Satisfactory,'' ``Needs to Improve,'' or 
``Substantial Noncompliance'' based on the bank's lending performance 
in each facility-based assessment area to arrive at the bank's overall 
rating assigned by the agencies as explained in Section XVII and in 
Sec.  __.29.
    The agencies also propose updating the criteria on discriminatory 
and certain other illegal practices that could adversely affect a 
bank's CRA rating, as well as what rating level (state, multistate MSA, 
and institution) would be affected in Sec.  __.28(d)(1). Further, the 
agencies propose adding additional laws and regulations to the 
illustrative list of examples of practices that could impact a bank's 
CRA rating in Sec.  __.28(d)(2).

A. Background

1. Current Method for Assigning Conclusions and Ratings
    Consistent with the CRA statute, the current CRA regulations 
provide that a bank is assigned an institution rating of 
``Outstanding,'' ``Satisfactory,'' ``Needs to Improve,'' and 
``Substantial Noncompliance'' in connection with a CRA 
examination.\248\ Ratings are also assigned for a bank's performance 
within each state in which the bank maintains one or more branches, and 
for each multistate MSA for those banks that have branches in two or 
more states within a multistate MSA.\249\ In addition to assigning an 
overall institution rating, examiners also assign state and multistate 
MSA ratings for each applicable performance test (lending, investment, 
and service tests) primarily based on the institution's performance in 
each assessment area within the state or multistate MSA examined using 
full-scope procedures.\250\ Performance conclusions in assessment areas 
not examined using the full-scope procedures are expressed as exceeds, 
is consistent with, or is below performance (overall or in the state).
---------------------------------------------------------------------------

    \248\ 12 U.S.C. 2906(b), implemented by 12 CFR __.28(a). The 
narrative descriptions of the ratings for performance under each 
evaluation method are in appendix A to the CRA regulations. See Q&A 
appendix A to 12 __--Ratings.
    \249\ 12 U.S.C. 2906(d).
    \250\ Ratings are not required at the assessment area level. 
Therefore, examiners provide conclusions about a bank's performance 
at the assessment area level. If a bank operates in just one 
assessment area, however, the bank's institution-level rating is 
equivalent to the performance conclusion within that assessment 
area.
---------------------------------------------------------------------------

    With one exception, the rating scale used for performance test 
ratings mirrors that of the aforementioned four statutory institution-
level ratings. For large banks, however, the ``Satisfactory'' rating 
for each of the three performance tests is split into ``High 
Satisfactory'' and ``Low Satisfactory.'' \251\ Under existing 
procedures for large banks, examiners use a rating scale in the 
Interagency Questions and Answers to convert ratings assigned for each 
test into point values; examiners then add those point values together 
to determine the overall institution rating.\252\ The conclusions 
assigned by the examiner are presented in the bank's CRA performance 
evaluation. However, the points assigned to each test and the bank's 
overall points that correspond to the institution's overall rating are 
not included in the performance evaluation. With the exception of the 
rating scale, the process of combining performance test ratings to 
determine the state, multistate MSA, or institution ratings relies 
primarily on examiner judgment, guided by quantitative and qualitative 
factors outlined in the current regulation. The current rating system 
allows flexibility. For example, exceptionally strong performance in 
some aspects of a particular rating profile may compensate for weak 
performance in others.\253\
---------------------------------------------------------------------------

    \251\ See Q&A Sec.  __.28(a)-3.
    \252\ Id.
    \253\ See Q&A appendix A to 12 __--Ratings.
---------------------------------------------------------------------------

    Current examination procedures also allow for assessment areas to 
be reviewed either for full-scope or limited-scope review. Full-scope 
reviews employ both quantitative and qualitative factors, while 
limited-scope reviews are assessed only quantitatively and, as noted 
previously, generally carry less weight in determining the overall 
state, multistate MSA, or institution rating.
    Under current examination procedures, the agencies use a fact-
specific review to determine whether an overall institution CRA rating 
should be downgraded due to discriminatory or other illegal credit 
practices.\254\

[[Page 33988]]

Currently, the agencies consider the nature, extent, and strength of 
the evidence of any discriminatory or other illegal credit practices, 
as well as any policies and procedures in place, or lack thereof, to 
prevent these kinds of practices, and any corrective action that the 
bank has taken or has committed to take.\255\
---------------------------------------------------------------------------

    \254\ 12 CFR __.28(c)(2).
    \255\ Id.
---------------------------------------------------------------------------

1. Stakeholder Feedback on Conclusions and Ratings
    Stakeholders generally agree that CRA ratings should reflect a 
bank's performance in the local communities they serve. Some 
stakeholders have expressed that the current process is overly 
subjective and relies too much on examiner judgment. Stakeholders have 
generally expressed support for more transparency about the levels of 
performance associated with different ratings and supported retaining 
the ``High Satisfactory'' and ``Low Satisfactory'' component ratings 
for large banks. Some stakeholders have expressed that the ratings 
process should be reformed to add more rigor and stricter standards.

B. Combining Test Performance Scores To Determine Overall Ratings

    As reflected in Sec.  __.28, the agencies propose updating the 
rating system to reflect a bank's performance on each applicable 
performance test. For example, ratings for a large bank would reflect 
its performance on the Retail Lending Test, Retail Services and 
Products Test, Community Development Financing Test, and Community 
Development Services Test.
    Appendix C of the proposal describes how performance conclusions 
for each applicable test would be developed, which reflects the 
specific proposals for each performance test as discussed in earlier 
sections of this SUPPLEMENTARY INFORMATION. Although there are test-
specific nuances and variations, in general, the agencies would assign 
both a conclusion (e.g., ``Low Satisfactory'') and performance score 
(e.g., 5.7) based on the bank's performance under a particular test. As 
a result, the bank would have both a conclusion and a performance score 
for each test, as applicable, at the assessment area, state, multistate 
MSA, and institution level.
    Appendix D of the proposal describes how overall performance 
ratings would be assigned. In general, to determine a bank's CRA rating 
at the state, multistate MSA, and institution levels, the agencies 
would aggregate a bank's performance scores for each applicable test, 
with specific weights assigned to the performance score of each test. 
The proposal would follow the same weighting approach to derive ratings 
at the state, multistate MSA, and institution level.
    For large banks, the agencies propose to determine a bank's state, 
multistate MSA, and institution rating by combining the bank's 
performance scores across all four performance tests for the state, 
multistate MSA, or institution overall. In combining these raw 
performance scores, the Retail Lending Test would be given a weight of 
45 percent, the Community Development Financing Test a weight of 30 
percent, the Retail Service and Products Test a weight of 15 percent 
and the Community Development Services Test a weight of 10 percent as 
described in proposed appendix D.
    The agencies propose to assign the largest weight to the Retail 
Lending Test, similar to the current approach, which assigns the 
lending test a weight of 50 percent. The agencies believe that it would 
be appropriate to somewhat reduce this weight, because the current 
Lending Test includes both retail lending and community development 
lending, while the proposed Retail Lending Test would include only 
retail lending. Further, the agencies believe that a weight of less 
than 45 percent for the Retail Lending Test would not be appropriate, 
in keeping with the CRA's longstanding emphasis on retail lending to 
low- and moderate-income individuals and communities.
    The agencies propose giving the Community Development Financing 
Test a weight of 30 percent to recognize the importance of both 
community development loans and community development investments in 
helping to meet community development needs. This is comparatively 
higher than the current weight given to the investment test at 25 
percent under the current regulation, which excludes community 
development loans. The agencies propose a weight of 15 percent for the 
Retail Services and Products Test and a weight of 10 percent for the 
Community Development Services Test. These weights are comparable to 
the existing service test weight of 25 percent, which includes both 
retail services and community development services. The agencies 
propose the four tests rather than three tests to more easily tailor 
examinations by bank size as explained in Section VII.
    For intermediate banks, the agencies propose to weight the Retail 
Lending Test at 50 percent and the intermediate bank community 
development evaluation (or if the bank opts in, for the Community 
Development Financing Test) at 50 percent as described in proposed 
appendix D. Any optional information regarding eligible retail services 
or community development services activities, as applicable, that an 
intermediate bank elects to provide would be reviewed qualitatively and 
not impact the weighting of the Retail Lending Test or the intermediate 
bank community development evaluation. The agencies' proposed weighting 
reflects the CRA's traditional emphasis on retail lending as well as 
the importance of community development activities in meeting community 
credit needs as mentioned previously. This weighting is also consistent 
with the current practice for intermediate small banks which gives 
equal weight to retail lending and community development activities for 
intermediate banks.
Request for Feedback
    Question 139. The agencies request feedback on whether it would be 
more appropriate to weight retail lending activity 60 percent and 
community development activity 40 percent in deriving the overall 
rating at the state, multistate MSA or institution level for an 
intermediate bank in order to maintain the CRA's focus on meeting 
community credit needs through small business loans, small farm loans, 
and home mortgage loans.

C. Limitations on Overall Ratings

    In addition to the above weighting approach, the agencies also 
propose to retain the requirement that, as applicable, for each state 
and multistate MSA and at the institution level, an intermediate bank's 
or a large bank's Retail Lending Test conclusion needs to be at least 
``Low Satisfactory'' in order for the bank's overall rating to be 
``Satisfactory'' or higher as described in proposed appendix D. The 
objective of this requirement is to prevent a bank from receiving a 
``Satisfactory'' or higher rating at the state, multistate MSA, or 
institution level if it failed to meet its community's credit needs for 
retail loans at that level. Consistent with current practice, the 
agencies propose this requirement to emphasize the importance of retail 
loans to low- and moderate-income communities.
    However, the agencies propose not applying the current requirement 
that an intermediate bank must receive a ``Satisfactory'' rating in 
both the Retail Lending Test and intermediate bank community 
development evaluation (or if the bank opts in, for the Community 
Development Financing Test). The agencies believe eliminating this 
requirement for intermediate banks would allow intermediate banks to 
meet

[[Page 33989]]

community credit needs consistent with their more limited capacity. An 
intermediate bank would, however, still need to receive at least a 
``Low Satisfactory'' on the Retail Lending Test in order to receive an 
overall ``Satisfactory'' at the institution level as noted above.
    The agencies also propose imposing additional restrictions on 
state, multistate MSA and institution-level ratings for large banks 
with ten or more assessment areas in a state, a multistate MSA, or 
overall, respectively. A large bank with ten or more assessment areas 
(facility-based assessment areas and retail lending assessment areas 
combined) at the relevant level would not be eligible to receive a 
``Satisfactory'' or higher rating at that level unless it achieved an 
overall performance of ``Low Satisfactory'' or better in at least 60 
percent of its assessment areas there, as described in proposed 
appendix D.
    Overall performance in a facility-based assessment area would be 
based on the conclusions the large bank received on each test in that 
assessment area. For purposes of this restriction only, the agencies 
propose developing a combined assessment area conclusion and 
performance score as described in proposed appendix D. A weighted 
average of these scores would be calculated across tests, using the 
same test-specific weights as the agencies are proposing to use to 
calculate ratings scores: The Retail Lending Test would be given a 
weight of 45 percent, the Community Development Financing Test a weight 
of 30 percent, the Retail Service and Products Test a weight of 15 
percent and the Community Development Services Test a weight of 10 
percent. If this weighted average was 4.5 or greater, the large bank 
would be considered to have an overall performance of at least ``Low 
Satisfactory'' in that facility-based assessment area. In retail 
lending assessment areas, the bank's overall performance would be 
equivalent to its Retail Lending Test conclusion there.
    The agencies propose this modification to the ratings approach to 
ensure that large banks receiving a ``Satisfactory'' rating are meeting 
the credit needs of their entire community, and not just densely 
populated markets with high levels of lending and deposits that would 
factor heavily into the weighted-average conclusion rollups. In this 
way, overall ratings would accurately reflect performance in all 
markets the large bank serves.
    Intermediate Bank Ratings Adjustments. The agencies propose that an 
intermediate bank that opts to be evaluated under the proposed 
Community Development Financing Test may request additional 
consideration for activities that qualify for consideration under the 
Retail Services and Products Test or Community Development Services 
Test in proposed appendix D. In these cases, the agencies may consider, 
based on the additional activities, whether to increase the bank's 
rating from a ``Satisfactory'' to an ``Outstanding'' at the institution 
level. An adjustment would not occur if an intermediate bank's 
respective rating, without consideration of the additional activities, 
is ``Needs to Improve'' or ``Substantial Noncompliance.'' The agencies 
believe that it is appropriate to emphasize retail lending performance, 
and that electing to conduct retail or community development services 
does not compensate for poor retail lending performance.
    Small Bank Ratings Adjustments. The agencies propose that a small 
bank may request additional consideration for activities that qualify 
for consideration under the Retail Services and Products Test, 
Community Development Financing Test, or Community Development Services 
Test in proposed appendix D. In these cases, the agencies may consider, 
based on the additional activities, whether to increase the bank's 
rating from a ``Satisfactory'' to an ``Outstanding'' at the institution 
level. An adjustment would not occur if a small bank's respective 
rating, without consideration of the additional activities, is ``Needs 
to Improve'' or ``Substantial Noncompliance.'' The agencies believe 
that it is appropriate to emphasize retail lending performance, and 
that electing to conduct other activities does not compensate for poor 
retail lending performance.
Request for Feedback
    Question 140. What are the advantages and disadvantages of the 
proposal to limit the state, multistate MSA, and institution-level 
ratings to at most a ``Needs to Improve'' for large banks with ten or 
more assessment areas unless 60 percent or more of the bank's 
assessment areas at that level have an overall performance of at least 
``Low Satisfactory''? Should this limitation apply to all assessment 
areas, or only facility-based assessment areas? Is ten assessment areas 
the right threshold number to prompt this limitation, and is 60 percent 
the right threshold number to pass it? If not, what should that number 
be? Importantly, what impact would this proposal have on branch 
closures?

D. Discriminatory and Other Illegal Practices

    The agencies propose continuing to consider discrimination and 
certain other illegal practices as inconsistent with a bank's 
affirmative obligation to meet the credit needs of its entire community 
and counter to the CRA's core purpose of encouraging banks to help meet 
the needs of low- and moderate-income communities and addressing 
inequities in credit access.
1. Clarifying the Scope of Products and Entities Considered for Rating 
Downgrades Related to Discriminatory or Other Illegal Practices
    The agencies propose to revise the language in the existing CRA 
regulations regarding the circumstances under which evidence of 
discriminatory or other illegal practices could adversely affect the 
evaluation of a bank's CRA performance. Under the current CRA 
regulations, evidence of discrimination or other illegal credit 
practices in any geography by the bank, or in any assessment area by 
any affiliate whose loans have been considered as part of the bank's 
lending performance, could result in a downgrade to the bank's CRA 
rating.\256\
---------------------------------------------------------------------------

    \256\ Sec.  __.28(c)(1).
---------------------------------------------------------------------------

    Under the proposal, the practices that could adversely affect a 
bank's CRA performance would no longer be limited to discriminatory or 
other illegal credit practices but would include any discriminatory or 
illegal practice. Such practices could be credit practices but could 
also be practices related to deposit products or other products and 
services offered by the bank. The agencies note that the CRA statute 
indicates that banks are required by law to meet the convenience and 
needs of their communities, which includes the need for credit services 
as well as deposit services. Consistent with this statutory focus, the 
proposed revisions would broaden these provisions of the current CRA 
regulations to include discriminatory or other illegal practices beyond 
merely credit practices in proposed Sec.  __.28(d)(1).
    In addition, the agencies propose revising the current CRA 
regulations to clarify in Sec.  __.28(d)(1)(i) that discriminatory or 
other illegal practices by a bank subsidiary could also result in a 
downgrade to the bank's CRA rating. The proposal would further state in 
Sec.  __.28(d)(1)(ii) that discriminatory or other illegal practices in 
any facility-based assessment area, retail lending assessment area, or 
outside retail lending area by any affiliate whose retail

[[Page 33990]]

loans are considered as part of the bank's lending performance could 
adversely affect a bank's CRA performance.
2. Additional Examples of Discriminatory or Other Illegal Practices
    For added clarity, the agencies propose amending the CRA regulation 
in Sec.  __.28(d)(2)(vii), (viii) and (iv), respectively to include 
violations of the Military Lending Act,\257\ the Servicemembers Civil 
Relief Act,\258\ as well as the prohibition against unfair, deceptive, 
or abusive acts or practices (UDAAP) \259\ as additional examples of 
acts and practices that are inconsistent to meeting community credit 
needs. Because the included list of applicable laws, rules, and 
regulations is illustrative, and not exhaustive, it is important to 
note that this is not a substantive change as compared to current 
examination procedures. Nonetheless, the agencies believe adding these 
laws to the list would provide greater clarity.
---------------------------------------------------------------------------

    \257\ 10 U.S.C. 987 et seq.
    \258\ 50 U.S.C. 3901 et seq.
    \259\ 12 U.S.C. 5531.
---------------------------------------------------------------------------

3. Effect of Evidence of Discriminatory or Other Illegal Practices
    Currently, in determining the effect of discriminatory or other 
illegal credit practices on a bank's assigned rating, the banking 
agencies consider: the nature, extent, and strength of the evidence of 
the practices; the policies and procedures that the bank (or affiliate, 
as applicable) has in place to prevent the practices; any corrective 
action that the bank (or affiliate, as applicable) has taken or has 
committed to take, including voluntary corrective action resulting from 
self-assessment; and any other relevant information.\260\
---------------------------------------------------------------------------

    \260\ 12 CFR __.28(c)(2).
---------------------------------------------------------------------------

    The agencies propose updating the CRA regulation in Sec.  
__.28(d)(3) to determine the effect of evidence of discrimination and 
other illegal practices on a bank's assigned CRA rating based on 
revised criteria used to evaluate a bank's level of compliance with 
consumer protection laws and regulations. The existing criteria were 
put in place when the rating system for consumer compliance 
examinations placed greater emphasis on transaction testing rather than 
the adequacy of an institution's consumer compliance management system 
in preventing consumer harm. In 2016, the Federal Financial 
Institutions Examination Council (FFIEC) revised the Consumer 
Compliance Rating System \261\ to focus more broadly on an 
institution's commitment to consumer protection. The agencies propose 
using the following updated criteria to determine whether there should 
be a rating downgrade: root cause of any violations of law, the 
severity of any consumer harm resulting from violations, the duration 
of time over which the violations occurred, and the pervasiveness of 
the violations. This change would align the criteria to determine 
whether a CRA downgrade is warranted with the Uniform Interagency 
Consumer Compliance Ratings System. In addition to the root cause, 
severity, duration, and pervasiveness of violations, examiners would 
also consider the degree to which the bank, a bank subsidiary, or an 
affiliate, as applicable, establishes an effective compliance 
management system across the institution to self-identify risks and to 
take the necessary actions to reduce the risk of non-compliance and 
consumer harm. All consumer compliance violations would be considered 
during a CRA examination, although some might not lead to a CRA rating 
downgrade.
---------------------------------------------------------------------------

    \261\ See FFIEC, Press Release, ``FFIEC Issues Uniform Consumer 
Compliance Rating System'' (Nov. 7, 2016), https://www.ffiec.gov/press/pr110716.htm.
---------------------------------------------------------------------------

    The agencies also propose updating the CRA regulation in Sec.  
__.28(d) to enable a rating downgrade at the state and multistate MSA 
level in addition to the current ability to downgrade the institution 
level rating to provide greater clarity and transparency to the bank 
and public about the geographic level at which the violations occurred.

XVII. Performance Standards for Small Banks and Intermediate Banks

    In recognition of their capacity constraints, the agencies propose 
to maintain the current evaluation method for small banks. The agencies 
are proposing to continue evaluating small banks under the small bank 
performance standards in the current CRA framework in Sec.  
__.29(a)(1); however, these banks may opt into the Retail Lending Test 
and may continue to request additional consideration for other 
qualifying CRA activities in Sec.  __.29(a)(2).
    The agencies propose evaluating intermediate banks under the 
proposed Retail Lending Test in Sec.  __.22 with certain provisions 
tailored to intermediate banks. In addition to the proposed Retail 
Lending Test, the agencies propose to evaluate an intermediate bank's 
community development activity pursuant to the criteria in Sec.  
__.29(b)(2), which is the same criteria as the current intermediate 
small bank community development test. In lieu of evaluation under 
Sec.  __.29(b)(2), intermediate banks could opt into being evaluated 
under the proposed Community Development Financing Test.
    All intermediate banks--evaluated under either the intermediate 
bank community development evaluation or that choose to be evaluated 
under the Community Development Financing Test--would have the option 
to designate retail loans (e.g., small business, small farm, and home 
mortgage loans) for consideration as community development loans if 
they have a primary purpose of community development and if the loans 
are not required to be reported.

A. Small Bank Performance Standards

1. Background
    Current Approach for Small Bank Performance Standards. The current 
category of small banks includes those banks with assets of less than 
$346 million as of December 31 of the prior two calendar years. Under 
the current CRA regulations, a small bank is evaluated under the small 
bank performance standards. Specifically, a small bank is evaluated 
under a lending test that considers the following criteria: (i) The 
bank's loan-to-deposit ratio; (ii) the percentage of loans located in 
the bank's assessment areas; (iii) the bank's record of lending to 
borrowers of different income levels and businesses and farms of 
different sizes; (iv) the geographic distribution of the bank's loans; 
and (v) the bank's record of taking action, if warranted, in response 
to written complaints about its performance in helping to meet credit 
needs in its assessment areas.\262\
---------------------------------------------------------------------------

    \262\ 12 CFR __.26(b).
---------------------------------------------------------------------------

    Stakeholder Feedback. Most stakeholders have expressed a preference 
for maintaining the current framework for small banks while permitting 
these banks to choose to opt into the new approach. These stakeholders 
noted that while a metrics-based approach may provide additional 
transparency regarding performance standards, it would be appropriate 
to continue to evaluate small banks under the current framework given 
their more limited capacity and resources. Some community-based 
stakeholders, however, have stated that all banks, including small 
banks, should be evaluated under a metrics-based approach.

[[Page 33991]]

2. Proposed Approach for Small Bank Performance Standards
    The agencies propose raising the asset threshold for small banks 
from $346 million to $600 million as described in Sec.  __.12. The 
agencies are not proposing changes to the manner in which small banks 
are evaluated or to the small bank performance standards. The agencies 
believe that it would be appropriate to continue to evaluate small 
banks under the current framework, consistent with the objective to 
tailor the evaluation approach according to a bank's size and business 
model. Instead, under the proposal, a small bank may opt into being 
evaluated under the Retail Lending Test.
    In addition, a small bank may request additional consideration for 
community development activities and for providing branches and other 
services and delivery systems that enhance credit availability in the 
bank's facility-based assessment areas. The bank could submit these 
activities for consideration in determining the bank's overall 
institution rating, without a requirement to opt into any additional 
performance test beyond the current small bank retail lending approach. 
As described above, the agencies would consider these activities to 
potentially elevate a bank's rating from ``Satisfactory'' to 
``Outstanding,'' and would not consider these activities to elevate a 
``Needs to Improve'' rating to ``Satisfactory'' or ``Outstanding.'' 
This limitation is intended to maintain a strong emphasis on retail 
lending performance. Under the proposed rule, and as in the current 
practice, a small bank could continue to achieve any rating, including 
``Outstanding,'' based on its retail lending performance alone, and 
would not be required to be evaluated on other activities.
Request for Feedback
    Question 141. The agencies propose to continue to evaluate small 
banks under the current framework in order to tailor the evaluation 
approach according to a bank's size and business model. What are other 
ways of tailoring the performance evaluation for small banks?
    Question 142. Should additional consideration be provided to small 
banks that conduct activities that would be considered under the Retail 
Services and Products Test, Community Development Financing Test, or 
Community Development Services Test when determining the bank's overall 
institution rating?

B. Intermediate Bank Performance Standards

1. Background
    Current Approach for Intermediate Small Banks. The current CRA 
regulations include an evaluation framework based on three bank size 
categories: Large, intermediate small, and small. The current category 
of intermediate small banks includes those banks with assets of at 
least $346 million as of December 31 of both of the prior two calendar 
years and less than $1.384 billion as of December 31 of either of the 
prior two calendar years. Intermediate small banks are evaluated under 
a lending test \263\ and a community development test,\264\ which 
assesses community development loans, qualified investments, and 
community development services together. An intermediate small bank has 
the flexibility to allocate its resources among community development 
loans, qualified investments, and community development services in 
amounts that it reasonably determines are most responsive to community 
development needs and opportunities.\265\ Appropriate levels of each of 
these activities would depend on the capacity and business strategy of 
the institution, community needs, and number and types of opportunities 
available for community development within the bank's assessment 
areas.\266\ A bank may not simply ignore one or more of these 
categories of community development, nor do the regulations prescribe a 
required threshold for community development loans, qualified 
investments, and community development services.\267\
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    \263\ 12 CFR __.26(b).
    \264\ 12 CFR __.26(c).
    \265\ See Q&A Sec.  __.26(c)-1.
    \266\ Id.
    \267\ Id.
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    Stakeholder Feedback. A number of stakeholders have supported 
maintaining three categories of banks with performance tests tailored 
to a bank's capacity and business model. Some stakeholders, and 
including those from the trade associations, indicated support for an 
intermediate bank category, though at least one state banking 
association preferred the proposed two-category approach.
2. Proposal for Intermediate Bank Performance Standards
    The agencies propose creating a new intermediate bank category that 
would include banks with assets of at least $600 million and not more 
than $2.0 billion as described in Sec.  __.12. The agencies propose 
that an intermediate bank would be evaluated under the proposed Retail 
Lending Test in Sec.  __.22 and the intermediate bank community 
development performance standards as described in proposed Sec.  
__.29(b)(2), which includes the same criteria as the community 
development test that currently applies to intermediate small banks. 
The agencies also propose that intermediate banks be given the option 
to be evaluated under the proposed Community Development Financing Test 
in Sec.  __.24 in lieu of the intermediate bank community development 
performance standards. The agencies believe this option provides 
intermediate banks the flexibility to determine how their community 
development activities are evaluated, recognizing the capacity and 
constraints of these size banks.
a. Retail Lending Test
    The agencies propose that under the Retail Lending Test, an 
intermediate bank's major product lines would be evaluated by applying 
the proposed metrics approach as specified under Sec.  __.22. This 
method would provide intermediate banks with increased clarity and 
consistency and transparency of supervisory expectations and standards 
for evaluating their retail lending products. The agencies do not 
propose any data reporting requirements for intermediate banks under 
the Retail Lending Test in Sec.  __.42. For example, the agencies would 
not require intermediate banks to collect deposits data by depositor 
location and would instead rely on the FDIC's Summary of Deposits data 
for use in the Retail Lending Test metrics as described in Sec.  __.22.
b. Community Development Evaluation
    Intermediate Bank Community Development Evaluation. The agencies 
propose evaluating community development activity of intermediate banks 
using the same criteria that is included in the current intermediate 
small bank community development test in 12 CFR __.26(c) under the 
proposed intermediate bank community development performance standards 
in Sec.  __.29(b)(2), retaining the flexibility provided to 
intermediate small banks under the current CRA guidance. The agencies 
propose retaining this additional flexibility for intermediate banks in 
recognition of their more limited capacity for engaging in community 
development activities compared to large banks. All intermediate banks, 
including those evaluated under the current intermediate small bank 
community

[[Page 33992]]

development test, would utilize the proposed community development 
definitions in Sec.  __.13.
    Flexibility for the Types of Community Development Activities. The 
agencies propose to retain the current flexibility in the array of 
community development activities by which an intermediate bank is 
evaluated. Intermediate banks generally conduct a combination of 
community development loans, qualified investments, and community 
development services. Under the current regulation, a bank may not 
ignore one or more of these categories of community development 
activities, and the current regulations do not prescribe a required 
threshold for community development loans, qualified investments, or 
community development services. The agencies propose that, consistent 
with current guidance, the appropriate levels of each activity would 
depend on the bank's capacity and business strategy, along with 
community development needs and opportunities that are identified by 
the bank.\268\
---------------------------------------------------------------------------

    \268\ See Q&A Sec.  __.26(c)-1.
---------------------------------------------------------------------------

    Flexibility for Community Development Loans. The agencies propose 
that intermediate banks continue to have the flexibility to have retail 
loans such as small business, small farm, and home mortgage loans be 
considered as community development loans. This option would be 
available to an intermediate bank if those loans have a primary purpose 
of community development and are not required to be reported by the 
bank. For example, an intermediate bank that is not required to report 
small business and small farm loans, may choose to report those loans 
for consideration as community development loans as provided in Sec.  
__.22(a)(5)(iii). Conversely, if an intermediate bank is required to 
report home mortgage loans, those loans would be required to be 
evaluated as retail loans under the Retail Lending Test and the bank 
would not have the option of having them considered as community 
development loans as provided in Sec.  __.22(a)(5)(i).
    The agencies seek feedback on whether intermediate banks should 
retain this flexibility for small business and small farm loans 
regardless of the reporting status of these loans. Intermediate banks 
are currently not required to report small business and small farm 
loans as CRA data. However, once the proposed CFPB Section 1071 
Rulemaking is finalized, there is a possibility that an intermediate 
bank may be required to report small business and small farm loans and 
would lose the flexibility to receive community development 
consideration for those retail loans because of their reporting status.
    Flexibility for Community Development Services. The agencies 
propose retaining the current flexibility of providing community 
development consideration for retail banking services if they provide 
benefit to low- or moderate-income individuals. Under the current 
regulation, in addition to the types of community development services 
associated with large banks,\269\ an intermediate bank would also 
receive CRA credit for retail banking services as community development 
services if they provide benefit to low- or moderate-income 
individuals, including low-cost deposit accounts and branches located 
in low- or moderate-income geographies, designated disaster, or 
distressed or underserved nonmetropolitan middle-income areas.\270\
---------------------------------------------------------------------------

    \269\ 12 CFR __.24; see also CRA Q&A Sec.  __.12(i)-3.
    \270\ 12 CFR __.26(c)(3); see also CRA Q&A Sec.  __.26(c)(3)-1.
---------------------------------------------------------------------------

    Option for Evaluation Under the Proposed Community Development 
Financing Test. In lieu of evaluation under proposed Sec.  __.29(b)(2) 
for evaluating community development activities of an intermediate 
bank, the agencies propose giving intermediate banks the option to be 
evaluated under the proposed Community Development Financing Test as 
specified in Sec.  __.24. Under this option, an intermediate bank also 
has the option to request additional consideration for activities that 
qualify under the Retail Services and Products Test in Sec.  __.23 and 
the Community Development Services Test in Sec.  __.25 for possible 
adjustment of an overall rating of ``Satisfactory'' to ``Outstanding.'' 
As described above, the agencies would consider these activities to 
potentially elevate a bank's rating from a ``Satisfactory'' to an 
``Outstanding.'' These activities would not be considered to elevate a 
``Needs to Improve'' rating to a ``Satisfactory'' or ``Outstanding'' 
rating. Similar to requirements for small banks, this limitation is 
intended to maintain a strong emphasis on retail lending performance. 
Under the proposed rule, an intermediate bank could continue to achieve 
any rating, including an ``Outstanding'' rating, based on its retail 
lending and community development performance alone, and would not be 
required to be evaluated on other activities.
    The additional consideration for retail services and products, and 
community development services would not be appropriate for an 
intermediate bank that is evaluated for community development 
activities under Sec.  __.29(b)(2) because that section already 
incorporates those activities.
    As previously noted, all intermediate banks, including those that 
opt for evaluation under the proposed Community Development Financing 
Test, would continue to have the option to designate retail loans 
(small business, small farm, and home mortgage loans) for consideration 
as community development loans if they have a primary purpose of 
community development and are not required to be reported.
Request for Feedback
    Question 143. The agencies' proposal to require intermediate banks 
to be evaluated under the proposed Retail Lending Test is intended to 
provide intermediate banks with increased clarity and transparency of 
supervisory expectations and standards for evaluating their retail 
lending products. The agencies propose tailoring the application of 
this test by limiting data reporting requirements for intermediate 
banks. Are there other ways of tailoring the Retail Lending Test for 
intermediate banks that should be considered?
    Question 144. The agencies propose to provide continued flexibility 
for the consideration of community development activities conducted by 
intermediate banks both under the status-quo community development test 
and the proposed Community Development Financing Test. Specifically, 
intermediate banks' retail loans such as small business, small farm, 
and home mortgage loans may be considered as community development 
loans, provided those loans have a primary purpose of community 
development and the bank is not required to report those loans. Should 
the agencies provide consideration for those loans under the Community 
Development Financing Test?
    Question 145. Should intermediate banks be able to choose whether a 
small business or small farm loan is considered under the Retail 
Lending Test or, if it has a primary purpose of community development, 
under the applicable community development evaluation, regardless of 
the reporting status of these loans? Should the same approach be 
applied for the intermediate bank community development performance 
standards in Sec.  __.29(b) and for intermediate banks that decide to 
opt into the Community Development Financing Test in Sec.  __.24?

[[Page 33993]]

XVIII. Effect of CRA Performance on Applications

    The agencies are proposing to maintain the current regulation's 
regulatory procedures for considering CRA performance on applications 
including, mergers, deposit insurance, branch openings and relocations, 
conversions and acquisitions, and other applications, as applicable to 
each agency. Consideration of CRA performance in bank applications is 
rooted in the CRA statute. The statute instructs the agencies to assess 
a bank's record of meeting the credit needs of its entire community, 
including low- and moderate-income neighborhoods, consistent with the 
safe and sound operation of such bank, and to take such record into 
account in its evaluation of an application for a deposit facility by 
such bank.\271\
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    \271\ 12 U.S.C. 2903(a)(2).
---------------------------------------------------------------------------

A. Current Approach for CRA Consideration in Applications

    Under the current CRA regulations, the agencies take into account a 
bank's CRA performance when considering certain applications, including 
those for: A branch opening; merger, consolidation, or acquisition; 
main office or branch relocation; deposit insurance request; and 
transactions subject to the Bank Merger Act and Bank Holding Company 
Act.\272\
---------------------------------------------------------------------------

    \272\ 12 CFR __.29. For applications under the Bank Merger Act 
or Bank Holding Company Act, a convenience and needs analysis is 
conducted. See 12 U.S.C. 1828(c) and 12 U.S.C. 1842.
---------------------------------------------------------------------------

    Basis for Approval or Denial of an Application. A bank's record of 
performance may be the basis for denying or conditioning approval of an 
application. Generally, an institution with a CRA rating below 
``Satisfactory'' may be restricted from certain activities until its 
next CRA examination.
    Interested Parties. The current regulation requires that the 
agencies consider public comment when determining whether to approve an 
application. In considering CRA performance for an application, the 
agencies take into account any views and comments expressed by 
interested parties.

B. Proposed Approach for CRA Consideration in Applications

    The agencies are not proposing changes to this section of their 
regulations outlining consideration of CRA performance for 
applications, since it is prescribed in the CRA statute. However, by 
making the assessment of CRA performance more transparent, consistent, 
and predictable, the proposed CRA methodology would provide greater 
certainty to a bank regarding the level and distribution of activity 
that would achieve a ``Satisfactory'' rating when the bank contemplates 
making an application. It would also provide clear metrics regarding 
the bank's record of meeting the credit needs of its entire community, 
including low- and moderate-income neighborhoods.
Request for Feedback
    Question 146. Are the agencies' current policies for considering 
CRA performance on applications sufficient? If not, what changes would 
make the process more effective?

XIX. Data Collection, Reporting, and Disclosure

    The agencies propose data collection and reporting requirements to 
increase the clarity, consistency, and transparency of the evaluation 
process through the use of standard metrics and benchmarks. The 
agencies also recognize the importance of using existing data sources 
where possible, and of tailoring data requirements where appropriate.
    Under the proposal, all large banks would have the same 
requirements for certain categories of data, including community 
development financing data, branch location data, and remote service 
facility location data. As noted in earlier sections, the proposal also 
retains the existing large bank data requirements for small business 
and small farm lending, although the agencies propose replacing this 
with section 1071 data once it is available. The proposal also provides 
updated standards for all large banks to report the delineation of 
their assessment areas.
    The agencies propose that some new data requirements would only 
apply to large banks with assets of over $10 billion. Specifically, the 
agencies propose that large banks with assets of over $10 billion would 
have data requirements for deposits data, retail services data on 
digital delivery systems, retail services data on responsive deposit 
products, and community development services data. In addition, all 
banks with assets of over $10 billion would have data requirements for 
automobile lending.
    Banks operating under an approved wholesale or limited purpose bank 
designation would not be required to collect or report deposits data or 
report retail services or community development services information.
    Intermediate banks, as defined in proposed Sec.  __.12, would not 
be required to collect or report any additional data compared to 
current requirements. As under current guidance, intermediate banks 
should continue to be prepared to demonstrate community development 
activities' qualifications.\273\ Intermediate banks would have no 
deposits data requirements, even when deciding to opt into the proposed 
Community Development Financing Test.
---------------------------------------------------------------------------

    \273\ See Q&A Sec.  __.12(h)-8.
---------------------------------------------------------------------------

    Small banks, as defined in proposed Sec.  __.12, would not be 
required to collect or report any additional data compared to current 
requirements.
    Under the proposal, the data reporting deadline would be moved from 
March 1 to April 1 of each year.

A. Background

1. Current Data Collection and Reporting Requirements
    Current Data Used for Deposits. The current CRA regulations do not 
require banks to collect or report deposits data. Instead, for small 
banks, total deposits and total loans data from the Call Report are 
used to calculate the loan-to-deposit ratio for the entire bank. Total 
deposits allocated to each branch from the FDIC's Summary of Deposits 
are used for performance context for banks of any size. Deposits data 
by depositor location are not currently collected or reported.
    Current Small Bank and Intermediate Small Bank Data Standards for 
Retail Lending. The current CRA regulations do not require small banks 
and intermediate small banks to collect, maintain, or report loan data, 
unless they opt to be evaluated under the lending, investment, and 
service tests that apply to large banks.\274\ Examiners generally use 
information for a bank's major loan products gathered from individual 
loan files or maintained on the bank's internal operating systems, 
including data reported pursuant to HMDA, if applicable.
---------------------------------------------------------------------------

    \274\ 12 CFR __.42(f).
---------------------------------------------------------------------------

    Current Large Bank Data Standards for Retail Lending and Community 
Development Financing. Under the current CRA regulations, large banks 
collect and report certain lending data for home mortgages, small 
business loans, small farm loans, and community development loans, 
pursuant to either HMDA or the CRA regulation.\275\ CRA data reporting 
requirements are based on bank size, not type of exam.\276\ If a bank, 
such as a wholesale or limited purpose bank, does not engage in lending 
of a particular type, current regulations do not require reporting such 
data. Examiners use this lending

[[Page 33994]]

data and other supplemental data to evaluate CRA performance. A bank 
may use the software provided by the FFIEC for data collection and 
reporting or develop its own programs. Retail lending data collection 
and reporting requirements differ based on the product line.
---------------------------------------------------------------------------

    \275\ 12 CFR __.42.
    \276\ See Q&A Sec.  __.42-1.
---------------------------------------------------------------------------

    For large banks that do not report HMDA data, examiners use home 
mortgage information maintained on the bank's internal operating 
systems or from individual loan files. The data elements for home 
mortgage loans used for CRA evaluations include loan amount at 
origination, location, and borrower income. For small business loans 
and small farm loans, the CRA regulations require large banks to 
collect and maintain the loan amount at origination, loan location, and 
an indicator of whether a loan was to a business or farm with gross 
annual revenues of $1 million or less.\277\ Large banks report 
aggregate small business and small farm data at the census tract 
level.\278\
---------------------------------------------------------------------------

    \277\ 12 CFR __.42(a).
    \278\ 12 CFR __.42(b)(1).
---------------------------------------------------------------------------

    Large banks are not required to collect or report data on consumer 
loans. However, if a large bank opts to have consumer loans considered 
as part of its CRA evaluation, it must collect and maintain this 
information based on the category of consumer loan and include it in 
its public file.\279\
---------------------------------------------------------------------------

    \279\ 12 CFR __.42(c)(1).
---------------------------------------------------------------------------

    The current CRA regulations also require large banks to report the 
aggregate number and dollar amount of their community development loans 
originated or purchased during the evaluation period, but not 
information for individual community development loans.\280\ A bank 
must, however, provide examiners with sufficient information to 
demonstrate its community development performance.\281\ The CRA 
regulations do not currently require the reporting or collection of 
community development loans that remain on the bank's books or the 
collection and reporting of any information about qualified community 
development investments. As a result, the total amount (originated and 
on-balance sheet) of community development loans and investments 
nationally, or within specific geographies, is not available through 
reported data. Consequently, examiners supplement reported community 
development loan data with additional information provided by a bank at 
the time of an examination, including the amount of investments, the 
location or areas benefited by these activities and information 
describing the community development purpose.
---------------------------------------------------------------------------

    \280\ 12 CFR __.42(b)(2).
    \281\ See Q&A Sec.  __.12(h)-8, which states, in relevant part, 
``Financial institutions that want examiners to consider certain 
activities should be prepared to demonstrate the activities' 
qualifications.''
---------------------------------------------------------------------------

    Data Currently Used for CRA Retail Services and Community 
Development Services Analyses. There are no specific data collection or 
reporting requirements in the CRA regulations for retail services or 
community development services. A bank must, however, provide examiners 
with sufficient information to demonstrate its performance in these 
areas, as applicable. A bank's CRA public file is required to include a 
list of bank branches, with addresses and census tracts; \282\ a list 
of branches opened or closed; \283\ and a list of services, including 
hours of operation, available loan and deposit products, transaction 
fees, and descriptions of material differences in the availability or 
cost of services at particular branches, if any.\284\
---------------------------------------------------------------------------

    \282\ 12 CFR __.43(a)(3).
    \283\ 12 CFR __.43(a)(4).
    \284\ 12 CFR __.43(a)(5).
---------------------------------------------------------------------------

    Banks have the option of including information regarding the 
availability of alternative systems for delivering services.\285\ Banks 
may also provide information on community development services, such as 
the number of activities, bank staff hours dedicated, or the number of 
financial education sessions offered.
---------------------------------------------------------------------------

    \285\ Id.
---------------------------------------------------------------------------

2. Stakeholder Feedback
    Industry group stakeholders have asked the agencies to remain 
mindful about minimizing any data collection, recordkeeping, and 
reporting burdens potentially associated with revising CRA regulations. 
Industry stakeholders have expressed concern that any new deposit, 
lending, investments, and other data collection, reporting, and 
recordkeeping requirements could potentially be costly and burdensome, 
as well as stating that efforts to develop data systems and the need 
for new compliance staff could come at the expense of engaging in 
community reinvestment activities. Additionally, industry stakeholders 
have stated that new data collection or reporting requirements should 
be assessed relative to the corresponding improvements to CRA 
examinations.
    In contrast, community groups have generally indicated that the 
certainty and transparency gained from accurate community development 
financing measures would be worth any potential reporting burden. These 
stakeholders have supported data collection related to community 
development purpose, duration of financing provided, and partnerships 
with MDIs and other entities. Regarding community development services, 
these stakeholders also favored the development of a standardized 
template with defined data fields and endorsed collection of data 
relating to bank inputs (e.g., community development hours per employee 
in each assessment area) and impacts (e.g., number of low- and 
moderate-income attendees at financial literacy or homebuyer counseling 
sessions, improvement to attendees' credit scores). Community group 
stakeholders have expressed support for bank collection, maintenance, 
and reporting of community development data to improve evaluation 
procedures and to increase public transparency.
    Regarding deposits, community group stakeholders have generally 
agreed that for small banks and intermediate-small banks, the FDIC's 
Summary of Deposits data could be an appropriate source to rely upon 
for computing metrics, given that these banks generally have fewer 
assessment areas and have most of their customer base residing within 
their assessment areas. Industry sentiment has been that while new 
depositor-related data collection and maintenance may be necessary for 
establishing a metrics-based approach to evaluating retail lending and 
community development financing, it may entail substantial costs on 
impacted banks. Overall, stakeholders generally agree that small banks 
should be exempted from new deposits data-related requirements.

B. Deposits Data

1. Deposits Data Collection and Maintenance Requirements
    The agencies propose that deposits data would be used for several 
evaluation metrics, benchmarks, and weights under the applicable 
performance tests. The agencies propose an approach for deposits data 
collection, maintenance, and reporting that is tailored to different 
bank sizes. Large banks with assets of over $10 billion would be 
required to collect, maintain, and report deposits data that is based 
on depositor location, as provided in Sec.  .__42. Large banks with 
assets of $10 billion or less, intermediate banks, and small banks 
would not be required to collect, maintain or report any deposits data. 
If these banks choose to voluntarily collect and maintain this data, 
the agencies would use it for any applicable metrics and weights.

[[Page 33995]]

Otherwise, the agencies propose using the FDIC's Summary of Deposits 
data for any applicable metrics for a bank that does not collect and 
maintain deposits data. As discussed further in this SUPPLEMENTARY 
INFORMATION, the agencies intend for the proposed approach to tailor 
new deposits data requirements only to large banks with assets of over 
$10 billion.
a. Large Banks With Assets of Over $10 Billion
    The agencies propose to require large banks with assets of over $10 
billion to collect and maintain county-level deposits data based on the 
county in which the depositor's address is located, rather than on the 
location of the bank branch to which the deposits are assigned, as is 
the case with the FDIC's Summary of Deposits data. This approach would 
allow for more precise measurement of a bank's local deposits by 
county. Furthermore, the agencies considered that banks generally 
collect and maintain depositor location data to comply with Customer 
Identification Program requirements and as part of their ordinary 
course of business. Banks would not report depositor addresses, but 
only deposits data that is aggregated at a county-, state, multistate 
MSA, and institution level.
    The agencies believe that the current approach of associating 
deposits with the location of the branch to which they are assigned 
would raise challenges under the proposed evaluation framework for 
large banks with assets of over $10 billion. The FDIC's Summary of 
Deposits data is not always an accurate measure of a bank's deposit 
base within an assessment area. Specifically, deposits assigned to a 
branch in the Summary of Deposits may be held by a depositor located 
outside of the assessment area where the branch is located, such as in 
a different assessment area of the bank, or outside of any of the 
bank's assessment areas.\286\
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    \286\ See FDIC Summary of Deposits Reporting Instructions (June 
30, 2021) (``Institutions should assign deposits to each office in a 
manner consistent with their existing internal record-keeping 
practices. The following are examples of procedures for assigning 
deposits to offices: <bullet> Deposits assigned to the office in 
closest proximity to the accountholder's address. <bullet> Deposits 
assigned to the office where the account is most active. <bullet> 
Deposits assigned to the office where the account was opened. 
<bullet> Deposits assigned to offices for branch manager 
compensation or similar purposes. Other methods that logically 
reflect the deposit gathering activity of the financial 
institution's branch offices may also be used. It is recognized that 
certain classes of deposits and deposits of certain types of 
customers may be assigned to a single office for reasons of 
convenience or efficiency. However, deposit allocations that diverge 
from the financial institution's internal record-keeping systems and 
grossly misstate or distort the deposit gathering activity of an 
office should not be utilized.''), https://www.fdic.gov/regulations/resources/call/sod/sod-instructions.pdf.
---------------------------------------------------------------------------

    Instead, the agencies propose that large banks with assets of over 
$10 billion collect and maintain annually, until the completion of the 
bank's next CRA examination, the dollar amount of the bank's deposits 
at the county level, based upon the addresses associated with accounts, 
and calculated based on the average daily balances as provided in 
statements, such as monthly or quarterly statements. This deposits data 
would not be assigned to branches, but would, instead, reflect the 
county level dollar amount of the bank's deposit base.
    The proposed collection and maintenance of deposits data at the 
county level for large banks with assets of over $10 billion would 
support proposals to more accurately: (i) Construct the bank volume 
metric and community development financing metric for each bank at the 
facility-based assessment area, state, multistate MSA, and institution 
levels, as applicable; (ii) construct the market benchmarks used for 
the retail lending volume screen and the community development 
financing metric at the facility-based assessment area, state, 
multistate MSA, and institution levels, as applicable; and (iii) 
implement a standardized approach for deriving multistate MSA, state, 
and institution conclusions and ratings by weighting assessment area 
conclusions (including retail lending assessment areas) and outside 
retail lending area conclusions through a combination of deposits and 
lending volumes.
    For each of these purposes, the agencies consider it beneficial to 
use deposits data that accurately reflect depositor location for all 
large banks with assets of over $10 billion. The agencies do not 
believe the above proposals could be implemented using the FDIC's 
Summary of Deposits data for all large banks. Specifically, the FDIC's 
Summary of Deposits data does not contain information distinguishing 
those deposits made by depositors located outside of a bank's facility-
based assessment areas from those within facility-based assessment 
areas. This limitation could introduce imprecision when using the 
Summary of Deposits data to weight performance conclusions in retail 
lending assessment areas, outside retail lending areas, and community 
development activity areas. For large banks with assets of over $10 
billion, the agencies believe that the benefits of precision outweigh 
the burden of requiring the collection and reporting of deposits data.
    For banks that collect and maintain deposits data, the agencies 
propose a definition of deposits, as stated in Sec.  __.12, that is 
based on two subcategories of the Call Report category of Deposits in 
Domestic Offices: (i) Deposits of individuals, partnerships, and 
corporations; and (ii) commercial banks and other depository 
institutions in the United States. These two subcategories of deposits 
constitute the majority of deposit dollars captured overall in the Call 
Report categories of Deposits in Domestic Offices and these 
subcategories are proposed because they increase a bank's capacity to 
lend and invest.
    The agencies propose that domestically held deposits of foreign 
banks, and of foreign governments and institutions would not be 
included because these deposits are not derived from a bank's domestic 
customer base. The proposal would exclude U.S., state, and local 
government deposits because these deposits are sometimes subject to 
restrictions and may be periodically rotated among different banks 
causing fluctuations in the level of deposits over time.
    Further, the agencies seek feedback regarding whether to include 
deposits for which the depositor is a commercial bank or other 
depository institution in the definition of deposits, as proposed, or 
if these deposits should be excluded from the definition. While these 
deposits may augment a bank's capacity to lend and invest, they are 
primarily held in banker's banks and credit banks, many of which are 
exempt from CRA, or operate under the Community Development Financing 
Test tailored for limited purpose banks, which does not use deposits 
data.
    For deposit account types for which accountholder location 
information is not generally available, the agencies propose that the 
aggregate dollar amount of deposits for these accounts would be 
included at the overall institution level, and not at other geographic 
levels. For example, the agencies would expect the aggregate dollar 
amount of deposits for accounts associated with pre-paid debit cards or 
Health Savings Accounts to be included at the institution level. The 
agencies seek feedback on additional clarifications regarding what 
deposit account types may not be appropriate to include at a county 
level.
    The agencies also seek feedback on the appropriate treatment of 
non-brokered reciprocal deposits in order to appropriately measure an 
institution's amount of deposits, avoid double

[[Page 33996]]

counting of deposits, and to ensure that accountholder location 
information for deposit accounts is available to the bank that is 
collecting and maintaining the data. The agencies are considering that 
a non-brokered reciprocal deposit as defined in 12 U.S.C. 
1831f(i)(2)(E) for the institution sending the non-brokered reciprocal 
deposit would qualify under the deposits definition in Sec.  __.12. In 
addition, the agencies are considering that a non-brokered reciprocal 
deposit as defined in 12 U.S.C. 1831f(i)(2)(E) for the institution 
receiving the non-brokered reciprocal deposit would not qualify under 
the deposits definition in Sec.  __.12.
    In order to reduce burden associated with the collection, 
maintenance, and reporting of deposits data, the agencies intend to 
explore the feasibility, including costs, of developing a certified 
geocoding and aggregation platform that banks could use to geocode and 
aggregate their data in the future.
b. Small Banks, Intermediate Banks, and Large Banks With Assets of $10 
Billion or Less
    The proposal would not require small banks, intermediate banks, and 
large banks with assets of $10 billion or less to collect deposits 
data. This approach is intended to minimize the data collection burden 
on banks with assets of less than $10 billion, in recognition that 
large banks with assets of over $10 billion have more capacity to 
collect and report new deposits data.
    Instead of using new deposits data, the agencies propose that the 
FDIC's Summary of Deposits data would be used for calculating the 
retail lending volume screen, as applicable, for these banks, if they 
do not elect to collect and maintain deposits data. The Summary of 
Deposits data would also be used for calculating the community 
development financing metric for large banks with assets of $10 billion 
or less and for intermediate banks that opt into the Community 
Development Financing Test. The Summary of Deposits data would also be 
used for the weights assigned to each facility-based assessment area 
when calculating performance scores at the state, multistate MSA, and 
institution levels, as applicable.
    The agencies propose that small banks, intermediate banks, and 
large banks with assets of $10 billion or less could choose to collect 
and maintain deposits data on a voluntary basis. Large banks with 
assets of $10 billion or less that elect to collect deposits data would 
be required to do so in a machine readable form provided by the 
agencies, while small banks and intermediate banks would have the 
option to collect deposits data in the bank's own format. The agencies 
would use collected data instead of the FDIC's Summary of Deposits data 
to calculate the bank's metrics and weights for all applicable tests 
and evaluation areas. The agencies considered that a bank with a 
significant percentage of deposits drawn from outside of assessment 
areas in particular may prefer to collect and maintain deposits data to 
reflect performance more accurately under the retail lending volume 
screen and the community development financing metrics, and to have 
weights given to the bank's assessment areas in a way that more 
accurately reflects the bank's deposits base when assigning ratings.
    The agencies seek feedback on the proposed approach and the 
tradeoffs of requiring only large banks with assets of over $10 billion 
to collect and maintain deposits data. On the one hand, the proposed 
approach would limit this requirement to banks with greater resources 
to comply with this proposed data requirement. On the other hand, the 
agencies have also considered that this approach may result in metrics 
and weights that do not reflect the geographic location of a bank's 
deposit base as accurately as would an approach that required the 
collection and maintenance of deposits data for all large banks. For 
example, a large bank with assets of $10 billion or less could have an 
internet-based business model not focused on branches. If such a bank 
did not elect to collect and maintain deposits data, the proposed 
approach would count all of the bank's deposits as being located within 
the bank's facility-based assessment areas, because the FDIC's Summary 
of Deposits data necessarily assigns all deposits to branch locations. 
The agencies have also considered that certain banks, particularly 
those for which the FDIC's Summary of Deposits data does not 
approximate well their actual depositors' locations, may wish to 
voluntarily collect and maintain deposits data for the sake of ensuring 
metrics and weights that accurately reflect the distribution of their 
deposits base.
    Relatedly, the agencies seek feedback on an alternative approach in 
which large banks with assets of $10 billion or less are required to 
collect and maintain deposits data, with the standards and requirements 
for this data as proposed for large banks with assets of over $10 
billion. The agencies have considered that this alternative may improve 
the precision and consistency of the metrics, benchmarks, and weights 
applicable to large banks with assets of $10 billion or less. In 
addition, this alternative may allow for more consistent evaluation 
standards, rather than using a different source of deposits data for 
different categories of large banks. However, the agencies have also 
considered that banks with assets of over $10 billion have greater 
capacity to collect and maintain deposits data. The agencies also seek 
feedback on whether a longer transition period to begin collecting and 
reporting deposits data for large banks with assets of $10 billion or 
less to begin to collect and maintain deposits data would make this 
alternative more feasible.
    Wholesale Banks and Limited Purpose Banks. Wholesale banks and 
limited purpose banks would not be required to collect or maintain 
deposits data under the proposal.
2. Reporting of Deposits Data
a. Large Banks With Assets of Over $10 Billion
    The agencies propose that large banks with assets of over $10 
billion would be required to report the aggregate dollar amount of 
deposits drawn from each county, state, and multistate MSA, and at the 
institution level based on average annual deposits (calculated based on 
average daily balances as provided in statements such as monthly or 
quarterly statements, as applicable) from the respective geography. The 
agencies intend for this approach to appropriately account for deposits 
that vary significantly over short time periods or seasonally. As 
discussed above, the reported deposits data would inform bank metrics, 
benchmarks, and weighting procedures for the Retail Lending Test and 
Community Development Financing Test.
    In addition, the agencies seek feedback on requiring large banks to 
report the number of depositors at the county level. This data would be 
used to support agency analysis of deposits data and could be used to 
support an alternative approach of using the proportion of a bank's 
depositors in each county to calculate the bank's deposit dollars for 
purposes of the community development financing metrics and benchmarks, 
as discussed in Section XII.
    The agencies are mindful of limiting the use of deposits data that 
is collected and reported under the proposed rule as appropriate. For 
this reason, the agencies propose not to make deposits data reported 
under Sec.  __.42 publicly available in the form of a data set for all 
reporting lenders. The agencies seek feedback on this approach, and 
whether

[[Page 33997]]

the agencies should instead publish county-level deposits data in the 
form of a data set.
b. Large Banks With Assets of $10 Billion or Less, Intermediate Banks, 
Small Banks, and Wholesale and Limited Purpose Banks
    Large banks with assets of $10 billion or less, intermediate banks, 
small banks, and wholesale and limited purpose banks would not be 
required to report deposits data under the proposal.
    As discussed in Section IX and Section XII, respectively, Summary 
of Deposits data would be used for measuring the deposits of large 
banks with assets of $10 billion or less for purposes of calculating 
the proposed market volume benchmark and community development 
financing benchmarks, even if a bank elected to collect and maintain 
deposits data to be used for purposes of calculating its metrics and 
weights. The agencies believe that not requiring these banks to report 
this data may reduce new data burden for these banks.
    The agencies seek feedback on the tradeoffs of the proposed 
approach of not requiring deposits data reporting for those banks that 
elect to voluntarily collect and maintain deposits data under Sec.  
__.42. While this approach would limit new reporting requirements, it 
would also not support the calculation of more precise market 
benchmarks, which requires reported deposits data. If a large bank with 
assets of $10 billion or less elects to collect and maintain deposits 
data, the agencies seek feedback on the alternative of requiring such a 
bank to also report that deposits data, which would help support more 
precise benchmarks.
    The agencies also seek feedback on an alternative approach of 
requiring all large banks with assets of $10 billion or less to 
collect, maintain, and report deposits data to further ensure accurate 
benchmarks and consistent standards for all large banks. In considering 
this alternative, the agencies seek feedback on whether a longer 
transition period (such as an additional 12 or 24 months beyond the 
transition period for large banks with assets of over $10 billion) 
would help make this alternative more feasible.
Request for Feedback
    Question 147. What are the potential benefits and downsides of the 
proposed approach to require deposits data collection, maintenance, and 
reporting only for large banks with assets of over $10 billion? Does 
the proposed approach create an appropriate balance between tailoring 
data requirements and ensuring accuracy of the proposed metrics? Should 
the agencies consider an alternative approach of requiring, rather than 
allowing the option for, large banks with assets of $10 billion or less 
to collect and maintain deposits data? If so, would a longer transition 
period for large banks with assets of $10 billion or less to begin to 
collect and maintain deposits data (such as an additional 12 or 24 
months beyond the transition period for large banks with assets of over 
$10 billion) make this alternative more feasible?
    Question 148. Should large banks with assets of $10 billion or less 
that elect to collect and maintain deposits data also be required to 
report deposits data? Under an alternative approach in which all large 
banks with assets of $10 billion or less are required to collect and 
maintain deposits data, should these banks also be required to report 
the data, or would it be appropriate to limit new data burden for these 
banks by not requiring them to report the data?
    Question 149. What are alternative approaches to deposits data 
collection and maintenance that would achieve a balance between 
supporting the proposed metrics and minimizing additional data burden? 
Would it be preferable to require deposits data collected as a year- or 
quarterly-end total, rather than an average annual deposit balance 
calculated based on average daily balances from monthly or quarterly 
statements?
    Question 150. Should deposits sourced from commercial banks or 
other depository institutions be excluded from the deposits data that 
is reported or optionally maintained by banks? Should other categories 
of deposits be included in this deposits data?
    Question 151. For what types of deposit accounts, such as pre-paid 
debit card accounts, and Health Savings Accounts, might depositor 
location be unavailable to the bank? For these account types, is it 
appropriate to require the data to be reported at the institution 
level? Should brokered deposits be reported at the institution level as 
well?
    Question 152. What is the appropriate treatment of non-brokered 
reciprocal deposits? Should a non-brokered reciprocal deposit be 
considered as a deposit for the bank sending the non-brokered 
reciprocal deposit, but not be considered as a deposit for the bank 
receiving the reciprocal deposit?
    Question 153. Do bank operational systems permit the collection of 
deposit information at the county-level, based on a depositor's 
address, or would systems need to be modified to capture this 
information? If systems need to be modified or upgraded, what would the 
associated costs be?
    Question 154. In order to reduce burden associated with the 
reporting of deposits data, what other steps can the agencies take or 
what guidance or reporting tools can the agencies develop to reduce 
burden while still ensuring adequate data to inform the metrics 
approach?
    Question 155. Should the agencies consider an alternative approach 
of publishing a data set containing county-level deposits data in order 
to provide greater insight into bank performance?

C. Retail Lending Data

1. Overview
    The agencies propose requiring large banks to collect, maintain, 
and report certain retail lending data, as applicable, for small 
business, small farm, automobile, and home mortgage loans (including 
closed-end home mortgages, open-end home mortgages, and multifamily 
loans). As discussed above, much of the retail lending data needed to 
examine a bank under the proposed Retail Lending Test is already 
currently collected and reported by large banks under the CRA 
regulations. The agencies propose to reduce burden associated with 
small business and small farm loan data by using the current 
requirements and data collection and reporting process that banks are 
familiar with in the short term, as discussed below. In the longer 
term, the CRA's data collection and reporting requirements for small 
business loans and small farm loans would be eliminated and replaced by 
the CFPB's section 1071 data collection and reporting requirements.
    The agencies also propose to tailor the data collection and 
reporting of automobile loans by only requiring large banks with assets 
of over $10 billion to collect, maintain and report this data. The data 
necessary to analyze CRA performance for automobile loans are loan 
amount at origination, loan location (state, county, census tract), and 
borrower income. Further, the proposal seeks feedback on whether to 
require large banks to collect and report one additional field for 
small business and small farm loans before the CFPB's section 1071 data 
is available. An indicator of whether a loan is to a business or farm 
with gross annual revenues of more than $250,000 but less than or equal 
to $1 million (using the revenues that the bank considered in making 
its credit decision) would allow the agencies to distinguish loans made 
to the smallest businesses and farms

[[Page 33998]]

before the CFPB's section 1071 data is available.
    In addition, the agencies propose different standards based on bank 
size because a bank's capacity to collect, maintain, and report data 
increases as a bank increases in size and resources, regardless of 
business strategy. The agencies propose data collection and reporting 
requirements for large banks using prescribed formats. The prescribed 
format requirements would not apply to small banks that elect to be 
examined under the metrics-based Retail Lending Test or to intermediate 
banks. Instead, examiners would use data that small and intermediate 
banks maintained in their own format or reported under other 
regulations, e.g., HMDA.
2. Small Business and Small Farm Loans
    Data Collected and Maintained. As required under the existing CRA 
regulation, the agencies propose to require the collection and 
maintenance of the following data related to small business loan and 
small farm loan originations and purchases by the bank: (i) A unique 
number or alpha-numeric symbol that can be used to identify the 
relevant loan file; (ii) an indicator for the loan type as reported on 
the bank's Call Report; (iii) the date of the loan origination or 
purchase; (iv) loan amount at origination or purchase; (v) the loan 
location (state, county, census tract); (vi) an indicator for whether 
the loan was originated or purchased; and (vii) an indicator for 
whether the loan was to a business or farm with gross annual revenues 
of $1 million or less.
    In addition, the agencies seek feedback on an additional 
requirement for banks to collect and maintain an indicator of whether 
the loan was to a business or farm with gross annual revenues of 
$250,000 or less. This additional indicator would allow the agencies to 
implement the borrower distribution analysis for small businesses and 
small farms with gross annual revenues of $250,000 or less before the 
availability of CFPB's section 1071 data. The agencies seek feedback on 
the costs and benefits of requiring this potential additional 
indicator.
    Reported Data. The agencies propose to require all large banks to 
report on an annual basis the aggregate number and amount of small 
business loans and small farm loans for the prior calendar year for 
each census tract in which the bank originated or purchased a small 
business or small farm loan by loan amounts in the categories of 
$100,000 or less, more than $100,000 but less than or equal to 
$250,000, and more than $250,000. A large bank would also report the 
aggregate number and amount of small business and small farm loans to 
businesses and farms with gross annual revenues of $1 million or less 
(using the revenues that the bank considered in making its credit 
decision). This data enables the agencies to conduct a borrower 
distribution analysis that shows the level of lending to small 
businesses of different revenue sizes. The agencies are also 
considering requiring the reporting of the number and amount of small 
business loans and small farm loans for each census tract for which the 
borrower had business revenue of $250,000 or less. The agencies seek 
feedback on whether to include this additional reporting data point.
    The agencies would publish a bank's small business and small farm 
data aggregated at the county-level. The agencies propose to use the 
existing small business loan and small farm loan data collection and 
reporting requirements. However, the agencies propose to use the CFPB's 
section 1071 data once it is available.\287\
---------------------------------------------------------------------------

    \287\ As noted above, the CFPB's Section 1071 Rulemaking will 
effect changes directed by section 1071 of the Dodd-Frank Act 
requiring financial institutions to compile, maintain, and submit to 
the CFPB certain data on applications for credit for women-owned, 
minority-owned, and small businesses. See 86 FR 56356 (Oct. 8, 
2021), as corrected by 86 FR 70771 (Dec. 13, 2021).
---------------------------------------------------------------------------

3. Home Mortgage Lending
    Under the proposal, banks would be required to collect, maintain, 
and report home mortgage data similar to current regulatory 
requirements. If a bank is a HMDA reporter, the bank (other than an 
intermediate bank or a small bank) would be required to report the 
location of each home mortgage loan outside of the MSAs in which the 
bank has home or branch office.
    Some banks that are not mandatory HMDA reporters may do enough 
mortgage lending that the agencies would consider one of the mortgage 
loan categories a major product line. This could occur, for example, if 
a bank with a largely online lending business model operated its 
headquarters in a micropolitan area and had no branches in MSAs. The 
evaluation of such a bank's retail lending performance would be less 
accurate if the bank did not collect, maintain, or report its mortgage 
loan data.
    The agencies therefore seek feedback on whether certain banks that 
are not mandatory reporters under HMDA should be required to collect 
and maintain, or report, mortgage loan data. One option would be to 
require any large bank that is not a mandatory HMDA reporter due to the 
locations of its branches, but that otherwise meets the HMDA size and 
lending activity requirements, to collect, maintain, and report the 
mortgage loan data necessary to calculate the retail lending volume 
screen and distribution metrics. This requirement would narrowly tailor 
additional data collection requirements to affect only banks that do a 
substantial volume of mortgage lending. A bank that, for example, 
specialized in small business lending and made only a few incidental 
mortgage loans would not be required to collect mortgage data under 
this alternative, as mortgage lending would not be a significant 
contributor to the agencies' evaluation of its retail lending 
performance regardless. Furthermore, this alternative approach would 
only be applied to large banks, to avoid unduly burdening intermediate 
and small banks in recognition of their more limited capacities.
    Under this alternative approach, the agencies would consider 
requiring banks as described above to collect and maintain the dollar 
amount of loans at origination or purchase, an indicator for whether 
the loan is a closed-end home mortgage loan, an open-end home mortgage 
loan, or a multifamily loan, the location of each of the bank's home 
mortgage loan origination or purchase, the annual income relied upon 
when making the loan, and an indicator of whether the loan was an 
origination or a purchase. These data fields would allow the 
calculation of all the bank's retail lending metrics for mortgage 
lending, clarifying expectations for banks and facilitating a more 
complete and accurate analysis by including this information in the 
bank metrics.
    Under this alternative proposal, banks would collect, maintain, and 
report home mortgage data on open- and closed-end one-to-four-unit home 
mortgages and on multifamily loans. Open-end mortgages and multifamily 
loans would be treated as separate product lines for determining major 
product lines and for evaluation under the metrics tests. A 
modification of this alternative proposal would be to require these 
same banks to report the data, as well as collect and maintain it. A 
reporting requirement would allow for more accurate benchmarks in the 
markets these banks serve; however, it could also be more burdensome 
for those banks.
    The agencies seek comment on the appropriateness of this 
alternative approach for new data collection, maintenance, and 
reporting requirements for home mortgage loans by non-HMDA reporters.

[[Page 33999]]

4. Automobile Lending
    The agencies propose that automobile loans would be the only 
consumer loan category with data collection and reporting requirements, 
and that these new requirements would apply only to banks with assets 
of over $10 billion. The metrics-based proposal would require banks 
with assets of over $10 billion to collect and maintain, until the 
completion of the bank's next CRA examination, the following data for 
automobile loans originated or purchased by the bank during the 
evaluation period: (i) A unique number or alpha-numeric symbol that can 
be used to identify the relevant loan file; (ii) the date of loan 
origination or purchase; (iii) the loan amount at origination or 
purchase; (iv) the loan location (state, county, census tract); (v) an 
indicator for whether the loan was originated or purchased by the bank; 
and (vi) the borrower's annual income the bank relied on when making 
its credit decision. In addition, a bank with assets of over $10 
billion would also be required to report the aggregate number and 
amount of automobile loans for each census tract in which the bank 
originated or purchased an automobile loan and the number and amount of 
those loans made to low- and moderate-income borrowers. As discussed in 
Section VIII, it is important to collect data for automobile loans 
because other market sources lack the comprehensiveness required to 
construct the necessary metrics and because automobile loans are an 
important credit need in some markets.
    The agencies propose to not publish automobile lending data for 
individual banks in the form of a data set for all reporting banks. 
Given that automobile lending data is not required under the current 
CRA regulations, the agencies are mindful of limiting the use of 
collected and reported automobile lending data as appropriate. The 
agencies seek feedback on whether, alternatively, it would be useful to 
publicly disclose county-level automobile lending data in the form of a 
data set. In order to reduce burden associated with reporting 
automobile loans for banks with assets of over $10 billion, the 
agencies are also exploring the feasibility, including costs, of 
developing a certified geocoding and aggregation platform in the future 
that banks could use to geocode and aggregate their data.
    A bank that qualifies for evaluation under the small bank 
performance standards but elects evaluation under the metrics-based 
Retail Lending Test would not be required to collect, maintain, and 
report the data required for large banks in a prescribed interagency 
format. Instead, as proposed for intermediate banks, examiners would 
use data the bank maintained in its own format or reported under other 
regulations. Data for these banks would be measured against the 
benchmarks created using data from banks with assets over $10 billion.
Request for Feedback
    Question 156. Should banks collect and report an indicator for 
whether the loan was made to a business or farm with gross annual 
revenues of $250,000 or less or another gross annual revenue threshold 
that better represents lending to the smallest businesses or farms 
during the interim period before the CFPB Section 1071 Rulemaking is in 
effect?
    Question 157. Would the benefits of requiring home mortgage data 
collection by non-HMDA reporter large banks that engage in a minimum 
volume of mortgage lending outweigh the burden associated with such 
data collection? Does the further benefit of requiring this data to be 
reported outweigh the additional burden of reporting?
    Question 158. Should large banks with assets of $10 billion or less 
be required to collect, maintain, and report automobile lending data? 
If so, would a longer transition period for large banks with assets of 
$10 billion or less to begin to collect, maintain, and report 
automobile lending data (such as an additional 12 or 24 months beyond 
the transition period for large banks with assets of over $10 billion) 
make this alternative more feasible? Does the added value from being 
able to use these data in the construction of metrics and benchmarks 
outweigh the burden involved in requiring data collection and reporting 
by these banks?
    Question 159. Should the agencies streamline any of the proposed 
data fields for collecting and reporting automobile data? If so, would 
it still allow for constructing comprehensive automobile lending 
metrics?
    Question 160. Should the agencies consider publishing county-level 
automobile lending data in the form of a data set?

D. Community Development Financing Activity Data

    The agencies propose to require large banks, intermediate banks 
that opt into the Community Development Financing Test, and wholesale 
and limited purpose banks to collect and maintain community development 
financing data. Under the proposal, large banks and wholesale and 
limited purpose banks would be required to collect and maintain the 
information in a format prescribed by the agencies, while intermediate 
banks that opt into the Community Development Financing Test would have 
the choice to either collect and maintain community development 
financing data in the prescribed format or a format of the bank's 
choosing. Large banks and wholesale and limited purpose banks would be 
required to report community development financing data. Small banks 
would not be subject to regulatory data collection and maintenance 
requirements for community development financing activities, even if 
they request consideration for community development financing 
activities.
    The proposed community development financing data would be 
necessary to construct community development financing metrics and 
benchmarks for large banks, which would be used to consistently 
evaluate the dollar amount of a bank's community development lending 
and investments as discussed in Section XII.
1. Data Required To Be Collected and Maintained
    Under the proposal, large banks and wholesale and limited purpose 
banks would be required to collect and maintain the information listed 
in Sec.  __.42(a)(5)(ii). The data fields include specific requirements 
under the categories of general information, such as the name of 
organization or entity, activity type, community development purpose; 
activity detail, which may include, for example, whether the activity 
was a low-income housing tax credit investment or a multifamily 
mortgage loan; indicators of the impact of the activity; location 
information; other details, such as indicators of whether the bank has 
retained certain types of documentation, such as rent rolls, to assist 
with verifying the eligibility of the activity; and the allocation of 
the dollar value of the activity to specific geographies, if available. 
Collecting and maintaining individual activity-level data would allow 
examiners to verify that activities qualify. Additionally, this 
information would allow examiners to review the impact and 
responsiveness of community development activities. The agencies intend 
to develop a template that would help banks to gather information in a 
consistent manner. Information provided on the template would help the 
agencies understand the impact and responsiveness of activities during 
the Impact Review of community development financing activities.

[[Page 34000]]

    Intermediate banks that opt to be evaluated under the Community 
Development Financing Test would need to collect and maintain the 
information listed in Sec.  __.42(a)(5)(ii), but would have the choice 
to either collect and maintain this community development financing 
data in a format of the bank's choosing, or in the prescribed format, 
and would not be required to report the data. For intermediate banks 
evaluated under the status quo intermediate bank community development 
evaluation, banks would not be required to collect and maintain data. 
Consistent with the current approach, these banks would continue to 
need to demonstrate that community development activities qualify.\288\ 
This approach is intended to appropriately tailor data collection and 
reporting requirements to account for differences in bank capacity.
---------------------------------------------------------------------------

    \288\ See Q&A Sec.  __.12(h)-8.
---------------------------------------------------------------------------

2. Data Reporting
    The agencies propose to require large banks and wholesale and 
limited purpose banks to report the community development financing 
data discussed above, with the exception of the name of organization or 
entity supported, which the agencies believe is sufficient to be 
collected and maintained, and does not need to be reported. This data 
would be used to construct metrics and benchmarks for evaluating bank 
community development financing performance. The benchmarks would 
provide consistent data points to banks, the agencies, and the public 
about the level of community development activities in an area and 
would provide context for interpreting a bank's community development 
financing metric, as discussed in Section XII. An intermediate bank 
could opt to report community development financing data but would not 
be required to do so.
    The agencies propose that community development financing data be 
reported to the agencies at the individual activity level. The agencies 
believe this information is necessary to construct the proposed 
community development financing metrics and benchmarks and to inform 
both the quantitative and qualitative analyses. Individual activity-
level data would also allow for the agencies to allocate activities 
that benefit multiple counties or states through a standard 
methodology, as discussed in Section XII, if a specific allocation is 
not provided by the bank. The agencies considered that reported data at 
the individual activity level would not require banks to aggregate 
community development data at the county level, which may be more 
burdensome. The agencies seek feedback on whether, rather than 
reporting data at the individual activity level, it would be more 
appropriate and sufficient to report data at the county-level for each 
institution. The agencies also seek feedback on whether to require 
banks to report the location of each activity in one of two ways, at 
the bank's option: (i) In the form of a specific address or addresses; 
or (ii) in the form of a census tract or tracts in which the activity 
was located. This would allow banks either to avoid disclosing the 
specific address of an activity in reported data if they wish to do so, 
or to avoid having to geocode their activities at the census tract 
level if they do not wish to do so.
Request for Feedback
    Question 161. How might the format and level of data required to be 
reported affect the burden on those banks required to report community 
development financing activity data, as well as the usefulness of the 
data? For example, would it be appropriate to require reporting 
community development financing data aggregated at the county-level as 
opposed to the individual activity-level?
    Question 162. What other steps can the agencies take, or what 
procedures can the agencies develop, to reduce the burden of the 
collection of additional community development financing data fields 
while still ensuring adequate data to inform the evaluation of 
performance? How could a data template be designed to promote 
consistency and reduce burden?

E. Retail Services and Products Data

    The agencies propose to require large banks to collect and maintain 
information to support the analysis of a bank's delivery systems and 
credit and deposit products, as described in Section XI, as applicable. 
Certain data collection and maintenance requirements would be tailored 
to only apply to large banks with assets of over $10 billion. 
Intermediate and small banks, at their option, would provide examiners 
with information on retail services and products activities in the 
format used in the bank's normal course of business, if the bank seeks 
additional consideration for these activities. As previously discussed, 
retail services performance data is not currently collected and 
reported to the agencies; instead, banks provide certain retail 
services information in the bank's public file.
    Required Data Collection. Under the proposal, large banks would be 
required to collect and maintain information listed in Sec.  
__.42(a)(4)(ii) to support the proposal's branch analysis, including: 
(i) Number and location of branches; (ii) whether branches are full-
service facilities (by offering both credit and deposit services) or 
limited-service facilities; (iii) locations and dates of branch 
openings and closings; (iv) hours of operation by location; and (v) 
services offered at each branch that are responsive low- and moderate-
income individuals and census tracts. This information is consistent 
with the information currently provided in a bank's public file.
    To support the analysis of remote service facilities availability, 
the agencies propose requiring information similar to what is being 
requested for branches, including: (i) Number and location of remote 
service facilities; (ii) whether remote service facilities are deposit-
taking, cash-advancing, or both; (iii) locations and dates of remote 
service facility openings and closings; and (iv) hours of operation of 
each remote service facility. The requirement to collect remote service 
facilities data would be a change from the current practice, under 
which banks have the option to provide ATM location data in a bank's 
public file. The agencies believe proposing to require data collection 
for branches and remote service facilities is appropriate in light of 
the proposed changes (as described in Section XI) which make greater 
use of benchmarks in the evaluation of a bank's delivery systems. The 
agencies seek feedback on whether to require the collection and 
maintenance of branch and remote service availability data as proposed 
or, alternatively, whether to continue with the current practice of 
reviewing the data from the bank's public file (i.e., where branch data 
is required and remote service facility availability is optional).
    In addition, the proposal's data collection and maintenance 
requirements would facilitate a review of whether digital and other 
delivery systems are responsive to the needs of low- and moderate-
income individuals. Specifically, the proposal would require large 
banks with assets of over $10 billion to collect and maintain 
information on: (i) The range of services and products offered through 
digital and other delivery systems and (ii) digital activity by 
individuals in low-, moderate-, middle-, and upper-income census 
tracts, respectively, such as the number of savings and checking 
accounts opened through digital and other delivery systems and 
accountholder usage of digital and other delivery systems. The agencies

[[Page 34001]]

acknowledge that banks may have varying methods and means for assessing 
the responsiveness of their digital delivery systems to low- and 
moderate-income individuals. Therefore, the agencies seek feedback on 
whether to require that these specific data points be used to evaluate 
a bank's digital and other delivery systems, or whether to allow banks 
the flexibility to determine which data points to collect, maintain, 
and provide for evaluation.
    For the proposed review of responsive deposit products, the 
agencies would require large banks with assets of over $10 billion to 
collect and maintain: (i) The number of responsive deposit accounts 
that were opened and closed for each calendar year in low-, moderate-, 
middle-, and upper income census tracts, respectively; and (ii) the 
percentage of responsive deposit accounts compared to total deposit 
accounts for each year of the evaluation period. These data would also 
be required for large banks with assets of $10 billion or less that 
elect to have their responsive deposit products evaluated. The agencies 
seek feedback on these requirements, and whether any other specific 
data points would support the evaluation of responsive deposit 
products.
    Format for Information Collection. The agencies are considering 
whether to use a standardized template to facilitate the collection and 
maintenance of data for the Retail Services and Products Test. A 
template would potentially offer flexibility for providing quantitative 
and qualitative information, which may change over time. This 
flexibility may be particularly relevant for aspects of retail services 
that banks have not consistently provided to the agencies previously, 
such as for digital and other delivery systems and deposit products.
Request for Feedback
    Question 163. Should the agencies require the collection and 
maintenance of branch and remote service availability data as proposed, 
or alternatively, should the agencies continue with the current 
practice of reviewing this data from the bank's public file?
    Question 164. Should the agencies determine which data points a 
bank should collect and maintain to demonstrate responsiveness to low- 
and moderate-income individuals via the bank's digital and other 
delivery systems such as usage? Alternatively, should the agencies 
grant banks the flexibility to determine which data points to collect 
and maintain for evaluation?
    Question 165. Are the proposed data collection elements for 
responsive deposit products appropriate, or are there alternatives to 
the proposed approach that more efficiently facilitate the evaluation 
of responsive deposit products? Should the agencies require collection 
and maintenance of specific data elements for the evaluation of 
responsive deposit products? Alternatively, should the agencies grant 
banks the flexibility to determine which data points to collect and 
maintain for evaluation?
    Question 166. Does the proposed retail services data exist in a 
format that is feasibly transferrable to data collection, or would a 
required template provided by the agencies be sufficient in the 
collection of retail services and products information?
    Question 167. What steps can the agencies take to reduce burden of 
the proposed information collection requirements while still ensuring 
adequate information to inform the evaluation of services?
    Question 168. Should large banks with assets of $10 billion or less 
be required to collect and maintain data on deposit product 
responsiveness and/or digital and other delivery systems? If so, would 
a longer transition period to begin to collect and report such data 
(such as an additional 12 or 24 months beyond the transition period for 
large banks with assets of over $10 billion) make this alternative more 
feasible? Does the added value from being able to use this data 
outweigh the burden involved in requiring data collection by these 
banks?

F. Community Development Services Data

    The agencies propose to require that large banks with assets of 
over $10 billion collect and maintain the community development 
services information listed in Sec.  __.42(a)(6), in machine readable 
form, as prescribed by the agencies. The data required to be collected 
and maintained would include the number of full-time equivalent 
employees at the facility-based assessment area, state, multistate MSA, 
and institution levels; total number of community development services 
hours performed by the bank in each facility-based assessment area, 
state, multistate MSA, and in total; date of activity; name of 
organization or entity; community development purpose; capacity served; 
whether the activity is related to the provision of financial services; 
and the location of the activity. To improve consistency in 
evaluations, the agencies intend to develop a standardized template for 
community development services data. Large banks with assets of $10 
billion or less would have the option, but would not be required, to 
collect and maintain the community development services data in Sec.  
__.42(a)(6); if they do so, they would have the option to collect and 
maintain data in their own format, or to use the prescribed template. 
This information would facilitate the proposed evaluation of a bank's 
community development service activities.
    In addition, the agencies propose that large banks with assets of 
over $10 billion would report the number of full-time equivalent 
employees at the facility-based assessment area, state, multistate MSA, 
and institution levels; and the total number of community development 
services hours performed by the bank in each facility-based assessment 
area, state, multistate MSA, and in total. This information is 
necessary to compute the proposed community development services 
metric, and the agencies do not believe it is necessary to require 
banks to report additional community development services information. 
The reported data would be used to develop a standard quantitative 
measure to evaluate community development services for banks with 
assets of over $10 billion.
    The agencies seek feedback on whether large banks with assets of 
$10 billion or less should also be required to collect and maintain 
community development service data in a machine readable form, as 
prescribed by the agencies, equivalent to the data required to be 
collected and maintained by large banks with assets of over $10 
billion. The agencies consider that this alternative may support more 
consistency and clarity in evaluations of community development 
services for all large banks.
Request for Feedback
    Question 169. Should large banks with assets of $10 billion or less 
be required to collect community development services data in a machine 
readable form, as prescribed by the agencies, equivalent to the data 
required to be collected and maintained by large banks with assets of 
over $10 billion? Under this alternative, should large banks with 
assets of $10 billion or less have the option of using a standardized 
template or collecting and maintaining the data in their own format? If 
large banks with assets of $10 billion or less are required to collect 
and maintain community development services data, would a longer 
transition period for these banks to begin to collect and maintain 
deposits data (such as an additional 12 or 24 months beyond the

[[Page 34002]]

transition period for large banks with assets of over $10 billion) make 
this alternative more feasible? Does the added value from being able to 
use this data in the construction of a metric outweigh the burden 
involved in requiring data collection by these banks?
    Question 170. Should large banks with assets of over $10 billion be 
required to collect, maintain, and report data on the number of full-
time equivalent employees at the assessment area, state, multistate MSA 
and institution level in order to develop a standardized metric to 
evaluate community development service performance for these banks?

G. Data Collection and Reporting Requirements for Operations 
Subsidiaries, Operating Subsidiaries, and Affiliates

    The proposal recognizes that a significant amount of bank activity 
may be conducted through a bank's operations subsidiaries, operating 
subsidiaries, and affiliates, necessitating appropriate data collection 
and reporting requirements. These data collection, maintenance, and 
reporting requirements are consistent with the requirements of the bank 
being evaluated.
1. Operations Subsidiaries and Operating Subsidiaries
    The agencies propose to require bank operations subsidiaries and 
operating subsidiaries, as applicable, that engaged in retail lending, 
retail services and products, community development financing and 
community development services activities to collect, maintain, and 
report such activities for purposes of evaluating the bank's 
performance tests, consistent with the requirements for the bank being 
evaluated. This would enable the agencies to capture all of the 
activities of operations subsidiaries and operating subsidiaries in CRA 
evaluations appropriately, in recognition that banks exercise a high 
level of ownership, control, and management of their operations 
subsidiaries or operating subsidiaries, as applicable.
2. Other Affiliates
    The agencies propose to require a bank that elects to have its 
affiliate activity considered, to also collect, maintain, and report 
the data for these activities that the bank would have collected, 
maintained, and reported if it engaged in these activities directly. 
Under the proposal, a bank that elects to have the agencies consider 
loans by an affiliate, for purposes of the Retail Lending Test, and 
loans or investments for purposes of the Community Development 
Financing Test, Community Development Financing Test for Wholesale or 
Limited Purpose Banks, or under an approved strategic plan, would be 
required to collect, maintain, and report those loans and investments 
data. For home mortgage loans, the bank would also be prepared to 
identify the home mortgage loans reported by the affiliate under 
Regulation C, if applicable, or as required under proposed Sec.  
__.42(a)(3) had the loans been originated or purchased by the bank.

H. Data for Delineating Assessment Areas

    Under the proposal, large banks would have data collection and 
reporting requirements for assessment area delineations. All other 
banks (small and intermediate banks) would be required to collect and 
maintain data as required for inclusion in their CRA public files, as 
is currently required. These banks would not have to report assessment 
area data. Small and intermediate banks could opt to use the large bank 
data collection and reporting format for providing data to examiners 
during their evaluation. For all size banks, the agencies would include 
assessment area delineations in performance evaluations.
1. Facility-Based Assessment Areas
    The proposal's requirements for large bank reporting of facility-
based assessment areas would include a list for each assessment area 
showing the states, MSAs, metropolitan divisions, and nonmetropolitan 
counties within each facility-based assessment area. Under the 
proposal, large banks would be required to delineate at least full 
counties for facility-based assessment areas.
2. Retail Lending Assessment Areas
    Under the proposal, large banks would be required to collect and 
report annually to the agencies a list showing the MSAs and counties 
within each retail lending assessment area. The agencies could verify 
retail lending assessment area designations using HMDA and CRA small 
business/small farm data, and the agencies could explore calculating 
retail lending assessment areas for banks.
3. Intermediate and Small Bank Requirements
    As mentioned earlier, small and intermediate banks would not have 
to report assessment area data under the proposal. Instead these banks 
would continue to maintain a CRA public file with required information, 
including: (i) A list of the bank's branches, their street addresses 
and census tract numbers; (ii) a list of branches opened or closed by 
the bank during the current year and each of the prior two calendar 
years, their street addresses and census tract numbers; and (iii) a map 
of each assessment area showing the boundaries of the area and 
identifying each state, county, and census tract contained within the 
area, either on the map or in a separate list.
Request for Feedback
    Question 171. Should small banks that opt to be evaluated under the 
metrics-based Retail Lending Test be required to collect, maintain, and 
report related data or is it appropriate to use data that a small bank 
maintains in its own format or by sampling the bank's loan files?
    Question 172. Would a tool to identify retail lending assessment 
areas based on reported data be useful?

I. Disclosure of HMDA Data by Race and Ethnicity

    Currently, CRA performance evaluations include significant data on 
mortgage lending to low- and moderate-income borrowers and low- and 
moderate-income census tracts, including the number and percentage of 
loans made by the bank being evaluated. These data also compare the 
bank's lending to the aggregate lending in the assessment area, 
distributed by borrower income and geography, as well as the 
demographic make-up of the assessment area being evaluated. This is 
done on the basis of income only (low, moderate, middle, and upper). 
CRA performance evaluations do not currently report data on lending by 
race or ethnicity. However, for mortgage lending, race and ethnicity 
data are already collected and reported by most banks subject to the 
large bank CRA lending test through HMDA. These data are not included 
in any organized, easy-to-read format in the CRA performance 
evaluation.
    The agencies propose to disclose in the CRA performance evaluation 
of a large bank the distribution of race and ethnicity of the bank's 
home mortgage loan originations and applications in each of the bank's 
facility-based assessment areas, and as applicable, in its retail 
lending assessment areas. Under the proposal, disclosure would be made 
for each year of the evaluation period using data currently reported 
under HMDA. The agencies would disclose the number and percentage of 
the bank's home mortgage loan

[[Page 34003]]

originations and applications by race and ethnicity and compare that 
data against the demographic data of the assessment area and the 
aggregate mortgage lending of all lenders in such area. The disclosure 
of race and ethnicity of the bank's home mortgage loan originations and 
applications on the bank's CRA performance evaluation would have no 
direct impact on the conclusions or ratings of the bank and would not 
constitute a lending analysis for the purpose of evaluating redlining 
risk factors as part of a fair lending examination. However, separate 
from this proposed disclosure, to the extent that analysis of HMDA 
reportable mortgage lending, along with additional data or information 
evaluated during a fair lending examination, leads the relevant agency 
to conclude that discrimination occurred, a bank's CRA rating may be 
affected (see proposed Sec.  __.28(d)).
    The agencies believe that public disclosure of these data in each 
assessment area would increase the transparency of a bank's mortgage 
lending operations.
Request for Feedback
    Question 173. Should the agencies disclose HMDA data by race and 
ethnicity in large bank CRA performance evaluations?

XX. Content and Availability of Public File, Public Notice by Banks, 
Publication of Planned Examination Schedule, and Public Engagement

    The agencies recognize that transparency and public engagement are 
fundamental aspects of the CRA evaluation process and aim to reinforce 
these objectives in this rulemaking. In order to ensure that a bank's 
CRA performance evaluation and related information are more readily 
accessible to the public, the agencies propose allowing any bank with a 
public website to post its CRA public file there. The proposal also 
clarifies the agencies' treatment of public comments in connection with 
CRA examinations. The agencies are also proposing to create a process 
whereby the public can provide input on community credit needs and 
opportunities in specific geographic areas.

A. Public File

1. Current Content Required in Public File
    Under the current CRA standards, a bank is required to maintain a 
public file that includes specific information on the bank's current 
business model, services, and most recent performance evaluation. The 
public file must include all written comments received from the public 
for the current year and each of the two prior calendar years that 
specifically relate to the bank's performance in helping to meet 
community credit needs, along with any responses by the bank.\289\ The 
public file is also required to contain: A list of the bank's current 
branches, their street addresses, and geographies,\290\ noting branches 
that have opened or closed during the evaluation period; \291\ a list 
of retail products and services, and if a bank chooses, information 
regarding alternative delivery systems; \292\ and a map of each of the 
bank's assessment areas.\293\
---------------------------------------------------------------------------

    \289\ 12 CFR __.43(a)(1).
    \290\ 12 CFR __.43(a)(3).
    \291\ 12 CFR __.43(a)(4).
    \292\ 12 CFR __.43(a)(5).
    \293\ 12 CFR __.43(a)(6).
---------------------------------------------------------------------------

    A bank, except a small bank or a bank that was a small bank in the 
prior calendar year, must include, when applicable, for each of the 
prior two calendar years: (i) The number and amount of consumer loans 
to low-, moderate-, middle- and upper-income individuals, located in 
low-, moderate-, middle- and upper-income census tracts; and located 
inside the bank's assessment areas and outside of the bank's assessment 
areas.\294\ The bank must also include a copy of the CRA Disclosure 
Statement.\295\ HMDA reporting institutions must include a statement in 
the public file that their HMDA data may be obtained on the CFPB's 
website.\296\
---------------------------------------------------------------------------

    \294\ 12 CFR __.43(b)(1)(i).
    \295\ 12 CFR __.43(b)(1)(ii).
    \296\ 12 CFR __.43(b)(2).
---------------------------------------------------------------------------

    A small bank or a bank that was a small bank during the prior 
calendar year must include in its public file, (i) the bank's loan-to-
deposit ratio for each quarter; and (ii) if it elects to be evaluated 
under other performance tests, any additional required 
information.\297\
---------------------------------------------------------------------------

    \297\ 12 CFR __.43(b)(3).
---------------------------------------------------------------------------

    A bank that received less than a ``Satisfactory'' rating during its 
most recent examination must include a description of its current 
efforts to improve its performance in helping to meet the credit needs 
of its entire community, in its public file.\298\ This description must 
be updated quarterly.
---------------------------------------------------------------------------

    \298\ 12 CFR __.43(b)(5).
---------------------------------------------------------------------------

    A bank may opt to add any other information to the public 
file.\299\
---------------------------------------------------------------------------

    \299\ 12 CFR __.43(a)(7).
---------------------------------------------------------------------------

2. Proposed Clarification to Specific Requirements for Information in 
Public File
    In general, the agencies propose to maintain the current 
requirements regarding information that banks are required to include 
in their public file, with additional clarification regarding specific 
requirements. The agencies propose using the term ``census tracts'' 
instead of the more general term ``geographies'' to specify the level 
of geography for information on current branches and branches that have 
been opened or closed during the current year and each of the prior two 
calendar years. The agencies also propose changes to the information 
that large banks would need to include in their public file.
    Large banks would be required to include assessment area maps that 
include both their facility-based assessment areas and, when 
applicable, retail lending assessment areas that identify the census 
tracts contained within those areas. In addition, large banks that are 
subject to data reporting requirements described in Sec.  __.42 would 
be required to include in their public file a written notice that the 
bank's CRA Disclosure Statement pertaining to the bank, its operations 
subsidiaries, or operating subsidiaries, as applicable, and its other 
affiliates, if applicable, may be obtained on the FFIEC's website. The 
bank would be required to include the written notice in the public file 
within three business days of its receipt from the FFIEC.
    A bank of any size that received less than a ``Satisfactory'' 
rating during its most recent examination would continue to be required 
to include a description of its current efforts to improve its 
performance in its public file. The agencies propose additional 
clarification specifying that the description would be required to be 
updated quarterly by March 31, June 30, September 30, and December 31, 
respectively.
3. Current Requirements for Location of Public Information
    Under the current CRA regulations, a bank's entire public file must 
be available at its main office. If a bank operates in more than one 
state, it must keep a file at one branch office in each of these 
states. Members of the public may ask to inspect this file at any time 
during the bank's branch operating hours. Upon request, a bank branch 
must also provide for inspection, within five days, all of the 
information in the public file relating to the branch's assessment 
area. When requested, a

[[Page 34004]]

bank must also provide a paper copy of its public CRA file, and it is 
allowed to charge a reasonable fee to cover copying and mailing costs.
4. Proposed Approach for Location of Public Information
    The agencies propose to make a bank's CRA public file more 
accessible by allowing any bank with a public website to include its 
CRA public file on the bank's public website. Banks would be allowed to 
retain their public file in digital form only and make paper copies 
available to the public upon request. Consequently, members of the 
public interested in the bank's performance in other communities served 
by the bank would be able to view the entire public file. If a bank 
does not maintain a public website, the proposal provides that the 
public file information would be required to be maintained at the main 
office and, if an interstate bank, at one branch office in each state. 
Furthermore, banks that do not maintain a public website would have to 
maintain, at each branch, a copy of the public section of the bank's 
most recent performance evaluation and a list of services provided by 
the branch.
    This proposal would increase the ease of accessibility of a bank's 
public file for interested members of the public. A bank would still be 
required to provide, upon request, copies of its public file to members 
of the public, either in paper or in digital form, and may continue to 
charge a reasonable fee for copying and mailing costs. A bank would 
also continue to be required to ensure that its public file includes 
information from each of the three previous years, as is the case 
currently.

B. Public Notice by Banks

1. Current Approach for Public Notices
    Currently, a bank must provide the appropriate public notice in the 
public lobby of its main office and each of its branches, as set forth 
in appendix B, that includes information about the availability of a 
bank's public file, the appropriate Federal banking agency's CRA 
examination schedule, and how a member of the public may provide public 
comment. A branch of a bank having more than one assessment area shall 
include certain content in the notice for branch offices. Only a bank 
that is an affiliate of a holding company, that is not prevented by 
statute from acquiring additional banks, shall include in the notice 
how the public can request information about applications covered by 
the CRA filed by the bank's holding company.
2. Proposed Approach for Public Notices
    The agencies propose to continue to require a bank to provide in 
the public area of its main office and each of its branches the public 
notice that would be set forth in proposed appendix F. Only a branch of 
a bank having more than one facility-based assessment area would be 
required to include certain content in the notice for branch offices. 
Notices are not required for retail lending assessment areas. A bank 
that is an affiliate of a holding company, that is not prevented from 
acquiring additional banks, must include the last sentence of the 
notices.

C. Publication of Planned Examination Schedule

1. Current Approach for Publication of Planned Examination Schedule
    Under the current regulations, the agencies publish at least 30 
days in advance of the beginning of each calendar quarter a list of 
banks scheduled for CRA examinations in that quarter.
2. Proposed Approach for Publication of Planned Examination Schedule
    The agencies propose to codify the current practice of publishing 
at least 60 days in advance of the beginning of each calendar quarter a 
list of banks scheduled for CRA examinations during the next two 
quarters. This additional notice to the public provides stakeholders 
more time to comment on a bank's CRA performance in advance of the 
examination.
    Further, the agencies propose to codify the practice of forwarding 
all public comments received regarding a bank's CRA performance to the 
bank and may also publish the public comments on the appropriate 
Federal banking agency's public website. These public comments would be 
taken into account in connection with the bank's next scheduled CRA 
examination.

D. Public Engagement

1. Current Approach for Public Engagement
    Currently, members of the public may submit comments to the 
agencies regarding a bank's CRA performance over the relevant 
evaluation period. Members of the public may also submit comments in 
connection with banking applications, including in connection with bank 
mergers and acquisitions.
2. Proposed Approach for Public Engagement
    The agencies encourage communication between members of the public 
and banks, including through the submission of public comments 
regarding community credit needs and opportunities as well as a bank's 
record of helping to meet community credit needs. To advance this 
public engagement, the agencies intend to establish a way for the 
public to provide feedback on community credit needs and opportunities 
in specific geographies, as a complement to, but distinct from, 
feedback on individual bank performance. In addition, such an approach 
would be a complement to, not a substitute for, examiners seeking 
feedback on bank performance from members of a bank's community as part 
of the CRA evaluation.
    Further, the agencies are considering whether it would be feasible, 
given the timing of data availability and data verification practices, 
for the agencies to publish certain retail lending and community 
development financing metrics and branch distribution information in 
advance of completing an examination to provide additional information 
to the public.
Request for Feedback
    Question 174. Are there other ways the agencies could encourage 
public comments related to CRA examinations, including any suggested 
changes to proposed Sec.  __.46?
    Question 175. Is there additional data the agencies should provide 
the public and what would that be?
    Question 176. Should the agencies publish bank-related data, such 
as retail lending and community development financing metrics, in 
advance of an examination to provide additional information to the 
public?
    Question 177. Should the agencies ask for public comment about 
community credit needs and opportunities in specific geographies?

XXI. Transition

    The proposal would establish an effective date for the final rule 
the first day of the first calendar quarter that begins at least 60 
days after publication in the Federal Register. The agencies also 
propose applicability dates for various provisions of the regulations 
which are applicable on, or over a period of time after, the effective 
date of the final rule.
    The agencies believe varying applicability dates would provide 
banks with time to transition from the current regulations to the 
proposed regulations for: Collecting, maintaining, and reporting data; 
transitioning systems; and establishing policies and procedures 
necessary for the orderly

[[Page 34005]]

implementation of the proposed regulatory framework.
    The agencies intend that, during the period between the final 
rule's effective date and the applicability dates in the final rule for 
certain provisions (transition period), the agencies' current CRA 
regulations will remain in effect for these provisions. The agencies 
would retain the authority to ensure an orderly transition between the 
two CRA frameworks and expect to issue guidance regarding the 
applicability of the relevant CRA framework during this time. The 
agencies also intend to include their current CRA regulations in 
agency-specific appendices of a final rule and to sunset these 
appendices as of the final applicability date, at which point all banks 
would need to be in compliance with all provisions of the final rule.

A. Applicability Dates for Certain Amendments

    The agencies propose that the following provisions become 
applicable on the effective date of the rule: (i) Authority, purposes, 
and scope; (ii) facility-based assessment area delineation provisions; 
(iii) small bank performance standards; (iv) intermediate bank 
community development performance standards; (v) effect of CRA 
performance on applications; (vi) content and availability of public 
file; (vii) public notice by banks; (viii) publication of planned 
examination schedule; and (ix) public engagement. The agencies believe 
that setting an applicability date for these provisions on the rule's 
effective date is appropriate and would not present significant 
implementation burden to banks because only minor amendments are 
proposed to these sections of the agencies' current CRA regulations.

B. Applicability Dates for New Requirements

    For other provisions, the agencies propose an applicability date of 
approximately 12 months after publication of a final rule for bank 
activities conducted on that date and forward.\300\ These provisions 
include: (i) Definitions (except for the revised definitions related to 
small business loans and small farms loans); \301\ (ii) community 
development definitions; (iii) qualifying activities confirmation and 
illustrative list of activities; (iv) retail lending assessment areas; 
\302\ (v) areas for eligible community development activity; (vi) 
performance tests, standards, and ratings, in general (Retail Lending 
Test, Retail Services and Products Test, Community Development 
Financing Test, Community Development Services Test, Community 
Development Financing Test for Wholesale and Limited Purpose Banks, and 
Strategic Plans); (vii) data collection and certain data reporting 
requirements; and (viii) Impact Review of Community Development 
Activities.
---------------------------------------------------------------------------

    \300\ Loans, investments, or services that were undertaken prior 
to the applicability date that were eligible for CRA consideration 
at the time would be considered at the subsequent CRA evaluation.
    \301\ As explained elsewhere in this proposal, the agencies 
would continue to maintain the current definitions related to small 
business loans and small farm loans until such time as the CFPB 
finalizes and implements its Section 1071 Rulemaking, and section 
1071 data becomes available.
    \302\ As set forth in Sec.  __.17 of the proposed CRA 
regulation, a large bank would designate retail lending assessment 
areas in any single MSA or in all nonmetropolitan counties within a 
single state if it originated over 100 home mortgage loans or over 
250 small business loans in each of the two preceding years in those 
geographic areas.
---------------------------------------------------------------------------

    Under this approach, banks would have a one-year transition period 
to prepare for the above provisions to go into effect. The agencies are 
cognizant that banks would need to adjust systems and train personnel 
to prepare for the implementation of a final CRA rule. Therefore, the 
agencies would set an applicability date that is appropriate based on 
the time of year a final rule is issued, including consideration of 
whether the beginning of a quarter or of a calendar year is 
appropriate.
    For example, assume that a final rule that includes a 12-month 
transition period is published at the beginning of Year 1. Bank 
activity in Year 2 would fall under the new definitions and performance 
tests included in this proposal. In this example, a large bank's 
activities in Year 2 would be evaluated under the proposed Retail 
Lending Test, Retail Services and Products Test, Community Development 
Financing Test, and Community Development Services Test at the bank's 
next CRA examination (beginning in or after Year 3, as explained 
below). Also beginning in Year 2, large banks would be required to 
establish retail lending assessment areas, and bank activity in these 
areas would be evaluated at the bank's next CRA examination (beginning 
in or after Year 3, as explained below). In addition, banks would be 
expected to begin data collection and maintenance requirements for 
activities, as applicable, in Year 2.

C. Transition Date for the Definition of Small Business Loans and Small 
Farm Loans

    The agencies propose transitioning from the current small business 
loan and small farm loan definitions based on the Call Report and 
instead leveraging the CFPB's proposed data collection on loans to 
businesses, including farms, with gross annual revenues of $5 million 
or less. In the short term, the small business loan definition, small 
farm loan definition, and the current data collection and reporting 
requirements and processes that banks are familiar with would remain 
the same.
    The agencies propose an effective date for the proposed small 
business and small farm definitions to be on or after the CFPB would 
make effective its final rule implementing section 1071. Alternatively, 
the agencies are also considering a 12-month period to transition their 
small business and small farm definitions to the new CFPB definitions, 
once that rulemaking is finalized.

D. Transition Dates for Data Collection, Reporting, and Disclosure 
Requirements

    Banks that would be required to collect new data under the proposal 
starting 12 months after publication of a final rule, would be required 
to report such data to the agencies by April 1 of the year following 
the first year of data collection. Thereafter, banks would be required 
to report collected data on an annual basis by April 1 of the year 
following the calendar year for which the data was collected. The 
agencies intend to eliminate the small business loan and small farm 
loan data collection and reporting requirements under the CRA 
regulations after the CFPB's section 1071 data collection and reporting 
requirements are in place. Likewise, the agencies' data disclosure 
requirements would become applicable the year following the first year 
of data collection.
    The agencies believe that the applicability dates for these 
provisions would give banks sufficient time from the date the final 
rule would be published in the Federal Register to revise their systems 
for data collection and develop new procedures for implementation of 
the proposed regulatory framework.

E. Start Date for CRA Examinations Under the New Tests

    The agencies propose starting CRA examinations pursuant to the 
proposed evaluation framework and new tests, in Sec. Sec.  __.22 
through 28, beginning two years after publication of a final rule.

[[Page 34006]]

    This approach would encompass banks evaluated under one or more of 
the following proposed tests: Retail Lending Test, Retail Services and 
Products Test, Community Development Financing Test, Community 
Development Services Test, and Community Development Financing Test for 
Wholesale and Limited Purpose Banks. CRA examinations conducted after 
this start date would evaluate the bank's activities conducted during 
the prior year (for which the proposal's requirements related to bank 
activities would already be effective, as described above). CRA 
examinations conducted immediately after this start date would be 
conducted using modified procedures until peer data and applicable 
benchmarks become available.
    Likewise, the agencies' inclusion of HMDA demographic information 
in large banks' CRA performance evaluations would begin two years after 
publication of a final rule.
    As described above in Section IX, until the data collected under 
CFPB's Section 1071 Rulemaking becomes available, the agencies propose 
that where small business lending or small farm lending qualifies as a 
major product line, the bank would be evaluated on its distribution of 
loans to businesses or farms with gross annual revenues of $1 million 
or less, rather than separately to those with gross annual revenues of 
$250,000 or less and more than $250,000 but less than or equal to $1 
million. For these product lines, the agencies would calculate a single 
bank metric, market benchmark, and community benchmark corresponding to 
the percentage of the bank's loans to, the percentage of all reporter 
banks' loans to, and the percentage of local businesses or farms with 
gross annual revenues of less than $1 million.
    Because small banks would, under the proposal, continue to be 
evaluated in the same manner as under the current CRA regulations, no 
start date is proposed in connection with the small bank performance 
standards. The agencies believe that this approach would be appropriate 
because no adjustments would be needed to the bank's systems, policies, 
or procedures, and no additional burden would be imposed, in order to 
comply with the proposed rule. Similarly, because intermediate banks 
would, under the proposal, continue to be evaluated under the current 
community development test for intermediate banks, no transition period 
is proposed in connection with this test. Small banks opting into the 
Retail Lending Test and intermediate banks opting into the Community 
Development Financing Test would have the same start date for CRA 
examinations as established for other banks evaluated under these 
tests.

F. Strategic Plans

    The agencies propose that the strategic plan provisions in proposed 
Sec.  __.27 would be applicable 12 months after publication of a final 
rule. As a result, a bank seeking approval to be evaluated under a 
strategic plan after this date would submit its plan to its appropriate 
Federal banking agency for approval consistent with the new 
requirements for strategic plans under the agencies' proposed CRA 
regulations. The agencies also propose that the strategic plan 
provisions of the CRA regulations in effect one day before publication 
of a final rule (i.e., the agencies' current CRA regulations) would 
apply to any new strategic plan, including any plan that replaces an 
expired strategic plan, submitted for approval during the transition 
period between the date of publication of a final rule and before the 
applicability date of the proposed strategic plan provisions. A plan 
submitted during this transition period would remain in effect until 
the expiration date of the approved plan. Banks that submit for 
approval a new strategic plan or one that replaces an existing plan 
between the date on which a final rule is published and the date 12 
months after that publication date may submit their plans consistent 
with the requirements for strategic plans under the agencies' current 
CRA regulations. Such a plan would remain in effect until the 
expiration date of the plan.
    Further, the Board and the FDIC propose that a strategic plan in 
effect as of the publication date of a final rule would remain in 
effect until the expiration date of that plan. The OCC proposes that a 
strategic plan in effect as of the publication date of a final rule 
remains in effect until the expiration date of the plan, except for 
provisions that were not permissible under its CRA regulations as of 
January 1, 2022. The OCC's CRA regulations require this additional 
provision because the OCC may have approved some existing strategic 
plans under the OCC 2020 CRA final rule, which allowed strategic plan 
provisions that differ from the current CRA regulations. This 
additional provision is identical to the language included in the OCC's 
final rule rescinding the OCC 2020 CRA final rule.
Request for Feedback
    Question 178. The agencies ask for comment on the proposed 
effective date and the applicability dates for the various provisions 
of the proposed rule, including on the proposed start date for CRA 
examinations under the new tests.
    Question 179. Would it be better to tie the timing of a change to 
the proposed small business and small farm definitions to when the CFPB 
finalizes its Section 1071 Rulemaking or to provide an additional 12 
months after the CFPB finalizes its proposed rule? What are the 
advantages and disadvantages of each option?
    Question 180. When should the agencies sunset the agencies' small 
business loan and small farm loan definitions?

XXII. Regulatory Analysis

Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA), 
requires an agency to consider the impact of its proposed rules on 
small entities. In connection with a proposed rule, the RFA generally 
requires an agency to prepare an Initial Regulatory Flexibility 
Analysis (IRFA) describing the impact of the rule on small entities, 
unless the head of the agency certifies that the proposed rule will not 
have a significant economic impact on a substantial number of small 
entities and publishes such certification along with a statement 
providing the factual basis for such certification in the Federal 
Register. An IRFA must contain: (i) A description of the reasons why 
action by the agency is being considered; (ii) a succinct statement of 
the objectives of, and legal basis for, the proposed rule; (iii) a 
description of, and, where feasible, an estimate of the number of small 
entities to which the proposed rule will apply; (iv) a description of 
the projected reporting, recordkeeping, and other compliance 
requirements of the proposed rule, including an estimate of the classes 
of small entities that will be subject to the requirement and the type 
of professional skills necessary for preparation of the report or 
record; (v) an identification, to the extent practicable, of all 
relevant Federal rules that may duplicate, overlap with, or conflict 
with the proposed rule; and (vi) a description of any significant 
alternatives to the proposed rule that accomplish its stated 
objectives.
1. OCC
    The OCC currently supervises 1,103 institutions (commercial banks, 
trust companies, Federal savings associations, and branches or agencies 
of foreign banks),\303\ of which

[[Page 34007]]

approximately 655 are small entities under the RFA.\304\ The OCC 
estimates that the proposed rule would impact approximately 636 of 
these small entities. Among these 636 small entities, four are limited 
purpose banks, two are wholesale banks, and three are evaluated based 
on an OCC-approved strategic plan.
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    \303\ Based on data accessed using FINDRS on February 21, 2022.
    \304\ The OCC bases its estimate of the number of small entities 
on the SBA's size thresholds for commercial banks and savings 
institutions, and trust companies, which are $750 million and $41.5 
million, respectively. Consistent with the General Principles of 
Affiliation 13 CFR 121.103(a), the OCC counts the assets of 
affiliated financial institutions when determining if the OCC should 
classify an OCC-supervised institution as a small entity. The OCC 
uses December 31, 2021, to determine size because a ``financial 
institution's assets are determined by averaging the assets reported 
on its four quarterly financial statements for the preceding year.'' 
See footnote 8 of the U.S. SBA's Table of Size Standards.
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    The OCC reviews the costs associated with the activities necessary 
to comply with requirements in a proposed rule to estimate expenditures 
by entities subject to the rule.\305\ In doing so, the OCC estimates 
the total time required to implement the proposed rule and the hourly 
wage of bank employees who may be responsible for the tasks associated 
with achieving compliance with the proposed rule. For OCC cost 
estimates, the OCC uses a compensation rate of $114 per hour.\306\
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    \305\ The OCC uses broad categories to capture expenditures. The 
OCC does not attempt to separately identify the costs associated 
with each requirement.
    \306\ To estimate wages the OCC reviewed May 2020 data for wages 
(by industry and occupation) from the U.S. Bureau of Labor 
Statistics (BLS) for credit intermediation and related activities 
(NAICS 5220A1). To estimate compensation costs associated with the 
rule the OCC uses $114.17 per hour, which is based on the average of 
the 90th percentile for six occupations adjusted for inflation (2 
percent as of Q1 2021), plus an additional 33.4 percent for benefits 
(based on the percent of total compensation allocated to benefits as 
of Q4 2020 for NAICS 522: Credit intermediation and related 
activities).
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    Because the proposal maintains the current small bank evaluation 
process and the small bank performance standards, the proposal would 
not impose any new requirements on OCC-supervised small entities with 
less than $600 million in assets. However, the OCC believes that these 
small entities would need to review the proposed rule and ensure their 
policies and procedures are compliant. The OCC estimates the annual 
cost for small entities to conduct this review would be approximately 
$4,560 dollars per bank (40 hours x $114 per hour). For supervised 
small entities that are defined as intermediate banks under the 
proposal, i.e., banks with assets between $600 million and $750 
million, the proposal would add some additional compliance burden 
because these banks would be subject to the new Retail Lending Test, 
but these banks would not be subject to regulatory data collection and 
maintenance requirements for retail loans. Therefore, the OCC estimates 
the annual cost for these banks for this additional compliance burden 
(plus the cost of reviewing the proposed rule and ensuring that 
policies and procedures are compliant) would be approximately $9,120 
(80 hours x $114 per hour).
    In general, the OCC classifies the economic impact on a small 
entity as significant if the total estimated impact in one year is 
greater than 5 percent of the small entity's total annual salaries and 
benefits or greater than 2.5 percent of the small entity's total non-
interest expense. Based on these thresholds, the OCC estimates the 
proposed rule would have a significant economic impact on approximately 
zero entities, which is not a substantial number. Therefore, the OCC 
certifies that the proposed rule would not have a significant economic 
impact on a substantial number of small entities.
2. Board
    The Board is providing an IRFA with respect to the proposed rule. 
For the reasons described below, the Board believes that the proposal 
would not have a significant economic impact on a substantial number of 
small entities. The Board invites public comment on all aspects of its 
IRFA.
a. Reasons Action Is Being Considered
    The agencies are proposing changes to update and clarify their CRA 
regulations, which establish the framework and criteria by which the 
agencies assess a bank's record of helping to meet the credit needs of 
its community, including low- and moderate-income neighborhoods, 
consistent with safe and sound operations. Additional discussion of the 
rationale for the proposal is provided in the introductory paragraphs 
to, as well as throughout, the SUPPLEMENTARY INFORMATION.
b. Objectives of the Proposed Rule
    The CRA vests the agencies with broad authority to promulgate 
regulations to carry out the purposes of the CRA with respect to the 
institutions that each agency supervises.\307\ The proposed changes to 
the agencies' CRA regulations are guided by the specific objectives 
laid out in the introductory paragraphs of the SUPPLEMENTARY 
INFORMATION.
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    \307\ 12 U.S.C. 2905.
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c. Description and Estimate of the Number of Small Entities
    Board-supervised institutions that would be subject to the proposed 
rule are state member banks (as defined in section 3(d)(2) of the 
Federal Deposit Insurance Act of 1991), and uninsured state branches of 
a foreign bank (other than limited branches) resulting from certain 
acquisitions under the International Banking Act, unless such bank does 
not perform commercial or retail banking services by granting credit to 
the public in the ordinary course of business.
    The SBA has adopted size standards providing that depository 
institutions with average assets of less than $750 million over the 
preceding year (based on the institution's four quarterly Call Reports) 
are considered small entities.\308\ The Board estimates that 
approximately 450 Board-supervised small entities would be subject to 
the proposed rule.\309\ Of these, approximately 420 would be considered 
small banks under the proposal, and approximately 30 would be 
considered intermediate banks under the proposal. The proposal would 
define ``small bank'' to mean a bank that had average assets of less 
than $600 million in either of the prior two calendar years, and would 
define ``intermediate bank'' to mean a bank that had average assets of 
at least $600 million in both of the prior two calendar years and 
average assets of less than $2 billion in either of the prior two 
calendar years, in each case based on the assets reported on its four 
quarterly Call Reports for each of those calendar years.\310\
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    \308\ 87 FR 18627, 18630 (Mar. 31, 2022) (NAICS codes 522110-
522190). Consistent with the General Principles of Affiliation in 13 
CFR 121.103, the assets of all domestic and foreign affiliates are 
counted toward the $750 million threshold when determining whether 
to classify a depository institution as a small entity.
    \309\ The Board's estimate is based on total assets reported on 
Forms FR Y-9 (Consolidated Financial Statements for Holding 
Companies) and FFIEC 041 (Consolidated Reports of Condition and 
Income) for 2021.
    \310\ By comparison, the agencies' current regulations define 
``small bank'' to mean a bank that, as of December 31 of either of 
the prior two calendar years, had assets of less than $346 million 
and define ``intermediate small bank'' to mean a bank with assets of 
at least $346 million as of December 31 of both of the prior two 
calendar years and less than $1.384 billion as of December 31 of 
either of the prior two calendar years.
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d. Estimating Compliance Requirements
    The proposal includes a new evaluation framework for evaluating the 
CRA performance of banks that is tailored by bank size and business 
model. For example, the agencies propose an evaluation framework that

[[Page 34008]]

would establish the following four tests for large retail banks: Retail 
Lending Test, Retail Services and Products Test, Community Development 
Financing Test, and Community Development Services Test. In addition to 
the new CRA evaluation framework, the proposal includes data 
collection, maintenance, and reporting requirements necessary to 
facilitate the application of various tests. A detailed summary of the 
proposal's requirements is provided in Sections III through XX of the 
SUPPLEMENTARY INFORMATION.
    With respect to the impact of the proposal on small banks and 
intermediate banks, the Board distinguishes between: (i) Proposed 
requirements that are mandatory for small banks or intermediate banks 
or that apply to these banks by default, and (ii) proposed provisions 
that are voluntary for small banks or intermediate banks or that apply 
at these banks' election.
    Mandatory or default requirements. Under the proposal, small banks 
would by default be evaluated under the small bank performance 
standards in Sec.  __.29, which evaluates a small bank's performance in 
helping to meet the credit needs of its facility-based assessment 
areas. These small bank performance standards are substantially the 
same as the small bank performance standards in the agencies' current 
CRA regulations.
    Intermediate banks would by default be evaluated under the Retail 
Lending Test in Sec.  __.22 and the community development performance 
standards in Sec.  __.29(b)(2). The Retail Lending Test would evaluate 
an intermediate bank's record of helping to meet the credit needs of 
its facility-based assessment areas through the bank's origination and 
purchase of retail loans in each facility-based assessment area (and, 
as applicable, in its outside retail lending area).\311\ The community 
development performance standards in Sec.  __.29(b)(2) would be used to 
evaluate an intermediate bank's community development performance. 
These community development performance standards are substantially the 
same as the criteria for evaluating an intermediate small bank under 
the community development test in the agencies' current CRA 
regulations.
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    \311\ Although the proposed Retail Lending Test represents a 
significant change from the lending test applicable to intermediate 
small banks in the agencies' current regulations, intermediate banks 
would not need to collect, maintain, or report data to facilitate 
the application of this test. Rather, as under the current 
regulations, examiners would continue to use information gathered 
from individual loan files or maintained on an intermediate bank's 
internal operating systems for purposes of the Retail Lending Test.
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    In addition, both small banks and intermediate banks would be 
required to maintain a public file as provided in Sec.  __.43. The 
proposed public file requirements that are mandatory for small banks 
and intermediate banks are substantially the same as the public file 
requirements that are mandatory for small banks and intermediate small 
banks under the agencies' current CRA regulations. As under the current 
CRA regulations, small banks and intermediate banks would generally be 
exempt by default from the data collection, maintenance, and reporting 
requirements of Sec.  __.42 of the proposal.
    Voluntary or elective provisions.\312\ A small bank that does not 
wish to be evaluated under the small bank performance standards may 
elect to be evaluated pursuant to the proposed Retail Lending Test. 
Similarly, under the proposal, a small bank may voluntarily request 
additional consideration for activities that would qualify for 
consideration under the proposed Retail Services and Products Test, 
Community Development Financing Test, or Community Development Services 
Test. In general, even where a small bank opts to be evaluated under 
one or more of these alternative tests, it would not be required to 
comply with the corresponding data collection, maintenance, and 
reporting requirements that are applicable to large banks under the 
proposal, as described in detail in Section XIX of the SUPPLEMENTARY 
INFORMATION.
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    \312\ In addition to the voluntary or elective provisions 
described herein, a small bank or intermediate bank may elect to be 
evaluated under a strategic plan, as under the agencies' current 
regulations. Additionally, any eligible bank may request to be 
designated as a wholesale or limited purpose bank. Under the 
proposal, a wholesale or limited purpose bank would be evaluated 
under the Community Development Financing Test for Wholesale or 
Limited Purpose Banks, which is similar to the community development 
test for wholesale or limited purpose banks under the agencies' 
current CRA regulations.
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    An intermediate bank that does not wish to be evaluated under the 
community development performance standards in Sec.  __.29(b)(2) may 
elect to be evaluated pursuant to the Community Development Financing 
Test. The Community Development Financing Test would evaluate an 
intermediate bank's record of helping to meet the community development 
financing needs of the bank's facility-based assessment areas, states, 
multistate MSAs, and nationwide area, through its provision of 
community development loans and community development investments. 
Where an intermediate bank elects to be evaluated under the Community 
Development Financing Test, the intermediate bank would be required to 
collect and maintain the loan and investment data specified in Sec.  
__.42(a)(5)(ii). If an intermediate bank elects to be evaluated under 
the Community Development Financing Test, the intermediate bank may 
voluntarily request additional consideration for activities that would 
qualify for consideration under the proposed Retail Services and 
Products Test or Community Development Services Test. In general, where 
an intermediate bank requests additional consideration for activities 
that would qualify for consideration under the proposed Retail Services 
and Products Test or Community Development Services test, the 
intermediate bank would not be required to comply with the 
corresponding data collection, maintenance and reporting requirements 
that are applicable to large banks under the proposal, as described in 
detail in Section XIX of the SUPPLEMENTARY INFORMATION.
    The agencies' current CRA regulations similarly allow small banks 
and intermediate small banks to voluntarily opt into one or more 
alternative tests in lieu of the mandatory or default requirements. 
However, based on the Board's supervisory experience with its current 
CRA regulation, few small banks or intermediate small banks choose to 
be evaluated under alternative tests, and the Board expects that this 
would continue to be the case under the proposal.
    For the reasons described above, the Board does not believe that 
the proposed rule would have a significant economic impact on a 
substantial number of small entities.
e. Duplicative, Overlapping, and Conflicting Rules
    The Board is not aware of any Federal rules that may duplicate, 
overlap with, or conflict with the proposed rule.
f. Significant Alternatives Considered
    In developing the proposal, one important goal of the agencies was 
to tailor standards for bank size and business models and minimize data 
collection and reporting burden. Consistent with this goal, under the 
proposal, small entities subject to the proposal would generally 
continue to be evaluated in the same manner as under the agencies' 
current CRA regulations. In addition, the proposal would not impose new 
mandatory data collection, maintenance, and reporting requirements on 
small banks or

[[Page 34009]]

intermediate banks. The agencies did not consider an alternative to the 
proposal that would impose new compliance requirements on small 
entities subject to the proposal.
3. FDIC
    The SBA has defined ``small entities'' to include banking 
organizations with total assets less than or equal to $750 
million.\313\ The proposed rule seeks to establish a definition of 
``small'' insured depository institution as one with average assets of 
less than $600 million in either of the prior two calendar years, based 
on the assets reported on its four quarterly Call Reports for each of 
those calendar years. The agencies, including the FDIC, are in the 
process of seeking approval from the SBA to use the proposed $600 
million threshold, adjusted annually for inflation, rather than the 
SBA's recently updated size standards, which include a $750 million 
threshold for small banks. In requesting this approval, the agencies 
believe that it is appropriate to evaluate banks with assets of between 
$600 million and $750 million under the proposed intermediate banks 
standards. While the FDIC undergoes that approval process it will 
employ the SBA's existing $750 million size standard in its Regulatory 
Flexibility Act compliance activities. Generally, the FDIC considers a 
significant effect to be a quantified effect in excess of 5 percent of 
total annual salaries and benefits per institution, or 2.5 percent of 
total noninterest expenses. The FDIC believes that effects in excess of 
these thresholds typically represent significant effects for FDIC-
insured institutions. The FDIC does not believe that the proposed rule, 
if adopted, would have a significant economic effect on a substantial 
number of small entities. However, some expected effects of the 
proposed rule are difficult to assess or accurately quantify given 
current information, therefore the FDIC has included an IRFA in this 
section.
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    \313\ The SBA defines a small banking organization as having 
$600 million or less in assets, where an organization's ``assets are 
determined by averaging the assets reported on its four quarterly 
financial statements for the preceding year.'' See 13 CFR 121.201 
(as amended by 84 FR 34261, effective Aug. 19, 2019). In its 
determination, the ``SBA counts the receipts, employees, or other 
measure of size of the concern whose size is at issue and all of its 
domestic and foreign affiliates.'' See 13 CFR 121.103. Following 
these regulations, the FDIC uses a covered entity's affiliated and 
acquired assets, averaged over the preceding four quarters, to 
determine whether the covered entity is ``small'' for the purposes 
of RFA.
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a. Reasons Why This Action Is Being Considered
    Over the past two decades, technology and the expansion of 
interstate banking has transformed the financial services industry and 
how banking services are delivered and consumed. These changes affect 
all banks, regardless of size or location, and are most evident in 
banks that have a limited physical presence or that rely heavily on 
technology to deliver their products and services. As banking has 
evolved, banks' communities are not solely identifiable by the areas 
that surround their physical locations. The Federal banking agencies 
have also gained a greater understanding of communities' needs for 
lending and investment, such as the need for community development 
investments and loans with maturities longer than the typical CRA 
evaluation period. The current CRA regulatory framework has not kept 
pace with the transformation of banking and has had the unintended 
consequence of incentivizing banks to limit some of their community 
development loans to the length of a CRA evaluation period.
b. Policy Objectives
    As previously discussed in the introductory paragraphs to, as well 
as in Sections I and II of, the SUPPLEMENTARY INFORMATION, in response 
to feedback, the agencies propose to strengthen the CRA regulatory 
framework to better achieve the underlying statutory purpose of 
encouraging banks to help serve the credit needs of their communities 
by making the CRA framework more objective, transparent, consistent, 
and easy to understand. To accomplish these goals, the proposal would: 
Clarify which activities qualify for CRA credit; update where 
activities count for CRA credit; create a more transparent and 
objective method for measuring CRA performance; and provide for more 
transparent, consistent, and timely CRA-related data collection, 
recordkeeping, and reporting. Revisions that reflect these objectives 
would provide clarity and visibility for all stakeholders on how a 
bank's CRA performance is evaluated and the level of CRA activities 
banks conduct. These changes also would encourage banks to serve their 
entire communities, including low- and moderate-income neighborhoods, 
more effectively through a broader range of CRA activities.
c. Legal Basis
    The FDIC is issuing this proposed rule under the authorities 
granted to it under the Community Reinvestment Act of 1977. For a 
discussion of the legal basis of the proposed rule, please refer to 
Section I of the SUPPLEMENTARY INFORMATION of this proposed rule.
d. Description of the Rule
    As previously discussed, the proposed rule, if adopted, would make 
the CRA regulatory framework more transparent and objective, and help 
ensure that all relevant compliance activities are considered and that 
the scope of the performance evaluation more accurately reflects the 
communities served by each institution. For a more extensive discussion 
of the proposed rule, please refer to Section II of the SUPPLEMENTARY 
INFORMATION of this proposed rule.
e. Small Entities Affected
    The FDIC supervises 3,128 depository institutions, of which 2,355 
are identified as small institutions by the terms of the RFA.\314\ The 
proposed rule would affect all FDIC-supervised institutions, therefore 
the FDIC estimates that the proposed rule would affect 2,355 small, 
FDIC-supervised institutions. The proposed rule, if adopted, would make 
the CRA regulatory framework more transparent and objective, and help 
ensure that all relevant compliance activities are considered and that 
the scope of the compliance evaluation more accurately reflects the 
communities served by each institution. The proposed rule would impact 
four different groups of small, FDIC-supervised institutions: Small 
banks, intermediate banks, small banks designated as wholesale or 
limited purpose, and small banks examined under a strategic plan. Of 
the 2,355 small, FDIC-supervised institutions, 2,289 would meet the 
criteria for designation as a small bank, 52 would meet the criteria 
for designation as an intermediate bank, while four would meet the 
definition of wholesale or limited purpose institutions. Finally, 10 
small, FDIC-supervised institutions have elected to use strategic 
plans.
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    \314\ Call Report, Sept. 30, 2021. Nine insured domestic 
branches of foreign banks are excluded from the count of FDIC-
insured depository institutions. These branches of foreign banks are 
not ``small entities'' for purposes of the RFA.
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    Wholesale or limited purpose banks are subject to the combined 
community development test under the current CRA regulations, and would 
be subject to the Community Development Financing Test for Wholesale or 
Limited Purpose Banks under the proposed rule, if adopted. As 
previously discussed, the combined community development test is 
generally similar to the proposed Community Development Financing

[[Page 34010]]

Test for Wholesale or Limited Purpose Banks, and therefore the FDIC 
does not believe that the proposed rule would substantively affect 
these four entities.
    As previously discussed, banks evaluated pursuant to an approved 
strategic plan are generally subject to similar recordkeeping, 
reporting and disclosure requirements under the current and proposed 
CRA regulations. However, the proposed rule is expected to change the 
way in which Strategic Plan banks are evaluated and therefore could 
pose some substantive effects. But, with the proposed rule the agencies 
seek to establish CRA evaluation metrics and goals that are responsive 
to the characteristics of the institutions to which they are applied. 
Therefore, the FDIC does not believe that the proposed rule would 
substantively affect these 10 small, FDIC-supervised institutions who 
have currently elected to be evaluated under strategic plans because 
their metrics and goals would appropriately reflect their breadth of 
activities for institutions of a smaller size.
    Of the 2,355 small, FDIC-supervised institutions, 447 (19.0 
percent) that are not wholesale, limited purpose, or strategic plan 
banks reported total assets of at least $346 million on both the 
December 31, 2021 and December 31, 2020 Call Reports, and reported less 
than $600 million in average assets for the four quarters of 2020 or 
the four quarters of 2021. Additionally, 52 (2.2 percent) small, FDIC-
supervised institutions reported average assets of at least $600 
million as of December 31 for both of the prior two calendar years and 
less than $750 million in affiliated and acquired assets, averaged over 
the preceding four quarters ending December 31, 2021. Therefore, the 
FDIC estimates that the proposed rule would most directly affect 447 
small, FDIC-supervised institutions that are currently subject to the 
intermediate small bank performance standards but would be subject to 
the small bank performance standards of the proposed rule, and 52 
small, FDIC-supervised institutions that are currently subject to the 
intermediate small bank performance standards but would be subject to 
the intermediate bank performance standards of the proposed rule. Apart 
from these 447 proposed small banks, 52 proposed intermediate banks and 
the 14 wholesale, limited purpose, and strategic plan banks, the 
remainder of the 2,355 small, FDIC-supervised institutions would be 
subject to the proposed small bank performance standards, just as they 
are subject to the standards applicable to the smallest institutions 
under the current regulation. As discussed in the SUPPLEMENTARY 
INFORMATION and below, the FDIC believes the proposed small bank 
performance standards are substantively similar to the current 
standards.
f. Expected Effects
    If the proposed rule was adopted, small banks generally would see 
no change in their exam elements. Small banks are presently evaluated 
under the small bank performance standards,\315\ which are 
substantively similar to the proposed small bank performance 
standards.\316\ Small banks would have the option of being evaluated 
under the new Retail Lending Test, so there is the possibility that 
small banks could experience changes in compliance requirements related 
to the proposed rule. However, as small bank participation is voluntary 
in the investments and services elements of the current regulation, and 
the Retail Lending Test of the proposed rule, any changes resulting 
from these aspects of the proposed rule would likely not be 
disadvantageous or costly to small institutions.
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    \315\ 12 CFR 345.26(a)(1).
    \316\ 12 CFR 345.29(a) of the proposed regulations.
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    If the proposed rule were adopted, small, FDIC-supervised 
institutions presently classified as intermediate small banks, but who 
would be classified as intermediate banks, could experience some change 
in their exam elements. Intermediate small banks are currently 
evaluated under a lending test \317\ and a community development 
test,\318\ which assesses community development loans, qualified 
investments, and community development services together. If adopted, 
the proposed rule would evaluate Intermediate banks under the proposed 
Retail Lending Test, with certain provisions tailored to intermediate 
banks, and the status quo community development test, unless they 
choose to opt into the Community Development Financing Test. The 
proposed Retail Lending Test is intended to make a bank's retail 
lending evaluation more transparent and predictable by specifying 
quantitative standards for lending consistent with achieving, for 
example, a ``Low Satisfactory'' or ``Outstanding'' conclusion in an 
assessment area. The proposed rule would limit the evaluation of an 
intermediate bank's retail lending performance to areas outside of its 
facility-based assessment areas only if it does more than 50 percent of 
its lending outside of its facility-based assessment areas. 
Intermediate banks would have the option of being evaluated under the 
new Community Development Financing Test, so there is the possibility 
that intermediate banks could experience changes in compliance 
requirements related to the proposed rule. However, since it is an 
intermediate bank's choice to participate in the Community Development 
Financing Test of the proposed rule or continue to be evaluated under 
the current intermediate small bank community development test as 
described in Sec.  __.29, any changes resulting from these aspects of 
the proposed rule are likely not to be disadvantageous or costly to 
intermediate institutions.
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    \317\ 12 CFR __.26(b).
    \318\ 12 CFR __.26(c).
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    The proposed rule would decrease compliance requirements for 447 
small, FDIC-supervised institutions by making them subject to the small 
bank performance standards rather than the intermediate bank 
performance standards. Small banks that are also intermediate small 
banks are presently evaluated under the small bank performance 
standards and the community development test.\319\ Under the proposed 
rule, 447 small, FDIC-supervised institutions would be newly classified 
as small banks, and therefore would no longer be subject to the 
community development test.
---------------------------------------------------------------------------

    \319\ 12 CFR 345.26(b) and 12 CFR 345.26(c).
---------------------------------------------------------------------------

    Small, FDIC-supervised institutions are unlikely to experience 
substantive changes to the regulatory costs of compliance with the CRA 
regulations as amended by the proposed rule. Under the proposed rule, 
as under the current CRA regulations, small and intermediate banks 
would generally be exempt from the data collection, reporting, and 
disclosure requirements of Sec.  __.42 of the proposal.
    The proposed rule's publicly available list of examples of 
qualifying activities would benefit small, FDIC-supervised institutions 
by establishing a reference for qualifying activities. The proposal 
would establish an optional process through which FDIC-insured 
institutions can seek confirmation of a particular activity and have it 
added to the list. Institutions that seek to do this could incur some 
costs, but the FDIC believes that small, FDIC-supervised institutions 
would only incur such costs if they believe that the benefits outweigh 
the costs.
    The proposed amendments to the CRA examination criteria and methods 
could result in changes to the ratings. Some small, FDIC-supervised 
institutions may experience changes in their CRA examination ratings, 
while

[[Page 34011]]

others may experience no change. Further, such potential changes could 
cause some small, FDIC-supervised institutions to incur costs 
associated with making changes to their CRA policies and procedures. 
The FDIC does not currently have access to information that would 
enable it to estimate these effects of the proposed rule. However, as 
previously discussed, small banks generally would see no change in 
their exam elements. Additionally, participation by small banks in the 
Retail Lending Test is voluntary, and therefore the FDIC believes that 
any associated changes to CRA examination ratings for small banks are 
not likely to be substantial.
    To the extent that the proposed rule, if adopted, affected the 
ratings that small, FDIC-supervised institutions receive from a CRA 
examination, it could affect their ability to accomplish other 
activities. Under current regulation and guidance, an institution's CRA 
examination rating is an element considered if an institution applies 
to establish a new domestic branch or other deposit-taking facility, 
exercise Trust Powers, or merge with or acquire another 
institution.\320\ The FDIC does not have the information necessary to 
estimate such effects, if any, on insured institutions.
---------------------------------------------------------------------------

    \320\ 12 CFR 345.29(a).
---------------------------------------------------------------------------

g. Other Statutes and Federal Rules
    The FDIC has not identified any likely duplication, overlap, and/or 
potential conflict between this proposed rule and any other Federal 
rule.
h. Alternatives Considered
    The FDIC is proposing revisions to the CRA to advance the 
objectives discussed above. The FDIC considered the status quo 
alternative of not revising the existing CRA regulations. However, for 
reasons stated previously the FDIC considers the proposed rule to be a 
more appropriate alternative.
    The FDIC also considered alternatives to the asset size thresholds 
that delineate small, intermediate, and large banks. For example, as 
previously discussed, the agencies are in the process of seeking 
approval from the SBA to use the proposed $600 million threshold, 
adjusted annually for inflation, rather than the SBA's recently updated 
size standards, which include a $750 million threshold for small banks. 
In requesting this approval, the agencies believe that it is 
appropriate to evaluate banks with assets of between $600 million and 
$750 million under the proposed intermediate bank standards, and that 
these banks have the capacity to conduct community development 
activities, as would be a required component of the evaluation for 
intermediate, but not small banks. Additionally, the agencies 
considered increasing the large bank asset threshold beyond the 
proposed $2 billion level, but decided it would remove a greater share 
of banks that play a significant role in fulfilling low- and moderate-
income credit needs in local areas from the more comprehensive 
evaluation included in the proposed large bank evaluation approach.
    The FDIC invites comments on all aspects of the supporting 
information provided in this section, and in particular, whether the 
proposed rule would have any significant effects on small entities that 
the FDIC has not identified.
OCC Unfunded Mandates Reform Act
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act) (2 U.S.C. 1532) requires that the OCC prepare a budgetary 
impact statement before promulgating a rule that includes any Federal 
mandate that may result in the expenditure by state, local, and Tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation, currently $165 
million) in any one year. If a budgetary impact statement is required, 
section 205 of the Unfunded Mandates Act (2 U.S.C. 1535) also requires 
the OCC to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule.
    We estimate that expenditures to comply with mandates during the 
first 12-month period of the proposed rule's implementation would be 
approximately $42.8 million. Therefore, we conclude that the proposed 
rule would not result in an expenditure of $165 million or more 
annually by state, local, and tribal governments, or by the private 
sector. Accordingly, the OCC has not prepared the written statement 
described in section 202 of the UMRA.
Riegle Community Development and Regulatory Improvement Act of 1994
    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act of 1994 (RCDRIA), 12 U.S.C. 4802(a), in 
determining the effective date and administrative compliance 
requirements for new regulations that impose additional reporting, 
disclosure, or other requirements on insured depository institutions, 
the agencies will consider, consistent with principles of safety and 
soundness and the public interest: (i) Any administrative burdens that 
the proposed rule would place on depository institutions, including 
small depository institutions and customers of depository institutions; 
and (ii) the benefits of the proposed rule. The agencies request 
comment on any administrative burdens that the proposed rule would 
place on depository institutions, including small depository 
institutions, and their customers, and the benefits of the proposed 
rule that the agencies should consider in determining the effective 
date and administrative compliance requirements for a final rule.
Paperwork Reduction Act
    Certain provisions of the proposed rule contain ``collections of 
information'' within the meaning of the Paperwork Reduction Act (PRA) 
of 1995 (44 U.S.C. 3501 through 3521). In accordance with the 
requirements of the PRA, the agencies may not conduct or sponsor, and 
the respondent is not required to respond to, an information collection 
unless it displays a currently valid OMB control number. The 
information collections contained in the proposed rule have been 
submitted to OMB for review and approval by the OCC and FDIC under 
section 3507(d) of the PRA (44 U.S.C. 3507(d)) and section 1320.11 of 
OMB's implementing regulations (5 CFR part 1320). The Board reviewed 
the proposed rule under the authority delegated to the Board by OMB. 
The agencies are proposing to extend for three years, with revision, 
these information collections.
    Title of Information Collection: OCC Community Reinvestment Act; 
Board Reporting, Recordkeeping, and Disclosure Requirements Associated 
with Regulation BB; FDIC, Community Reinvestment Act.
    OMB Control Numbers: OCC 1557-0160; Board 7100-0197; FDIC 3064-
0092.
    Frequency of Response: On occasion.
    Affected Public: Businesses or other for-profit.
    Respondents:
    OCC: National banks, Federal savings associations, Federal branches 
and agencies.
    FDIC: All insured state nonmember banks, insured state-licensed 
branches of foreign banks, insured state savings associations, and bank 
service providers.
    Board: All state member banks (as defined in 12 CFR 208.2(g)), bank 
holding companies (as defined in 12 U.S.C. 1841), savings and loan 
holding companies (as defined in 12 U.S.C. 1467a), foreign banking 
organizations (as defined in 12 CFR 211.21(o)), foreign

[[Page 34012]]

banks that do not operate an insured branch, state branch or state 
agency of a foreign bank (as defined in 12 U.S.C. 3101(11) and (12)), 
Edge or agreement corporations (as defined in 12 CFR 211.1(c)(2) and 
(3)), and bank service providers.
    The information collection requirements in the proposed rule are as 
follows:
    Sec.  __.26 Wholesale and limited purpose banks. Banks requesting a 
designation as either a wholesale bank or limited purpose bank would be 
required to file a request in writing with the appropriate Federal 
banking agency at least 3 months prior to the proposed effective date 
of the designation.
    Sec.  __.27 Strategic plan. Banks could submit a strategic plan to 
the appropriate Federal banking agency for approval. Requirements 
regarding the content of such a plan are set forth in Sec.  __.27 of 
the proposed rule. The appropriate Federal banking agency would assess 
a bank's record of helping to meet the credit needs of its facility-
based assessment areas, and, as applicable, its retail assessment 
areas, and geographic areas served at the institution level under its 
strategic plan if the plan has been properly submitted, been approved, 
is in effect, and in operation for a minimum of one year. The proposal 
specifies requirements for the term of a strategic plan, the treatment 
of multiple assessment areas, the treatment of operations subsidiaries 
or operating subsidiaries, as applicable, and affiliates, public 
participation, submission, content, and amendment. Additionally, during 
the term of a plan, a bank could request that the appropriate Federal 
banking agency approve an amendment to the plan in the absence of a 
change in material circumstances. A bank that requests such an 
amendment would be required to provide an explanation regarding why it 
is necessary and appropriate to amend its plan goals.
    Sec.  __.42(a)(1) Small business and small farm loans data. A bank, 
except a small bank or an intermediate bank, would be required to 
collect and maintain in prescribed machine readable form, until the 
completion of its next CRA examination, data on small business and 
small farm loans originated or purchased by the bank during the 
evaluation period.
    Sec.  __.42(a)(2) Consumer loans data--automobile loans. A bank 
with assets of over $10 billion would be required to collect and 
maintain in prescribed machine readable form, until the completion of 
its next CRA examination, data for automobile loans originated or 
purchased by the bank during the evaluation period.
    Sec.  __.42(a)(4) Retail services and products data. A large bank 
would be required to collect and maintain data in a machine readable 
form until the completion of its next CRA examination. These data 
include information regarding branches and remote service facilities, 
and information with respect to retail services and products offered 
and provided by the bank during the evaluation period. Large banks with 
assets of over $10 billion, or large banks with assets of $10 billion 
or less that requests additional consideration for digital and other 
delivery systems, must collect and maintain data on the range of 
services and products offered through digital and other delivery 
systems and digital activity by individuals in low, moderate, middle, 
and upper-income census tracts. Large banks with assets of over $10 
billion, or large banks with assets of $10 billion or less, that 
request additional consideration for responsive deposit products, must 
collect and maintain data including the number of deposit products 
opened and closed by individuals in low-, moderate-, middle-, and 
upper-income census tracts.
    Sec.  __.42(a)(5) Community development loans and community 
development investments data. A bank, except a small or an intermediate 
bank, would be required to collect and maintain the following data for 
community development loans and community development investments 
originated or purchased by the bank: general information on the loan or 
investment; community development loan or investment activity 
information; the indicators of the impact of the activity as 
applicable; location information; other information relevant to 
determining that an activity meets the standards under community 
development; and allocation of dollar value of the activity to counties 
served by the community development activity, if available. Large banks 
would be required to collect and maintain this information in 
prescribed machine readable form. An intermediate bank that opts to be 
evaluated under the Community Development Financing Test, would be 
required to collect and maintain this information in the format used by 
the bank in the normal course of business. Both of these types of banks 
would be required to maintain this data until completion of its next 
CRA examination. These banks would be required to collect and maintain, 
on an annual basis, data for loans and investments originated or 
purchased during the evaluation period. Likewise, these banks would be 
required to collect and maintain data on community development loans 
and investments from prior years that are held on the bank's balance 
sheet at the end of each quarter.
    Sec.  .42(a)(6) Community development services data. A large bank 
with assets of over $10 billion would be required to collect and 
maintain in prescribed machine readable form until the completion of 
its next CRA examination, community development services data including 
bank information, community development services activity information, 
and location information.
    Sec.  __.42(a)(7) Deposits data. A large bank that had assets of 
over $10 billion would be required to collect and maintain annually in 
prescribed machine readable form until the completion of its next CRA 
examination, the dollar amount of its deposits at the county level, 
based upon the address associated with the individual account (except 
for account types where an address is not available), calculated based 
on average daily balances as provided in statements such as monthly or 
quarterly statements. A large bank with assets of $10 billion or less 
that opts to collect and maintain deposits data would be required to do 
so in machine readable form, until completion of the bank's next CRA 
examination.
    Sec.  __.42(b)(1) Small business and small farm loan data. A bank, 
except a small or intermediate bank, would be required to report 
annually by April 1 in prescribed machine readable form, certain 
aggregate data for small business or small farm loans for each census 
tract in which the bank originated or purchased such loans.
    Sec.  __.42(b)(2) Consumer loans--automobile loans data. A bank 
with assets of over $10 billion would be required to report annually by 
April 1, in prescribed machine readable form, the aggregate number and 
amount of automobile loans and the number and amount of those loans 
made to low- and moderate-income borrowers for each census tract in 
which they originated or purchased such loans.
    Sec.  __.42(b)(3) Community development loan and community 
development investment data. A bank, except a small or an intermediate 
bank, would be required to report annually by April 1 the following 
community development loan and community development investment data: 
general information on loans and investments; community development 
loan or investment activity information; indicators of the impact of 
the activity;

[[Page 34013]]

location information; other information relevant to determining that an 
activity meets the standards under community development; and 
allocation of dollar value of activity to counties served by the 
community development activity (if available).
    Sec.  __.42(b)(4) Community development services data. A large bank 
with assets of over $10 billion would be required to report annually by 
April 1, community development services data including bank 
information.
    Sec.  __.42(b)(5) Deposits data. A large bank with assets of over 
$10 billion would be required to report annually by April 1 in 
prescribed machine readable form the deposits data for the previous 
calendar year including for each county, state, and multistate MSA and 
for the institution overall. The reporting would include the average 
annual deposit balances (calculated based on average daily balances as 
provided in statements such as monthly or quarterly statements, as 
applicable), in aggregate, of deposit accounts with associated 
addresses located in such county, state or multistate MSA where 
available, and for the institution overall.
    Sec.  __.42(c) Data on operations subsidiaries or operating 
subsidiaries. To the extent that their operations subsidiaries, or 
operating subsidiaries, as applicable, engage in retail lending, retail 
services, community development financing, or community development 
services activities, a bank would be required to collect, maintain, and 
report these activities for purposes of evaluating the bank's 
performance. For home mortgage loans, a bank would need to be prepared 
to identify the loans reported by the operations subsidiary, or 
operating subsidiary, under 12 CFR part 1003, if applicable, or collect 
and maintain home mortgage loans by the operations subsidiary that the 
bank would have collected and maintained under Sec.  _.42(a)(3) had the 
loans been originated or purchased by the bank.
    Sec.  __.42(d) Data on other affiliates. A bank that elects to have 
loans by an affiliate considered for purposes of this part would be 
required to collect, maintain, and report the lending and investments 
data they would have collected, maintained, and reported under Sec.  
__.42(a) or (b) had the loans or investments been originated or 
purchased by the bank. For home mortgage loans, it would also need to 
identify the home mortgage loans reported by its affiliate under 12 CFR 
part 1003, if applicable, or collect and maintain home mortgage loans 
by the affiliate that the bank would have collected and maintained 
under Sec.  __.42(a)(3) had the loans been originated or purchased by 
the bank.
    Sec.  __.42(e) Data on community development financing by a 
consortium or a third party. A bank that elects to have community 
development loans and community development investments by a consortium 
or third party be considered for purposes of this part would be 
required to collect, maintain, and report the lending and investments 
data they would have collected, maintained, and reported under Sec.  
__.42(a)(5) and (b)(3) if the loans or investments had been originated 
or purchased by the bank.
    Sec.  __.42(f)(1) Facility-based assessment areas. A bank, except a 
small bank or intermediate bank, would be required to collect and 
report to the [Agency] by April 1 of each year a list of each facility-
based assessment area showing the states, MSAs, counties or county 
equivalents, metropolitan divisions, and nonmetropolitan counties 
within each facility-based assessment area.
    Sec.  __.42(f)(2) Retail lending assessment areas. A large bank 
would be required to delineate retail lending assessment area based on 
geographic, MSA, and nonmetropolitan areas of states criteria specified 
in the proposal. A large bank would be required to collect and report a 
list showing the MSAs and nonmetropolitan counties within each retail 
lending assessment area by April 1 of each year.
    Sec. Sec.  __.43, __.44. Public File and Public Notice. Banks would 
be required to maintain a public file, in either paper or digital 
format, that includes prescribed information. Banks would be required 
to provide copies on request, either on paper or in another form 
acceptable to the person making the request, of the information in its 
public file. A bank would also be required to provide in the public 
area of its main office and branches the public notice set forth in 
proposed appendix F.

                                                                    Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Estimated        Average                          Total
           Source and type of burden                           Description                   number of    estimated time   Frequency of      estimated
                                                                                            respondents    per response      response      annual burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Reporting
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   __.26...................................  Wholesale and limited purpose banks....
                                                 OCC....................................              12               4               1              48
                                                 Board..................................               1               4               1               4
                                                 FDIC...................................               1               4               1               4
Sec.   __.27...................................  Strategic plan.........................
                                                 OCC....................................               6             400               1           2,400
                                                 Board..................................               6             400               1           2,400
                                                 FDIC...................................              11             400               1           4,400
Sec.   __.42(b)(1).............................  Small business and small farm loan data
                                                 OCC....................................             139               8               1           1,112
                                                 Board..................................             100               8               1             800
                                                 FDIC...................................             216               8               1           1,728
Sec.   __.42(b)(2).............................  Consumer loans--automobile loans data..
                                                 OCC....................................              50               8               1             400
                                                 Board..................................              25               8               1             200
                                                 FDIC...................................              48               8               1         384,336
Sec.   __.42(b)(3).............................  Community development loan and
                                                  community development investment data.
                                                 OCC....................................             148               8               1           1,184
                                                 Board..................................             114               8               1             912
                                                 FDIC...................................             227               8               1           1,816
Sec.   __.42(b)(4).............................  Community development services data....

[[Page 34014]]

 
                                                 OCC....................................              46               8               1             368
                                                 Board..................................              36               8               1             288
                                                 FDIC...................................              48               8               1             384
Sec.   __.42(b)(5).............................  Deposits data..........................
                                                 OCC....................................              46               8               1             368
                                                 Board..................................              36               8               1             288
                                                 FDIC...................................              48               8               1             384
Sec.   __.42(c)................................  Data on operations subsidiaries/
                                                  operating subsidiaries.
                                                 OCC....................................             174              38               1           6,612
                                                 Board..................................             191              38               1           7,258
                                                 FDIC...................................             684              38               1          25,992
Sec.   __.42(d)................................  Data on other affiliates...............
                                                 OCC....................................               9              38               1             342
                                                 Board..................................               6              38               1             228
                                                 FDIC...................................             233              38               1           8,854
Sec.   __.42(e)................................  Data on community development financing
                                                  by a consortium or a third party.
                                                 OCC....................................              31              17               1             527
                                                 Board..................................              15              17               1             255
                                                 FDIC...................................              13              17               1             221
Sec.   __.42(f)(1).............................  Facility-based assessment areas data...
                                                 OCC....................................             151               2               1             302
                                                 Board..................................             114               2               1             228
                                                 FDIC...................................             237               2               1             474
Sec.   __.42(f)(2).............................  Retail Lending Assessment Areas........
                                                 OCC....................................             139               4               1             556
                                                 Board..................................              15               4               1              60
                                                 FDIC...................................              69               4               1             276
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Recordkeeping
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   __.42(a)(1).............................  Small business and small farm loan data
                                                 OCC....................................             139             219               1          30,441
                                                 Board..................................             100             219               1          21,900
                                                 FDIC...................................             216             219               1          47,304
Sec.   __.42(a)(2).............................  Consumer loan data--automobile loans...
                                                 OCC....................................              50              75               1           3,750
                                                 Board..................................              25              75               1           1,875
                                                 FDIC...................................              48              75               1           3,600
Sec.   __.42(a)(4).............................  Retail services and products data......
                                                 OCC....................................             139              50               1           6,950
                                                 Board..................................             108              50               1           5,400
                                                 FDIC...................................             216              50               1          10,800
Sec.   __.42(a)(5).............................  Community development loan and
                                                  community development investment data.
                                                 OCC....................................             148             300               1          44,400
                                                 Board..................................             114             300               1          34,200
                                                 FDIC...................................             227             300               1          68,100
Sec.   __.42(a)(6).............................  Community development services data....
                                                 OCC....................................              46              50               1           2,300
                                                 Board..................................              48              50               1           2,400
                                                 FDIC...................................              42              50               1           2,100
Sec.   __.42(a)(7).............................  Deposits data..........................
                                                 OCC....................................              46             350               1          16,100
                                                 Board..................................              36             350               1          12,600
                                                 FDIC...................................              48             350               1          16,800
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Disclosures
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   __.43...................................  Content and availability of public file
Sec.   __.44...................................  Public notice by banks.................
                                                 OCC....................................             977              10               1           9,770
                                                 Board..................................             695              10               1           6,950
                                                 FDIC...................................           3,128              10               1          31,280
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Total Estimated Annual Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 OCC....................................  ..............  ..............  ..............         127,930
                                                 Board..................................  ..............  ..............  ..............          97,646

[[Page 34015]]

 
                                                 FDIC...................................  ..............  ..............  ..............         225,201
--------------------------------------------------------------------------------------------------------------------------------------------------------

Comments Are Invited on
    (a) Whether the collection of information is necessary for the 
proper performance of the functions of the agencies, including whether 
the information has practical utility;
    (b) The accuracy of the agencies' estimate of the burden of the 
collection of information;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of the collection on respondents, 
including through the use of automated collection techniques or other 
forms of information technology; and
    (e) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
Commenters may submit comments regarding the burden estimate, or any 
other aspect of this collection of information, including suggestions 
for reducing the burden, to the addresses listed in the ADDRESSES 
caption in the NPR. All comments will become a matter of public record. 
A copy of the comments may also be submitted to the OMB desk officer 
for the agencies: By mail to U.S. Office of Management and Budget, 725 
17th Street NW, #10235, Washington, DC 20503; by facsimile to (202) 
395-5806; or by email to: <a href="/cdn-cgi/l/email-protection#e18e889380be9294838c889292888e8fa18e8c83cf848e91cf868e97"><span class="__cf_email__" data-cfemail="305f5942516f4345525d594343595f5e705f5d521e555f401e575f46">[email protected]</span></a>, Attention, 
Federal Banking Agency Desk Officer.
Plain Language
    Section 722 of the Gramm-Leach-Bliley Act requires the agencies to 
use plain language in all proposed and final rules published after 
January 1, 2000. The agencies invite comment on how to make this 
proposed rule easier to understand.
    For example:
    <bullet> Have the agencies organized the material to inform your 
needs? If not, how could the agencies present the proposed rule more 
clearly?
    <bullet> Are the requirements in the proposed rule clearly stated? 
If not, how could the proposal be more clearly stated?
    <bullet> Does the proposed regulation contain technical language or 
jargon that is not clear? If so, which language requires clarification?
    <bullet> Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the proposed regulation easier to 
understand? If so, what changes would achieve that?
    <bullet> Is this section format adequate? If not, which of the 
sections should be changed and how?
    <bullet> What other changes can the agencies incorporate to make 
the proposed regulation easier to understand?

XXIII. Text of Common Proposed Rule (All Agencies)

    The text of the agencies' common proposed rule appears below:

PART __--COMMUNITY REINVESTMENT

Sec.
Subpart A--General
__.11 Authority, purposes, and scope.
__.12 Definitions.
__.13 Community development definitions.
__.14 Qualifying activities confirmation and illustrative list of 
activities.
__.15 Impact review of community development activities.
Subpart B--Geographic Considerations
__.16 Facility-based assessment areas.
__.17 Retail lending assessment areas.
__.18 Areas for eligible community development activity.
Subpart C--Standards for Assessing Performance
__.21 Performance tests, standards, and ratings, in general.
__.22 Retail lending test.
__.23 Retail services and products test.
__.24 Community development financing test.
__.26 Wholesale or limited purpose banks.
__.27 Strategic plan.
__.28 Assigned conclusions and ratings.
__.29 Performance standards for small banks and intermediate banks.
__.31 [Reserved].
Subpart D--Records, Reporting, Disclosure, and Public Engagement 
Requirements
__.42 Data collection, reporting, and disclosure.
__.43 Content and availability of public file.
__.44 Public notice by banks.
__.45 Publication of planned examination schedule.
__.46 Public engagement.
Subpart E--Transition Rules
__.51 Applicability dates, and transition provisions.
Appendix A to Part __--Calculations for the Retail Tests
Appendix B to Part __--Calculations for the Community Development 
Tests
Appendix C to Part __--Performance Test Conclusions
Appendix D to Part __--Ratings
Appendix E to Part __--Small Bank Conclusions and Ratings and 
Intermediate Bank Community Development Evaluation Conclusions
Appendix F to Part __[Reserved]

PART __--COMMUNITY REINVESTMENT

Subpart A--General


Sec.  __.11  Authority, purposes, and scope.

    (a) [Reserved].
    (b) Purposes. This part implements the requirement in the Community 
Reinvestment Act (12 U.S.C. 2901 et seq.) (CRA) that the [Agency] 
assess a bank's record of helping to meet the credit needs of the local 
communities in which the bank is chartered, consistent with the safe 
and sound operation of the bank, and to take this record into account 
in the agency's evaluation of an application for a deposit facility by 
the bank. Accordingly, this part:
    (1) Establishes the framework and criteria by which the [Agency] 
assesses a bank's record of responding to the credit needs of its 
entire community, including low- and moderate-income neighborhoods, 
consistent with the safe and sound operation of the bank; and
    (2) Provides that the [Agency] takes that record into account in 
considering certain applications.
    (c) [Reserved].


Sec.  __.12  Definitions.

    For purposes of this part, the following definitions apply:
    Affiliate means any company that controls, is controlled by, or is 
under common control with another company. The term ``control'' has the 
same meaning given to that term in 12 U.S.C. 1841(a)(2), and a company 
is under common control with another company if both companies are 
directly or indirectly controlled by the same company.
    Affordable housing means activities described in Sec.  __.13(b).

[[Page 34016]]

    Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if a person or census tract is located in an MSA, or for the 
metropolitan division, if a person or census tract is located in an MSA 
that has been subdivided into metropolitan divisions; or
    (2) The statewide nonmetropolitan median family income, if a person 
or census tract is located outside an MSA.
    Bank means [Agency definition of bank].
    Branch means a staffed banking facility, whether shared or 
unshared, that is approved or authorized as a branch by the [Agency] 
and that is open to, and accepts deposits from, the general public.
    Census tract means a census tract delineated by the U.S. Census 
Bureau in the most recent decennial census.
    Closed-end home mortgage loan has the same meaning given to the 
term ``closed-end mortgage loan'' in 12 CFR 1003.2(d), excluding 
multifamily loans as defined in this section.
    Community development means activities described in Sec.  __.13(b) 
through (l).
    Community Development Financial Institution (CDFI) has the same 
meaning given to that term in section 103(5)(A) of the Riegle Community 
Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4701 et 
seq.).
    Community development investment means a lawful investment, 
including a legally binding commitment to invest that is reported on 
Schedule RC-L of the Consolidated Reports of Condition and Income as 
filed under 12 U.S.C. 1817 (Call Report), deposit, membership share, 
grant, or monetary or in-kind donation that has a primary purpose of 
community development, as described in Sec.  __.13(a).
    Community development loan means a loan, including a legally 
binding commitment to extend credit, such as a standby letter of 
credit, that:
    (1) Has a primary purpose of community development, as described in 
Sec.  __.13(a); and
    (2) Has not been considered by the bank, an [operations subsidiary 
or operating subsidiary] of the bank, or an affiliate of the bank under 
the Retail Lending Test as an automobile loan, closed-end home mortgage 
loan, open-end home mortgage loan, small business loan, or small farm 
loan, unless:
    (i) The loan is for a multifamily dwelling (as defined in 12 CFR 
1003.2(n)); or
    (ii) In the case of an intermediate bank that is not required to 
report a home mortgage loan, a small business loan, or a small farm 
loan, the bank may opt to have the loan considered under the Retail 
Lending Test in Sec.  __.22 or under the intermediate bank community 
development performance standards in Sec.  __.29(b)(2), or, if the bank 
opts in, the Community Development Financing Test in Sec.  __.24.
    Community development services means activities described in Sec.  
__.25(d).
    Consumer loan means a loan to one or more individuals for 
household, family, or other personal expenditures. A consumer loan does 
not include a closed-end home mortgage loan, an open-end home mortgage 
loan, a multifamily loan, a small business loan, or a small farm loan. 
A consumer loan includes the following categories of loans:
    (1) Automobile loan, which means a consumer loan extended for the 
purchase of and secured by a new or used passenger car or other 
vehicle, such as a minivan, a pickup truck, a sport-utility vehicle, a 
van, or a similar light truck for personal use, as defined in Schedule 
RC-C of the Call Report;
    (2) Credit card loan, which means a line of credit for household, 
family, or other personal expenditures that is accessed by a borrower's 
use of a ``credit card,'' as defined in 12 CFR 1026.2;
    (3) Other revolving credit plan, which means a revolving credit 
plan that is not accessed by credit card; and
    (4) Other consumer loan, which is a consumer loan that is not 
included in one of the other categories of consumer loans.
    County means any county or statistically equivalent entity as 
defined by the U.S. Census Bureau.
    Deposits, for purposes of this part, has the following meanings:
    (1) For banks that collect, maintain, and report deposits data as 
provided in Sec.  __.42, deposits means deposits in domestic offices of 
individuals, partnerships, and corporations, and of commercial banks 
and other depository institutions in the U.S. as defined in Schedule 
RC-E of the Call Report; deposits does not include U.S. Government 
deposits, state and local government deposits, domestically held 
deposits of foreign governments or official institutions, or 
domestically held deposits of foreign banks or other foreign financial 
institutions;
    (2) For banks that collect and maintain, but that do not report, 
deposits data as provided in Sec.  __.42, deposits means deposits in 
domestic offices of individuals, partnerships, and corporations, and of 
commercial banks and other depository institutions in the U.S. as 
defined in Schedule RC-E of the Call Report; deposits does not include 
U.S. Government deposits, state and local government deposits, 
domestically held deposits of foreign governments or official 
institutions, or domestically held deposits of foreign banks or other 
foreign financial institutions, except that, for purposes of the Retail 
Lending Test's Market Volume Benchmark and for all community 
development financing benchmarks, deposits has the same meaning as in 
the FDIC's Summary of Deposits Reporting Instructions;
    (3) For banks that do not collect and maintain deposits data as 
provided in Sec.  __.42, deposits has the same meaning as in the FDIC's 
Summary of Deposits Reporting Instructions.
    Deposit location means:
    (1) For banks that collect and maintain deposits data as provided 
in Sec.  __.42, the census tract or county, as applicable, in which the 
consumer resides, or the census tract or county, as applicable, in 
which the business is located if it has a local account.
    (2) For banks that collect and maintain, but that do not report, 
deposits data as provided in Sec.  __.42, the census tract or county, 
as applicable, in which the consumer resides, or the census tract or 
county, as applicable, in which the business is located if it has a 
local account except that, for purposes of the Market Volume Benchmark 
and for all community development financing benchmarks, the county of 
the bank branch to which the deposits are assigned in the FDIC's 
Summary of Deposits.
    (3) For banks that do no collect and maintain deposits data as 
provided in Sec.  __.42, the county of the bank branch to which the 
deposits are assigned in the FDIC's Summary of Deposits.
    Dispersion of retail lending means how geographically diffuse or 
widely spread such lending is across census tracts of different income 
levels within a facility-based assessment area, retail lending 
assessment area, or outside retail lending area.
    Distressed or underserved nonmetropolitan middle-income census 
tract means a census tract publicly designated as such by the Board, 
the Federal Deposit Insurance Corporation (FDIC), and the Office of the 
Comptroller of the Currency (OCC), based on the criteria in paragraphs 
(1) and (2) of this definition, compiled in a list and published 
annually by the Federal Financial Institutions Examination Council 
(FFIEC).
    (1) A nonmetropolitan middle-income census tract is designated as 
distressed if it is in a county that meets one or more of the following 
criteria:
    (i) An unemployment rate of at least 1.5 times the national 
average;

[[Page 34017]]

    (ii) A poverty rate of 20 percent or more; or
    (iii) A population loss of 10 percent or more between the previous 
and most recent decennial census or a net migration loss of five 
percent or more over the five-year period preceding the most recent 
census.
    (2) A nonmetropolitan middle-income census tract is designated as 
underserved if it meets the criteria for population size, density, and 
dispersion that indicate the area's population is sufficiently small, 
thin, and distant from a population center that the census tract is 
likely to have difficulty financing the fixed costs of meeting 
essential community needs. The criteria for these designations are 
based on the Urban Influence Codes established by the U.S. Department 
of Agriculture's Economic Research Service numbered ``7,'' ``10,'' 
``11,'' or ``12.''
    Distribution of retail lending refers to how such lending is 
apportioned among borrowers of different income levels, businesses or 
farms of different sizes, or among census tracts of different income 
levels.
    Evaluation period refers to the period of time between CRA 
examinations, generally in calendar years, in accordance with the 
[Agency's] guidelines and procedures.
    Facility-based assessment area means a geographic area delineated 
in accordance with Sec.  __.16.
    High opportunity area means:
    (1) An area designated by the U.S. Department of Housing and Urban 
Development (HUD) as a ``Difficult Development Area'' (DDA); or
    (2) An area designated by a state or local Qualified Allocation 
Plan as a High Opportunity Area, and where the poverty rate falls below 
10 percent (for metropolitan areas) or 15 percent (for nonmetropolitan 
areas).
    Home mortgage loan means a closed-end home mortgage loan or an 
open-end home mortgage loan as these terms are defined in this section 
and that is not an excluded transaction under 12 CFR 1003.3(c)(1) 
through (10) and (13).
    Income level includes:
    (1) Low-income, which means:
    (i) For individuals within a census tract, an individual income 
that is less than 50 percent of the area median income; or
    (ii) For a census tract, a median family income that is less than 
50 percent of the area median income.
    (2) Moderate-income, which means:
    (i) For individuals within a census tract, an individual income 
that is at least 50 percent and less than 80 percent of the area median 
income; or
    (ii) For a census tract, a median family income that is at least 50 
percent and less than 80 percent of the area median income.
    (3) Middle-income, which means:
    (i) For individuals within a census tract, an individual income 
that is at least 80 percent and less than 120 percent of the area 
median income; or
    (ii) For a census tract, a median family income that is at least 80 
percent and less than 120 percent of the area median income.
    (4) Upper-income, which means:
    (i) For individuals within a census tract, an individual income 
that is 120 percent or more of the area median income; or
    (ii) For a census tract, a median family income that is 120 percent 
or more of the area median income.
    Intermediate bank means a bank that had average assets of at least 
$600 million in both of the prior two calendar years and less than $2 
billion in either of the prior two calendar years, based on the assets 
reported on its four quarterly Call Reports for each of those calendar 
years. The $600 million figure and the $2 billion figure will be 
adjusted annually and published by the [Agency], based on the year-to-
year change in the average of the Consumer Price Index for Urban Wage 
Earners and Clerical Workers, not seasonally adjusted, for each 12-
month period ending in November, with rounding to the nearest million.
    Large bank means a bank that had average assets of at least $2 
billion in both of the prior two calendar years, based on the assets 
reported on its four quarterly Call Reports for each of those calendar 
years. The $2 billion figure will be adjusted annually and published by 
the [Agency], based on the year-to-year change in the average of the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, not 
seasonally adjusted, for each 12-month period ending in November, with 
rounding to the nearest million.
    Limited purpose bank means a bank that offers only a narrow retail 
product line (such as credit cards, other revolving consumer credit 
plans, other consumer loans, or other non-reported commercial and farm 
loans) to a regional or broader market and for which a designation as a 
limited purpose bank is in effect, in accordance with Sec.  __.26.
    Loan location. A loan is located as follows:
    (1) A consumer loan is located in the census tract where the 
borrower resides at the time that the consumer submits the loan 
application;
    (2) A home mortgage loan is located in the census tract where the 
property securing the loan is located; and
    (3) A small business loan or small farm loan is located in the 
census tract where the main business facility or farm is located or 
where the loan proceeds otherwise will be applied, as indicated by the 
borrower.
    Low branch access census tract means a census tract with one bank, 
thrift, or credit union branch within:
    (1) Ten miles of the census tract center of population or within 
the census tract in nonmetropolitan areas;
    (2) Five miles of the census tract center of population or within 
the census tract in a census tract located in an MSA but primarily 
outside of the principal city components of the MSA; or
    (3) Two miles of the census tract center of population or within 
the census tract in a census tract located in an MSA and primarily 
within the principal city components of the MSA.
    Low-cost education loan means any private education loan, as 
defined in section 140(a)(7) of the Truth in Lending Act (15 U.S.C. 
1650(a)(8)) (including a loan under a state or local education loan 
program), originated by the bank for a student at an ``institution of 
higher education,'' as generally defined in sections 101 and 102 of the 
Higher Education Act of 1965 (20 U.S.C. 1001 and 1002) and the 
implementing regulations published by the U.S. Department of Education, 
with interest rates and fees no greater than those of comparable 
education loans offered directly by the U.S. Department of Education. 
Such rates and fees are specified in section 455 of the Higher 
Education Act of 1965 (20 U.S.C. 1087e).
    Low-income credit union (LICU) has the same meaning given to that 
term in 12 CFR 701.34.
    Metropolitan area means any MSA, combined MSA, or metropolitan 
division as defined by the Director of the Office of Management and 
Budget.
    Metropolitan division has the same meaning given to that term by 
the Director of the Office of Management and Budget.
    Metropolitan statistical area (MSA) has the same meaning given to 
that term by the Director of the Office of Management and Budget.
    Military bank means a bank whose business predominately consists of 
serving the needs of military personnel who serve or have served in the 
armed forces (including the U.S. Air Force, U.S. Army, U.S. Coast 
Guard, U.S. Marine Corps, and U.S. Navy) or dependents of military 
personnel.
    Minority depository institution (MDI) means an entity that:

[[Page 34018]]

    (1) For purposes of activities conducted pursuant to 12 U.S.C. 
2907(a) (i.e., donating, selling on favorable terms (as determined by 
the [Agency]), or making available on a rent-free basis any branch of 
the bank, which is located in a predominately minority neighborhood) 
has the meaning given to that term in 12 U.S.C. 2907(b)(1); and
    (2) For all other purposes:
    (i) Has the meaning given to that term in 12 U.S.C. 2907(b)(1);
    (ii) Is a minority depository institution, as defined in section 
308 of the Financial Institutions Reform, Recovery, and Enforcement Act 
of 1989 (FIRREA) (12 U.S.C. 1463 note); or
    (iii) Is considered to be a minority depository institution by the 
appropriate Federal banking agency. For purposes of this paragraph, 
``appropriate Federal banking agency'' has the meaning given to it in 
12 U.S.C. 1813(q).
    Multifamily loan means a loan for a ``multifamily dwelling'' as 
defined in 12 CFR 1003.2(n).
    Multistate metropolitan statistical area (multistate MSA) has the 
same meaning given to that term by the Director of the Office of 
Management and Budget.
    Nationwide area means the entire United States and its territories.
    Native land area means:
    (1) All land within the limits of any Indian reservation under the 
jurisdiction of the U.S. Government, as described in 18 U.S.C. 1151(a);
    (2) All dependent Indian communities within the borders of the 
United States whether within the original or subsequently acquired 
territory thereof, and whether within or without the limits of a state, 
as described in 18 U.S.C. 1151(b);
    (3) All Indian allotments, the Indian titles to which have not been 
extinguished, including rights-of-way running through the same, as 
defined in 18 U.S.C. 1151(c);
    (4) Any land held in trust by the United States for Native 
Americans, as described in 38 U.S.C. 3765(1)(A);
    (5) Reservations established by a state government for a tribe or 
tribes recognized by the state;
    (6) Any Alaska Native village as defined in 43 U.S.C 1602(c);
    (7) Lands that have the status of Hawaiian Home Lands as defined in 
section 204 of the Hawaiian Homes Commission Act, 1920 (42 Stat. 108), 
as amended;
    (8) Areas defined by the U.S. Census Bureau as Alaska Native 
Village Statistical Areas, Oklahoma Tribal Statistical Areas, Tribal-
Designated Statistical Areas, or American Indian Joint-Use Areas; and
    (9) Land areas of state-recognized Indian tribes and heritage 
groups that are defined and recognized by individual states and 
included in the U.S. Census Bureau's annual Boundary and Annexation 
Survey.
    Nonmetropolitan area means any area that is not located in an MSA.
    Open-end home mortgage loan has the same meaning as given to the 
term ``open-end line of credit'' in 12 CFR 1003.2(o), excluding 
multifamily loans as defined in this section.
    [Operations subsidiary or operating subsidiary] means [Agency 
definition of operations subsidiary or operating subsidiary].
    Outside retail lending area means the nationwide area outside of a 
bank's facility-based assessment areas and, as applicable, retail 
lending assessment areas.
    Remote service facility means an automated, virtually staffed, or 
unstaffed banking facility owned or operated by, or operated 
exclusively for, a bank, such as an automated teller machine (ATM), 
interactive teller machine, cash dispensing machine, or other remote 
electronic facility at which deposits are received, cash dispersed, or 
money lent.
    Retail banking services means retail financial services provided by 
a bank to consumers, small businesses, and small farms and includes a 
bank's systems for delivering retail financial services.
    Retail lending assessment area means a geographic area, separate 
and distinct from a facility-based assessment area, delineated in 
accordance with Sec.  __.17.
    Retail loan. (1) For purposes of the Retail Lending Test in Sec.  
__.22, retail loan means an automobile loan, closed-end home mortgage 
loan, open-end home mortgage loan, multifamily loan, small business 
loan, or small farm loan;
    (2) For all other purposes, retail loan means a consumer loan, home 
mortgage loan, small business loan, or small farm loan.
    Small bank means a bank that had average assets of less than $600 
million in either of the prior two calendar years, based on the assets 
reported on its four quarterly Call Reports for each of those calendar 
years. The $600 million figure will be adjusted annually and published 
by the [Agency], based on the year-to-year change in the average of the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, not 
seasonally adjusted, for each 12-month period ending in November, with 
rounding to the nearest million.
    Small business means a business that had gross annual revenues for 
its preceding fiscal year of $5 million or less.
    Small business loan means, notwithstanding the definition of 
``small business'' in this section, a loan included in ``loans to small 
businesses'' as defined in the instructions for preparation of the Call 
Report.
    Small farm means a farm that had gross annual revenues for its 
preceding fiscal year of $5 million or less.
    Small farm loan means, notwithstanding the definition of ``small 
farm'' in this section, a loan included in ``loans to small farms'' as 
defined in the instructions for preparation of the Call Report.
    State means a U.S. state or territory, and includes the District of 
Columbia.
    Targeted census tract means:
    (1) A low-income census tract or a moderate-income census tract; or
    (2) A distressed or underserved nonmetropolitan middle-income 
census tract.
    Very low branch access census tract means a census tract with no 
bank, thrift, or credit union branches within:
    (1) Ten miles of the census tract center of population or within 
the census tract in nonmetropolitan areas;
    (2) Five miles of the census tract center of population or within 
the census tract located in an MSA but primarily outside of the 
principal city components of the MSA; or
    (3) Two miles of the census tract center of population or within 
the census tract located in an MSA and primarily within the principal 
city components of the MSA.
    Wholesale bank means a bank that is not in the business of 
extending home mortgage, small business, small farm, or consumer loans 
to retail customers, and for which a designation as a wholesale bank is 
in effect, in accordance with Sec.  __.26.
    Women's depository institution (WDI) has the same meaning given to 
that term in 12 U.S.C. 2907(b)(2).


Sec.  __.13   Community Development Definitions.

    (a) Consideration for activities with a primary purpose of 
community development. A bank may receive community development 
consideration for a loan, investment, or service that has a primary 
purpose of community development. A bank will receive consideration for 
the entire activity where the activity meets the criteria for having a 
primary purpose of community development under paragraphs (a)(1)(i) and 
(a)(1)(ii) of this section, except that a bank will receive 
consideration for the portion of any activity considered to have a 
primary purpose of community development under paragraph (a)(1)(i)(A) 
of this section.

[[Page 34019]]

    (1) Primary purpose of community development. A loan, investment, 
or service has a primary purpose of community development:
    (i) If a majority of the dollars, applicable beneficiaries, or 
housing units of the activity are identifiable to one or more of the 
community development purposes in paragraph (a)(2) of this section;
    (A) Where an activity supports rental housing purchased, developed, 
financed, rehabilitated, improved, or preserved in conjunction with a 
federal, state, local, or tribal government affordable housing plan, 
program, initiative, tax credit, or subsidy with a stated purpose or 
bona fide intent of providing affordable housing for low-income or 
moderate-income individuals under paragraph (b)(1) of this section, and 
fewer than 50 percent of the housing units supported by that activity 
are affordable, the activity has a primary purpose of community 
development only for the percentage of total housing units in any 
development that are affordable.
    (B) Notwithstanding paragraph (a)(1)(i)(A) of this section, where 
an activity involves low-income housing tax credits to support 
affordable housing under paragraph (b) of this section, the activity 
has a primary purpose of community development for the full value of 
the investment even where fewer than 50 percent of the housing units 
supported by that activity are affordable.
    (ii) If the express, bona fide intent of the activity is one or 
more of the community development purposes in paragraph (a)(2) of this 
section and the activity is specifically structured to achieve, or is 
reasonably certain to accomplish, the community development purpose.
    (2) Community development purposes. Loans, investments, or services 
meet the definition of community development purpose if they promote 
one or more of the following:
    (i) Affordable housing that benefits low- or moderate-income 
individuals, as described in paragraph (b) of this section;
    (ii) Economic development that supports small businesses or small 
farms, as described in paragraph (c) of this section;
    (iii) Community supportive services that serve or assist low- or 
moderate-income individuals, as described in paragraph (d) of this 
section;
    (iv) Revitalization activities undertaken in conjunction with a 
federal, state, local, or tribal government plan, program, or 
initiative that must include an explicit focus on revitalizing or 
stabilizing targeted census tracts, as described in paragraph (e) of 
this section;
    (v) Essential community facilities that benefit or serve residents 
of targeted census tracts, as described in paragraph (f) of this 
section;
    (vi) Essential community infrastructure that benefits or serves 
residents of targeted census tracts, as described in paragraph (g) of 
this section;
    (vii) Recovery activities that support the revitalization of a 
designated disaster area, as described in paragraph (h) of this 
section;
    (viii) Disaster preparedness and climate resiliency activities that 
benefit or serve residents of targeted census tracts, as described in 
paragraph (i) of this section;
    (ix) Activities undertaken with MDIs, WDIs, LICUs, or CDFIs 
certified by the U.S. Department of the Treasury's Community 
Development Institutions Fund (Treasury Department-certified CDFIs), as 
described in paragraph (j) of this section;
    (x) Financial literacy programs or initiatives, including housing 
counseling, as described in paragraph (k) of this section; or
    (xi) Activities undertaken in Native Land Areas that benefit or 
serve residents, including low- or moderate-income residents, of Native 
Land Areas, as described in paragraph (l) of this section.
    (b) Affordable housing. Activities that support affordable housing 
for low- or moderate-income individuals are:
    (1) Rental housing in conjunction with a government affordable 
housing plan, program, initiative, tax credit, or subsidy. Rental 
housing purchased, developed, financed, rehabilitated, improved, or 
preserved in conjunction with a federal, state, local, or tribal 
government affordable housing plan, program, initiative, tax credit, or 
subsidy with a stated purpose or bona fide intent of providing 
affordable housing for low- or moderate-income individuals;
    (2) Multifamily rental housing with affordable rents. Rents are 
deemed affordable for purchased, developed, financed, rehabilitated, 
improved, or preserved multifamily rental housing if, for the majority 
of the units, the monthly rent as underwritten by the bank, reflecting 
post-construction or post-renovation changes as applicable, does not 
exceed 30 percent of 60 percent of the area median income for the 
metropolitan area or nonmetropolitan county, and:
    (i) The housing is located in a low- or moderate-income census 
tract;
    (ii) The housing is purchased, developed, financed, rehabilitated, 
improved, or preserved by any non-profit organization with a stated 
mission of, or that otherwise directly supports, providing affordable 
housing;
    (iii) The property owner has made an explicit written pledge to 
maintain affordable rents for low- or moderate-income individuals for 
at least five years or the length of the financing, whichever is 
shorter; or
    (iv) The bank provides documentation that a majority of the housing 
units are occupied by low- or moderate-income individuals or families.
    (3) Activities that support affordable owner-occupied housing for 
low- or moderate-income individuals. Activities, excluding single-
family home mortgage loans considered under the Retail Lending Test in 
Sec.  __.22, that directly assist low- or moderate-income individuals 
to obtain, maintain, rehabilitate, or improve affordable owner-occupied 
housing or activities that support programs, projects, or initiatives 
that assist low- or moderate-income individuals to obtain, maintain, 
rehabilitate, or improve affordable owner-occupied housing; and
    (4) Mortgage-backed securities. Purchases of mortgage-backed 
securities that contain a majority of either loans financing housing 
for low- or moderate-income individuals or loans financing housing that 
otherwise qualifies as affordable housing under paragraph (b) of this 
section.
    (c) Economic development. Economic development activities are:
    (1) Activities undertaken consistent with federal, state, local, or 
tribal government plans, programs, or initiatives that support small 
businesses or small farms as those entities are defined in the plans, 
programs, or initiatives, notwithstanding how those entities are 
defined in Sec.  __.12, including lending to, investing in, or 
providing services to an SBA Certified Development Company (13 CFR 
120.10), Small Business Investment Company (13 CFR 107), New Markets 
Venture Capital Company (13 CFR 108), qualified Community Development 
Entity (26 U.S.C. 45D(c)), or U.S. Department of Agriculture Rural 
Business Investment Company (7 CFR 4290.50);
    (2) Support for financial intermediaries that lend to, invest in, 
or provide technical assistance to businesses or farms with gross 
annual revenues of $5 million or less; or
    (3) Providing technical assistance to support businesses or farms 
with gross

[[Page 34020]]

annual revenues of $5 million or less, or providing services such as 
shared space, technology, or administrative assistance to such 
businesses or farms or to organizations that have a primary purpose of 
supporting such businesses or farms.
    (d) Community supportive services. Community supportive services 
are general welfare services that serve or assist low- or moderate-
income individuals including, but not limited to, childcare, education, 
workforce development and job training programs, and health services 
and housing services programs that serve or assist low- or moderate-
income individuals, including:
    (1) Activities conducted with a non-profit organization that has a 
defined mission or purpose of serving low- or moderate-income 
individuals or is limited to offering community supportive services 
exclusively to low- and moderate-income individuals;
    (2) Activities conducted with a non-profit organization located in 
and serving low- or moderate-income census tracts;
    (3) Activities conducted in low- or moderate-income census tracts 
and targeted to the residents of the census tract;
    (4) Activities offered to individuals at a workplace where the 
majority of employees are low- or moderate-income, based on readily 
available U.S. Bureau of Labor Statistics data for the average wage for 
workers in that particular occupation or industry;
    (5) Activities provided to students or their families through a 
school at which the majority of students qualify for free or reduced-
price meals under the U.S. Department of Agriculture's National School 
Lunch Program;
    (6) Activities that have a primary purpose of benefitting or 
serving individuals who receive or are eligible to receive Medicaid;
    (7) Activities that benefit or serve individuals who receive or are 
eligible to receive Federal Supplemental Security Income, Social 
Security Disability Insurance, or support through other Federal 
disability assistance programs; or
    (8) Activities that benefit or serve recipients of government 
assistance plans, programs, or initiatives that have income 
qualifications equivalent to, or stricter than, the definitions of low- 
and moderate-income as defined in this part. Examples include, but are 
not limited to, HUD's section 8, 202, 515, and 811 programs or the U.S. 
Department of Agriculture's section 514, 516, and Supplemental 
Nutrition Assistance programs.
    (e) Revitalization activities undertaken in conjunction with a 
government plan, program, or initiative. Revitalization activities are 
those undertaken in conjunction with a federal, state, local, or tribal 
government plan, program, or initiative that includes an explicit focus 
on revitalizing or stabilizing targeted census tracts. Revitalization 
activities include, and are not limited to, adaptive reuse of vacant or 
blighted buildings, brownfield redevelopment, or activities consistent 
with a plan for a business improvement district or main street program. 
Revitalization activities do not include housing-related activities. 
Revitalization activities must meet the following criteria:
    (1) The activities benefit or serve residents, including low- or 
moderate-income residents, in one or more of the targeted census 
tracts; and
    (2) The activities do not displace or exclude low- or moderate-
income residents in the targeted census tracts.
    (f) Essential community facilities activities. Essential community 
facilities activities are those that provide financing or other support 
for public facilities that provide essential services generally 
accessible by a local community, including, but not limited to, 
schools, libraries, childcare facilities, parks, hospitals, healthcare 
facilities, and community centers. Activities that support essential 
community facilities are activities conducted in targeted census tracts 
that meet the following criteria:
    (1) The activities benefit or serve residents, including low- or 
moderate-income residents, in one or more of the targeted census 
tracts;
    (2) The activities do not displace or exclude low- or moderate-
income residents in the targeted census tracts; and
    (3) An activity that finances or supports essential community 
facilities must be conducted in conjunction with a federal, state, 
local, or tribal government plan, program, or initiative that includes 
an explicit focus on benefitting or serving the targeted census tracts.
    (g) Essential community infrastructure activities. Essential 
community infrastructure activities are those that provide financing 
and other support for infrastructure, including, but not limited to, 
broadband, telecommunications, mass transit, water supply and 
distribution, and sewage treatment and collection systems. Activities 
that support essential community infrastructure are activities 
conducted in targeted census tracts that meet the following criteria:
    (1) The activities benefit or serve residents, including low- or 
moderate-income residents, in one or more of the targeted census 
tracts;
    (2) The activities do not displace or exclude low- or moderate-
income residents in the targeted census tracts; and
    (3) An activity that finances or supports essential community 
infrastructure must be conducted in conjunction with a federal, state, 
local, or tribal government plan, program, or initiative that includes 
an explicit focus on benefitting the targeted census tracts.
    (h) Recovery activities in designated disaster areas. Activities 
that promote recovery from a designated disaster:
    (1) Are activities that revitalize or stabilize geographic areas 
subject to a Major Disaster Declaration administered by the Federal 
Emergency Management Agency (FEMA). Activities that promote recovery 
from a designated disaster exclude activities that revitalize or 
stabilize counties designated to receive only FEMA Public Assistance 
Emergency Work Category A (Debris Removal) and/or Category B (Emergency 
Protective Measures), unless the Board, the FDIC, and the OCC announce 
a temporary exception. Activities are eligible for 36 months after a 
Major Disaster Declaration, unless extended by the Board, the FDIC, and 
the OCC;
    (2) Must benefit or serve residents, including low- or moderate-
income residents, and not displace or exclude low- or moderate-income 
residents, of such geographic areas; and
    (3) Must be conducted in conjunction with a federal, state, local, 
or tribal government disaster plan that includes an explicit focus on 
benefitting the designated disaster area.
    (i) Disaster preparedness and climate resiliency activities. 
Disaster preparedness and climate resiliency activities are activities 
that assist individuals and communities to prepare for, adapt to, and 
withstand natural disasters, weather-related disasters, or climate-
related risks. Disaster preparedness and climate resiliency activities 
are those conducted in targeted census tracts that meet the following 
criteria:
    (1) The activities benefit or serve residents, including low- or 
moderate-income residents, in one or more of the targeted census 
tracts; and
    (2) The activities do not displace or exclude low- or moderate-
income residents in the targeted census tracts;
    (3) A disaster preparedness and climate resiliency activity must be 
conducted in conjunction with a federal, state, local, or tribal 
government plan, program, or initiative focused on

[[Page 34021]]

disaster preparedness or climate resiliency that includes an explicit 
focus on benefitting a geographic area that includes the targeted 
census tracts.
    (j) Activities with MDIs, WDIs, LICUs, or CDFIs. Activities with 
MDIs, WDIs, LICUs, or CDFIs are:
    (1) Investments, loan participations, and other ventures undertaken 
by any bank, including by MDIs and WDIs, in cooperation with other 
MDIs, other WDIs, or LICUs; and
    (2) Lending, investment, and service activities undertaken in 
connection with a Treasury Department-certified CDFI. A bank's lending, 
investment, and service activities undertaken in connection with a 
Treasury Department-certified CDFI at the time of the activity will be 
presumed to qualify for favorable community development consideration.
    (k) Financial literacy. Activities that promote financial literacy 
are those that assist individuals and families, including low- or 
moderate-income individuals and families, to make informed financial 
decisions regarding managing income, savings, credit, and expenses, 
including with respect to homeownership.
    (l) Qualifying activities in Native Land Areas. (1) Activities in 
Native Land Areas are activities related to revitalization, essential 
community facilities, essential community infrastructure, and disaster 
preparedness and climate resiliency that are specifically targeted to 
and conducted in Native Land Areas. Activities in Native Land Areas 
must benefit residents of Native Land Areas, including low- or 
moderate-income residents.
    (i) Revitalization activities in Native Land Areas are those 
undertaken in conjunction with a Federal, state, local, or tribal 
government plan, program, or initiative that includes an explicit focus 
on revitalizing or stabilizing Native Land Areas and a particular focus 
on low- or moderate-income households. Revitalization activities in 
Native Land Areas:
    (A) Must benefit or serve residents of Native Land Areas, with 
substantial benefits for low- or moderate-income residents; and
    (B) Must not displace or exclude low- or moderate-income residents
    (ii) Essential community facilities in Native Land Areas are public 
service facilities that provide essential services to a community, 
including, but not limited to, schools, libraries, childcare 
facilities, parks, hospitals, healthcare facilities, and community 
centers. Activities that support essential community facilities must 
benefit or serve residents, including low- or moderate-income 
residents, of Native Land Areas;
    (iii) Eligible community infrastructure in Native Land Areas 
includes, but is not limited to, broadband, telecommunications, mass 
transit, water supply and distribution, and sewage treatment and 
collection systems. Activities that support eligible community 
infrastructure must benefit or serve residents, including low- or 
moderate-income residents, of one or more of Native Land Areas; and
    (iv) Disaster preparedness and climate resiliency activities in 
Native Land Areas are activities that assist individuals and 
communities to prepare for, adapt to, and withstand natural disasters, 
weather-related disasters, or climate-related risks. Disaster 
preparedness and climate resiliency activities must benefit or serve 
residents, including low- or moderate-income residents, of Native Land 
Areas.
    (2) Activities that support and benefit Native Land Areas under 
paragraphs (l)(1)(ii) and (l)(1)(iii) of this section must:
    (i) Benefit or serve residents, including low- or moderate-income 
residents, of Native Land Areas, and must not displace or exclude low- 
or moderate-income residents of such geographic areas; and
    (ii) Be conducted in conjunction with a Federal, state, local, or 
tribal government plan, program, or initiative that benefits or serves 
residents of Native Land Areas.
    (3) Activities that support and benefit Native Land Areas under 
paragraph (l)(1)(iv) of this section must:
    (i) Benefit or serve residents, including low- or moderate-income 
residents, of Native Land Areas, and must not displace or exclude low- 
or moderate-income residents of such geographic areas; and
    (ii) Be conducted in conjunction with a Federal, state, local, or 
tribal government plan, program, or initiative focused on disaster 
preparedness or climate resiliency that benefits or serves residents of 
Native Land Areas.


Sec.  __.14   Qualifying activities confirmation and illustrative list 
of activities.

    (a) Illustrative activities list. The Board, the FDIC, and the OCC 
maintain a publicly available illustrative list of non-exhaustive 
examples of community development activities that qualify for CRA 
consideration.
    (b) Modifying the illustrative activities list. (1) The Board, the 
FDIC, and the OCC will update the illustrative list of activities 
periodically.
    (2) If the Board, the FDIC, and the OCC determine that an activity 
is no longer eligible for CRA community development consideration, the 
owner of the loan or investment at the time of the determination will 
continue to receive CRA consideration for the remaining term or period 
of the loan or investment. However, these loans or investments will not 
be considered eligible for CRA community development consideration for 
any purchasers of that loan or investment after the determination.
    (c) Confirmation of an eligible activity. Pursuant to paragraph (d) 
of this section, a bank subject to this part may submit a request to 
the [Agency] for confirmation that an activity is eligible for CRA 
consideration. When the Board, the FDIC, and the OCC confirm that an 
activity is or is not eligible for CRA consideration, the [Agency] will 
notify the requestor, and the Board, the FDIC, and the OCC may add the 
activity to the publicly available illustrative list of activities, 
incorporating any conditions imposed, if applicable.
    (d) Process. (1) A bank may request that the [Agency] confirm that 
an activity is eligible for CRA consideration by submitting a request 
to the [Agency], in a format prescribed by the [Agency].
    (2) In responding to a request for confirmation that an activity is 
eligible for CRA consideration, the Board, the FDIC, and the OCC will 
consider:
    (i) The information provided to describe and support the request;
    (ii) Whether the activity is consistent with the safe and sound 
operation of the bank; and
    (iii) Any other information that the agencies deem relevant.
    (3) The Board, the FDIC, and the OCC may impose any conditions on 
confirmation of an activity's eligibility for CRA consideration, in 
order to ensure consistency with the requirements of this part.


Sec.  __.15  Impact Review of Community Development Activities.

    (a) Impact review, in general. Under the Community Development 
Financing Test in Sec.  __.24, the Community Development Services Test 
in Sec.  __.25, and the Community Development Financing Test for 
Wholesale or Limited Purpose Banks in Sec.  __.26, the [Agency] 
evaluates the impact and responsiveness of a bank's community 
development activities in each facility-based assessment area and, as 
applicable, each state, multistate MSA, and nationwide area. In 
evaluating the impact and responsiveness of a bank's qualifying 
activities, the [Agency] may take into account performance context 
information set out in Sec.  __.21(e), as applicable.

[[Page 34022]]

    (b) Impact review factors. Factors considered in evaluating the 
impact and responsiveness of a bank's qualifying activities include, 
but are not limited to, whether the activities:
    (1) Serve persistent poverty counties, defined as counties or 
county-equivalents that have had poverty rates of 20 percent or more 
for the past 30 years, as measured by the most recent decennial 
censuses;
    (2) Serve geographic areas with low levels of community development 
financing;
    (3) Support an MDI, WDI, LICU, or Treasury Department-certified 
CDFI;
    (4) Serve low-income individuals and families;
    (5) Support small businesses or small farms with gross annual 
revenues of $250,000 or less;
    (6) Directly facilitate the acquisition, construction, development, 
preservation, or improvement of affordable housing in High Opportunity 
Areas;
    (7) Benefit Native communities, such as qualifying activities in 
Native Land Areas under Sec.  __.13(l);
    (8) Are a qualifying grant or donation;
    (9) Reflect bank leadership through multi-faceted or instrumental 
support; or
    (10) Result in a new community development financing product or 
service that addresses community development needs for low- or 
moderate-income individuals and families.

Subpart B--Geographic Considerations


Sec.  __.16  Facility-based assessment areas.

    (a) In general. A bank must delineate one or more facility-based 
assessment areas within which the [Agency] evaluates the bank's record 
of helping to meet the credit needs of its community pursuant to the 
standards in this part. The [Agency] does not evaluate the bank's 
delineation of its facility-based assessment areas as a separate 
performance criterion, but the [Agency] reviews the delineation for 
compliance with the requirements of this section.
    (b) Facility-based assessment areas for evaluating performance. (1) 
A facility-based assessment area must include each county in which a 
bank has a main office, a branch, any other staffed bank facility that 
accept deposits, or a deposit-taking remote service facility, as well 
as the surrounding geographies in which the bank has originated or 
purchased a substantial portion of its loans (including home mortgage 
loans, small business loans, small farm loans, and automobile loans). 
For purposes of this paragraph, facilities refers to those that are 
open to the general public and excludes nonpublic facilities.
    (2) Except as provided in paragraph (b)(3) of this section, a 
facility-based assessment area must consist of one or more MSAs or 
metropolitan divisions (using the MSA or metropolitan division 
boundaries that were in effect as of January 1 of the calendar year in 
which the delineation is made) or one or more contiguous counties 
within an MSA, metropolitan division, or the nonmetropolitan area of a 
state and may not extend beyond an MSA boundary or beyond a state 
boundary unless the assessment area is located in a multistate MSA or 
combined statistical area.
    (3) An intermediate bank or a small bank may adjust the boundaries 
of its facility-based assessment areas to include only the portion of a 
county that it reasonably can be expected to serve, subject to 
paragraph (c) of this section. A facility-based assessment area that 
includes a partial county must consist only of whole census tracts.
    (c) Limitations on the delineation of a facility-based assessment 
area. Each bank's facility-based assessment areas:
    (1) May not reflect illegal discrimination; and
    (2) May not arbitrarily exclude low- or moderate-income census 
tracts, taking into account the bank's size and financial condition.
    (d) Military banks. Notwithstanding the requirements of this 
section, a bank whose business predominantly consists of serving the 
needs of military personnel or their dependents who are not located 
within a defined geographic area may delineate its entire deposit 
customer base as its assessment area.
    (e) Use of facility-based assessment areas. The [Agency] uses the 
facility-based assessment areas delineated by a bank in its evaluation 
of the bank's CRA performance unless the [Agency] determines that the 
facility-based assessment areas do not comply with the requirements of 
this section.


Sec.  __.17  Retail lending assessment areas.

    (a) In general. The [Agency] evaluates a large bank's performance, 
including a large bank that elects to be evaluated under an approved 
strategic plan, by assessing the bank's retail lending activities in 
one or more retail lending assessment areas outside of the bank's 
facility-based assessment areas. A large bank must delineate retail 
lending assessment areas based upon the criteria in paragraphs (b) and 
(c) of this section.
    (b) Geographic requirements regarding retail lending assessment 
areas. (1) A retail lending assessment area must consist of either:
    (i) The entirety of a single MSA (using the MSA boundaries that 
were in effect as of January 1 of the calendar year in which the 
delineation applies), excluding counties inside facility-based 
assessment areas; or
    (ii) All of the counties in a single state that are not included in 
an MSA (using the MSA boundaries that were in effect as of January 1 of 
the calendar year in which the delineation applies), excluding counties 
inside facility-based assessment areas, aggregated into a single retail 
lending assessment area.
    (2) A retail lending assessment area may not extend beyond an MSA 
boundary or beyond a state boundary unless the assessment area is 
located in a multistate MSA or combined statistical area.
    (c) Delineation of retail lending assessment areas. A large bank 
must delineate a retail lending assessment area in any MSA or 
nonmetropolitan area of a state, respectively, in which it originated, 
as of December 31 of each of the two preceding calendar years, in that 
geographic area:
    (1) At least 100 home mortgage loans outside of facility-based 
assessment areas; or
    (2) At least 250 small business loans outside of facility-based 
assessment areas.
    (d) Use of retail lending assessment areas. The [Agency] uses the 
retail lending assessment areas delineated by a large bank in its 
evaluation of the bank's retail lending performance unless the [Agency] 
determines that the retail lending assessment areas do not comply with 
the requirements of this section.


Sec.  __.18  Areas for eligible community development activity.

    In addition to a bank receiving consideration under this part for 
community development activities conducted in its facility-based 
assessment areas, a bank will also receive consideration for community 
development loans, community development investments, and community 
development services provided outside of its facility-based assessment 
areas within the states and multistate MSAs in which the bank has a 
facility-based assessment area and in a nationwide area, as provided in 
Sec. Sec.  __.21, __.24, __.25, __.26, __.28, and appendices C and D of 
this part, as applicable.

[[Page 34023]]

Subpart C--Standards for Assessing Performance


Sec.  __.21  Performance tests, standards, and ratings, in general.

    (a) Performance tests. The [Agency] uses the following performance 
tests and standards to assess a bank's CRA performance:
    (1) The Retail Lending Test as provided in Sec.  __.22.
    (2) The Retail Services and Products Test as provided in Sec.  
__.23.
    (3) The Community Development Financing Test as provided in Sec.  
__.24.
    (4) The Community Development Services Test as provided in Sec.  
__.25.
    (5) The Community Development Financing Test for Wholesale or 
Limited Purpose Banks as provided in Sec.  __.26.
    (6) The small bank performance standards as provided in Sec.  
__.29(a).
    (7) The intermediate bank community development performance 
standards as provided in Sec.  __.29(b)(2).
    (8) Standards in a strategic plan approved as provided in Sec.  
__.27.
    (b) Application of performance tests and standards. (1) Large 
banks. To evaluate the performance of a large bank, the [Agency] 
applies the Retail Lending Test, the Retail Services and Products Test, 
the Community Development Financing Test, and the Community Development 
Services Test.
    (2) Intermediate banks. (i) To evaluate the performance of an 
intermediate bank, the [Agency] applies the Retail Lending Test and 
either the community development performance standards as provided in 
Sec.  __.29(b)(2) or, if the bank chooses, the Community Development 
Financing Test.
    (ii) If an intermediate bank chooses evaluation under the Community 
Development Financing Test, the following applies:
    (A) The [Agency] evaluates the intermediate bank for the evaluation 
period preceding the bank's next CRA examination under the Community 
Development Financing Test and continues evaluations under the 
Community Development Financing Test for subsequent evaluation periods 
until the bank opts out. If an intermediate bank opts out of the 
Community Development Financing Test, the [Agency] reverts to 
evaluating the bank under the intermediate bank community development 
performance standards, starting with the entire evaluation period 
preceding the bank's next CRA examination.
    (B) The intermediate bank may request additional consideration for 
activities that qualify under the Retail Services and Products Test or 
the Community Development Services Test and, after considering such 
activities, the [Agency] may adjust the bank's rating at the 
institution level from ``Satisfactory'' to ``Outstanding,'' if the bank 
would have received a ``Satisfactory'' before the additional 
consideration.
    (3) Small banks. (i) To evaluate the performance of a small bank, 
the [Agency] applies the small bank performance standards as provided 
in Sec.  __.29(a), unless the bank chooses evaluation under the Retail 
Lending Test.
    (ii) If a small bank chooses evaluation under the Retail Lending 
Test, the following applies:
    (A) The [Agency] applies the same provisions used for evaluating 
intermediate banks under the Retail Lending Test to the small bank, 
except for Sec.  __.22(a)(3).
    (B) The [Agency] evaluates the small bank for the evaluation period 
preceding the bank's next CRA examination under the Retail Lending Test 
and continues evaluations under the Retail Lending Test for subsequent 
evaluation periods until the bank opts out. If a small bank opts out of 
the Retail Lending Test, the [Agency] reverts to evaluating the bank 
under the small bank performance standards as provided in Sec.  
__.29(a), starting with the entire evaluation period preceding the 
bank's next CRA examination.
    (C) The small bank may request additional consideration for 
activities that qualify under the Retail Services and Products Test, 
the Community Development Financing Test, or the Community Development 
Services Test and, after considering such activities, the [Agency] may 
adjust the bank's rating at the institution level from ``Satisfactory'' 
to ``Outstanding.''
    (4) Wholesale or limited purpose banks. (i) The [Agency] evaluates 
a wholesale or limited purpose bank under the Community Development 
Financing Test for Wholesale or Limited Purpose Banks.
    (ii) A wholesale or limited purpose bank may request additional 
consideration for activities that qualify under the Community 
Development Services Test and, after considering such activities, the 
[Agency] may adjust the bank's rating at the institution level from 
``Satisfactory'' to ``Outstanding.''
    (5) Banks operating under a strategic plan. The [Agency] evaluates 
the performance of a bank that chooses evaluation under a strategic 
plan approved under Sec.  __.27 in accordance with the goals set forth 
in such plan.
    (c) Activities of [operations subsidiaries or operating 
subsidiaries] and other affiliates. In the performance evaluation of a 
bank, the [Agency] considers the qualifying activities of a bank's 
[operations subsidiaries or operating subsidiaries] and other 
affiliates in accordance with paragraphs (c)(1) and (c)(2) of this 
section, provided that no other bank, other [operations subsidiaries or 
operating subsidiaries], or other affiliates of the bank claim the 
activity for purposes of this part.
    (1) Activities of [operations subsidiaries or operating 
subsidiaries]. The [Agency] considers the qualifying activities of a 
bank's [operations subsidiaries or operating subsidiaries] as part of 
the bank's performance evaluation, unless an [operations subsidiary or 
operations subsidiary] is independently subject to the CRA. The bank 
must collect, maintain, and report data on the activities of its 
[operations subsidiaries or operating subsidiaries] as provided in 
Sec.  __.42(d).
    (2) Activities of other affiliates. The [Agency] considers the 
qualifying activities of affiliates of a bank that are not [operations 
subsidiaries or operating subsidiaries], if the bank so chooses, 
subject to the following:
    (i) The affiliate is not independently subject to the CRA.
    (ii) The bank collects, maintains, and reports data on the 
activities of the affiliate as provided in Sec.  __.42(e).
    (iii) Under the Retail Lending Test, if a bank chooses to have the 
[Agency] consider retail loans within a retail loan category that are 
made or purchased by one or more of the bank's affiliates in a 
particular facility-based assessment area, retail lending assessment 
area, outside retail lending area, state, or multistate MSA, or 
nationwide, the [Agency] will consider, subject to paragraphs (c)(2)(i) 
and (c)(2)(ii) of this section, all of the retail loans within that 
retail loan category made by all of the bank's affiliates in, 
respectively, the particular facility-based assessment area, retail 
lending assessment area, outside retail lending area, state, or 
multistate MSA, or nationwide.
    (d) Community development financing by a consortium or a third 
party. If a bank participates in a consortium that makes community 
development loans or community development investments, or if a bank 
invests in a third party that makes such loans or investments, those 
loans or investments may be considered, at the bank's option, subject 
to the following limitations:
    (i) The bank must report the data pertaining to these loans and 
investments under Sec.  __.42(f);
    (ii) If the participants or investors choose to allocate qualifying 
loans or investments among themselves for

[[Page 34024]]

consideration under this section, no participant or investor may claim 
a loan origination, loan purchase, or investment if another participant 
or investor claims the same loan origination, loan purchase, or 
investment; and
    (iii) The bank may not claim loans or investments accounting for 
more than its percentage share (based on the level of its participation 
or investment) of the total qualifying loans or investments made by the 
consortium or third party.
    (e) Performance context information considered. When applying the 
performance tests and standards provided in paragraphs (a) and (b) of 
this section, including in considering whether to approve a strategic 
plan, the [Agency] may consider performance context information to the 
extent that it is not considered as part of the tests and standards in 
paragraphs (a) and (b) of this section, including:
    (1) Any information regarding a bank's institutional capacity or 
constraints, including the size and financial condition of the bank, 
safety and soundness limitations, or any other bank-specific factors 
that significantly affect the bank's ability to conduct retail banking 
or community development activities in its facility-based assessment 
areas;
    (2) Any information regarding the bank's past performance;
    (3) Demographic data on income levels and income distribution, 
nature of housing stock, housing costs, economic climate, or other 
relevant data pertaining to the geographic areas in which the bank is 
evaluated;
    (4) Any information about retail banking and community development 
needs and opportunities in the geographic areas in which the bank is 
evaluated provided by the bank or other relevant sources, including but 
not limited to members of the community, community organizations, 
state, local, and tribal governments, and economic development 
agencies;
    (5) Data and information provided by the bank regarding the bank's 
business strategy and product offerings;
    (6) The bank's public file, as described in Sec.  __.43, including 
any oral or written comments about the bank's CRA performance submitted 
to the bank or the [Agency] and the bank's responses to those comments; 
and
    (7) Any other information deemed relevant by the [Agency].
    (f) Conclusions and ratings. (1) Conclusions. As provided in Sec.  
__.28 and appendix C of this part, the [Agency] assigns to a bank, 
other than a small bank, conclusions for the bank's performance on the 
applicable tests and standards in this section, as follows: 
``Outstanding,'' ``High Satisfactory,'' ``Low Satisfactory,'' ``Needs 
to Improve,'' or ``Substantial Noncompliance.'' As provided in Sec.  
__.28 and appendix E of this part, the [Agency] assigns to a small bank 
conclusions for the bank's performance on the applicable tests and 
standards in this section, as follows: ``Outstanding,'' 
``Satisfactory,'' ``Needs to Improve,'' or ``Substantial 
Noncompliance.''
    (2) Ratings. The [Agency] assigns to a bank a rating regarding its 
overall CRA performance, as applicable, in each state, in each 
multistate MSA, and at the institution level. The ratings assigned by 
the [Agency] reflect the bank's record of helping to meet the credit 
needs of its entire community, including low- and moderate-income 
neighborhoods, consistent with the safe and sound operation of the 
bank. As provided in Sec.  __.28 and appendices D and E of this part, 
the [Agency] assigns to a bank a rating of: ``Outstanding''; 
``Satisfactory''; ``Needs to Improve''; or ``Substantial 
Noncompliance.''
    (3) Performance scores. As provided in Sec.  __.28 and appendices C 
and D of this part, the [Agency] develops performance scores in 
connection with assigning conclusions and ratings for a bank, other 
than a small bank evaluated under the small bank performance standards 
in Sec.  __.29(a), a wholesale or limited purpose bank under the 
Community Development Financing Test for Wholesale or Limited Purpose 
Banks in Sec.  __.26, or a bank evaluated based on a strategic plan 
under Sec.  __.27.
    (g) Safe and sound operations. The CRA and this part do not require 
a bank to make loans or investments or to provide services that are 
inconsistent with safe and sound banking practices, including 
underwriting standards. Banks are permitted to develop and apply 
flexible underwriting standards for loans that benefit low- or 
moderate-income individuals, small businesses or small farms, and low- 
or moderate-income census tracts, only if consistent with safe and 
sound operations.


Sec.  __.22  Retail lending test.

    (a) Retail Lending Test--scope. (1) General. The Retail Lending 
Test evaluates a bank's record of helping to meet the credit needs of 
its facility-based assessment areas through a bank's origination and 
purchase of retail loans in each facility-based assessment area.
    (2) Large banks. For large banks, the Retail Lending Test also 
evaluates a bank's record of helping to meet credit needs, through the 
bank's origination and purchase of retail loans, as applicable:
    (i) In each retail lending assessment area; and
    (ii) In its outside retail lending area, at the institution level.
    (3) Intermediate banks. For intermediate banks, the Retail Lending 
Test also evaluates, at the institution level, a bank's record of 
helping to meet credit needs through the bank's origination and 
purchase of retail loans in its outside retail lending area if the bank 
originates and purchases over 50 percent of its retail loans, by dollar 
amount, outside of its facility-based assessment areas over the 
relevant evaluation period.
    (4) Major product line. (i) Major product line refers to retail 
lending in each of the following, separate categories:
    (A) Closed-end home mortgage loans: (to include home purchase, home 
refinance, home improvement, and other purpose closed-end loans, but 
not including multifamily loans);
    (B) Open-end home mortgage loans (to include, but not limited to, 
home equity lines of credit, but not including multifamily loans);
    (C) Multifamily loans;
    (D) Small business loans;
    (E) Small farm loans; and
    (F) Automobile loans;
    (ii) Major product line with regard to closed-end home mortgage 
loans, open-end home mortgage loans, multifamily loans, small business 
loans, and small farm loans, respectively, means any category of such 
loans that individually comprises 15 percent or more of a bank's retail 
lending in a particular facility-based assessment area, retail lending 
assessment area, or outside retail lending area, by dollar amount, over 
the relevant evaluation period;
    (iii) (A) Major product line with regard to automobile loans means 
automobile loans that collectively comprise 15 percent or more of a 
bank's retail lending in a particular facility-based assessment area, 
retail lending assessment area, or outside retail lending area, based 
on a combination of the dollar amount and number of loans, over the 
relevant evaluation period.
    (B) Specifically, automobile loans will be considered a major 
product line if the average of the percentage of automobile lending 
dollars out of total retail lending dollars and the percentage of 
automobile loans by loan count out of all total retail lending by loan 
count is 15 percent or greater in a particular facility-based 
assessment area, retail lending assessment area, or outside retail 
lending area.
    (5) Exclusion. (i) A retail loan may be considered only under the 
Retail Lending Test and is not eligible for

[[Page 34025]]

consideration under the Community Development Financing Test in Sec.  
__.24 or the intermediate bank community development performance 
standards in Sec.  __.29(b)(2);
    (ii) Notwithstanding paragraph (a)(5)(i), a multifamily loan under 
Sec.  __.13(b) may be considered under the Retail Lending Test and 
under the Community Development Financing Test;
    (iii) Notwithstanding paragraph (a)(5)(i), in the case of an 
intermediate bank that is not required to report a home mortgage loan, 
a small business loan, or a small farm loan, the bank may opt to have 
the loan considered under the Retail Lending Test or, if the loan is a 
qualifying activity pursuant to Sec.  __.13, under the Community 
Development Financing Test or the intermediate bank community 
development performance standards in Sec.  __.29(b)(2).
    (b) Methodology. (1) Retail lending volume screen. The [Agency] 
first reviews numerical metrics regarding a bank's retail lending 
volume in each facility-based assessment area that are developed under 
paragraph (c) of this section.
    (2) Retail lending distribution metrics. The [Agency] also uses 
numerical metrics, developed under paragraph (d) of this section, to 
evaluate the geographic and borrower distribution of a bank's major 
product lines in each facility-based assessment area and, as 
applicable:
    (i) In each retail lending assessment area; and
    (ii) In its outside retail lending area, at the institution level, 
using a tailored benchmark based on the bank's specific geographic 
markets served.
    (3) Additional factors considered. The [Agency] also uses criteria 
described in paragraph (e) of this section to evaluate a bank's retail 
lending performance in its facility-based assessment areas.
    (c) Retail lending volume screen. (1) Banks that meet or surpass 
the retail lending volume threshold in a facility-based assessment 
area. If the [Agency] determines that a bank meets or surpasses the 
Retail Lending Volume Threshold in a facility-based assessment area 
under paragraph (c)(3) of this section:
    (i) The [Agency] will evaluate a bank's retail loan distribution 
for each major product line under paragraph (d) of this section to 
determine a bank's applicable recommended conclusion for retail lending 
performance; and
    (ii) The [Agency] will assign the bank a recommended Retail Lending 
Test conclusion in the facility-based assessment area based upon its 
retail lending performance under paragraphs (c) and (d) of this 
section. The [Agency] will also evaluate the criteria in paragraph (e) 
of this section to determine whether to adjust the recommended Retail 
Lending Test conclusion.
    (2) Banks that fail to meet the retail lending volume threshold in 
a facility-based assessment area. If the [Agency] determines that a 
bank fails to meet the Retail Lending Volume Threshold in a facility-
based assessment area under paragraph (c)(3) of this section:
    (i) If, after reviewing the factors in in paragraph (c)(2)(iii) of 
this section, the [Agency] determines that there is an acceptable basis 
for the bank failing to meet Retail Lending Volume Threshold in a 
facility-based assessment area, the [Agency] will evaluate the bank's 
retail loan distribution for each major product line under paragraph 
(d) of this section to develop a recommended Retail Lending Test 
conclusion. The [Agency] will also evaluate the criteria in paragraph 
(e) of this section to determine whether to adjust the recommended 
Retail Lending Test conclusion;
    (ii) (A) If, after reviewing the factors described in paragraph 
(c)(2)(iii) of this section, the [Agency] determines there is not an 
acceptable basis for a large bank failing to meet Retail Lending Volume 
Threshold in a facility-based assessment area, the [Agency] will assign 
the bank a Retail Lending Test conclusion of ``Substantial 
Noncompliance'' or ``Needs to Improve'' in that facility-based 
assessment area based upon:
    (1) The bank's retail lending volume and the extent by which it 
failed to meet the Retail Lending Volume Threshold;
    (2) Its retail loan distribution for each major product line under 
paragraph (d) of this section; and
    (3) The criteria in paragraph (e) of this section.
    (B) If, after reviewing the factors described in paragraph 
(c)(2)(iii) of this section, the [Agency] determines there is not an 
acceptable basis for an intermediate bank, or a small bank that opts to 
be evaluated under the Retail Lending Test, failing to meet the Retail 
Lending Volume Threshold in a facility-based assessment area, the 
[Agency] will take into account the bank's performance relative to the 
Retail Lending Volume Threshold when determining the bank's recommended 
Retail Lending Test conclusion in that facility-based assessment area.
    (iii) The [Agency] will determine whether there is an acceptable 
basis for a bank failing to meet the Retail Lending Volume Threshold in 
a facility-based assessment area by considering the bank's 
institutional capacity and constraints, including the financial 
condition of a bank, the presence or lack thereof of other lenders in 
the geographic area, safety and soundness limitations, business 
strategy, and other factors that limit the bank's ability to lend in 
the assessment area.
    (3) Retail lending volume threshold. The [Agency] determines that a 
bank has met or surpassed the Retail Lending Volume Threshold in a 
facility-based assessment area where the bank has a Bank Volume Metric 
of 30 percent or greater of the Market Volume Benchmark for that 
facility-based assessment area. The Bank Volume Metric and the Market 
Volume Benchmark for a facility-based assessment are derived under 
section I of appendix A of this part.
    (d) Retail lending distribution metrics. (1) Scope. For each major 
product line, the [Agency] evaluates the geographic and borrower 
distributions of a bank's retail loans, as applicable:
    (i) In each facility-based assessment area;
    (ii) In each retail lending assessment area; and
    (iii) In its outside retail lending area, at the institution level.
    (2) Recommended Retail Lending Test conclusions. (i) Using bank 
borrower and geographic distributions for each major product line 
compared against applicable performance ranges, as described in 
appendix A of this part, the [Agency] will assign a bank recommended 
Retail Lending Test conclusion, as determined in appendix A of this 
part, in:
    (A) (1) Each facility-based assessment area of a large bank where 
the bank meets or surpasses the Retail Lending Volume Threshold under 
paragraph (c) of this section or the [Agency] determines that the bank 
has an acceptable basis for failing to meet the Retail Lending Volume 
Threshold; and
    (2) Each facility-based assessment area of an intermediate bank;
    (B) Each retail lending assessment area of a large bank; and
    (C) As applicable, a large bank's or an intermediate bank's outside 
retail lending area, at the institution level.
    (ii) Geographic distribution measures. Regarding a bank's 
geographic distribution of retail lending, the [Agency] will review a 
bank's performance in low- and moderate-income census tracts using the 
following measures:
    (A) A Geographic Bank Metric, derived under section III.1 of 
appendix A of this part;

[[Page 34026]]

    (B) A Geographic Market Benchmark, derived under section III.2.a of 
appendix A of this part; and
    (C) A Geographic Community Benchmark, derived under section III.2.b 
of appendix A of this part.
    (D). For each major product line, the [Agency] will compare the 
following in low-income census tracts and moderate-income census 
tracts, respectively:
    (1) The bank's performance, as captured by the Geographic Bank 
Metric and as described in sections V.2.b and V.2.c of appendix A of 
this part, compared against:
    (2) Performance ranges, with boundaries based upon the Geographic 
Market Benchmark and the Geographic Community Benchmark as described in 
section V.2 of appendix A of this part, associated with each potential 
recommended Retail Lending Test performance conclusion: 
``Outstanding,'' ``High Satisfactory,'' ``Low Satisfactory,'' ``Needs 
to Improve,'' and ``Substantial Noncompliance.''
    (iii) Borrower distribution measures. Regarding the bank's borrower 
distribution of retail lending, apart from multifamily lending, the 
[Agency] will review a bank's retail lending performance regarding, as 
applicable, low-income borrowers and moderate-income borrowers, small 
businesses with gross annual revenues of $250,000 or less and small 
businesses with gross annual revenues of more than $250,000 but less 
than or equal to $1 million, and small farms with gross annual revenues 
of $250,000 or less and small farms with gross annual revenues of more 
than $250,000 but less than or equal to $1 million, using the following 
measures:
    (A) A Borrower Bank Metric, derived under section IV.1 of appendix 
A of this part;
    (B) A Borrower Market Benchmark, derived under section IV.2.a of 
appendix A of this part; and
    (C) A Borrower Community Benchmark, derived under section IV.2.b of 
appendix A of this part.
    (D) For each major product line, the [Agency] will compare the 
following regarding lending to, as applicable: low-income borrowers and 
moderate-income borrowers; small businesses with gross annual revenues 
of $250,000 or less and small businesses with gross annual revenues of 
more than $250,000 but less than or equal to $1 million, and small 
farms with gross annual revenues of $250,000 or less and small farms 
with gross annual revenues of more than $250,000 but less than or equal 
to $1 million:
    (1) The bank's performance, as captured by the Borrower Bank Metric 
and as described in section V.2 of appendix A of this part, compared 
against:
    (2) Performance ranges, with boundaries based upon the Borrower 
Market Benchmark and the Borrower Community Benchmark as described in 
sections V.2.d and V.2.e of appendix A of this part, associated with 
each potential recommended Retail Lending Test performance conclusion: 
``Outstanding''; ``High Satisfactory''; ``Low Satisfactory''; ``Needs 
to Improve''; and ``Substantial Noncompliance.''
    (e) Additional factors considered when evaluating retail lending 
performance. In addition to considering how a bank performs relative to 
the Retail Lending Volume Threshold described in paragraph (c) of this 
section and the performance ranges described in paragraph (d) of this 
section, the [Agency] evaluates the retail lending performance of a 
bank in each facility-based assessment area by considering:
    (1) Information indicating that a bank has purchased retail loans 
for the sole or primary purpose of inappropriately influencing its 
retail lending performance evaluation, including but not limited to 
subsequent resale of some or all of those retail loans or any 
indication that some or all of the loans have been considered in 
multiple banks' CRA evaluations.
    (2) The dispersion of retail lending within the facility-based 
assessment area to determine whether there are gaps in lending in the 
facility-based assessment area that are not explained by performance 
context.
    (3) The number of banks whose reported retail lending and deposits 
data is used to establish the applicable Retail Lending Volume 
Threshold, geographic distribution, and borrower distribution 
thresholds.
    (4) Missing or faulty data that would be necessary to calculate the 
relevant metrics and benchmarks or any other factors that prevent the 
[Agency] from calculating a recommended conclusion. If unable to 
calculate a recommended conclusion, the [Agency] will assign a Retail 
Lending Test conclusion based on consideration of the relevant 
available data.
    (f) Retail Lending Test performance conclusions and ratings. (1) 
Conclusions. As provided in Sec.  __.28 and appendix C of this part, 
the [Agency] assigns conclusions for a bank's Retail Lending Test 
performance in, as applicable, its facility-based assessment areas, 
retail lending assessment areas, and outside retail lending area. As 
described in appendix C of this part, conclusions assigned for a bank's 
performance in facility-based assessment areas and, as applicable, 
retail lending assessment areas are the basis for assigned conclusions 
at the state, multistate MSA, and institution levels. As applicable, a 
bank's assigned conclusion at the institution level is also informed by 
the bank's retail lending activities in its outside retail lending 
area.
    (2) Ratings. As provided in Sec.  __.28 and appendix D of this 
part, the [Agency] incorporates a bank's Retail Lending Test 
conclusions into, as applicable, its state, multistate MSA, and 
institution ratings.


Sec.  __.23  Retail services and products test.

    (a) Scope of Retail Services and Products Test. (1) In general. The 
Retail Services and Products Test evaluates the availability and 
responsiveness of a bank's retail banking services and products 
targeted to low- and moderate-income individuals and in low- and 
moderate-income census tracts in a bank's facility-based assessment 
areas and at the state, multistate MSA, and institution levels. The 
[Agency] considers the bank's delivery systems, as described in 
paragraph (b) of this section, and the bank's products and other 
services, as described in paragraph (c) of this section.
    (2) Exclusion. Activities considered for a bank under the Community 
Development Services Test may not be considered under the Retail 
Services and Products Test.
    (b) Delivery systems. To evaluate a bank's delivery systems, the 
[Agency] analyzes the following: branch availability and services, as 
provided in paragraph (b)(1) of this section and remote service 
facility availability, as provided in paragraph (b)(2) of this section. 
For a large bank that had average assets of over $10 billion in both of 
the prior two calendar years, based on the assets reported on its four 
quarterly Call Reports for each of those calendar years, the [Agency] 
also analyzes digital and other delivery systems, as provided in 
paragraph (b)(3) of this section. A large bank that had average assets 
of $10 billion or less in either of the prior two calendar years, based 
on the assets reported on its four quarterly Call Reports for each of 
those calendar years, may request additional consideration under the 
Retail Services and Products Test for its digital and other delivery 
systems under paragraph (b)(3) of this section.
    (1) Branch availability and services. The [Agency] evaluates a 
bank's branch distribution, branch openings and closings, and branch 
hours of operation

[[Page 34027]]

and services responsive to the needs of low- and moderate-income 
individuals and in low- and moderate-income communities.
    (i) Branch distribution. The [Agency] evaluates a bank's branch 
distribution based on the following:
    (A) Branch distribution metrics. The [Agency] considers the number 
and percentage of the bank's branches within low-, moderate-, middle-, 
and upper-income census tracts.
    (B) Benchmarks. The [Agency]'s consideration of the branch 
distribution metrics in a facility-based assessment area is informed by 
the following benchmarks:
    (1) Percentage of census tracts in the facility-based assessment 
area by low-, moderate-, middle-, and upper-income census tracts, 
respectively;
    (2) Percentages of households in the facility-based assessment area 
by low-, moderate-, middle-, and upper-income census tracts, 
respectively;
    (3) Percentage of total businesses in the facility-based assessment 
area by low-, moderate-, middle-, and upper-income census tracts, 
respectively; and
    (4) Percentage of all full-service bank branches in the facility-
based assessment area by low-, moderate-, middle-, and upper-income 
census tracts, respectively.
    (C) Geographic considerations. The [Agency] considers the 
availability of branches in the following census tracts:
    (1) Low branch access census tracts or very low branch access 
census tracts, as defined in Sec.  __.12;
    (2) Middle- and upper-income census tracts in which branches 
deliver services to low- and moderate-income individuals;
    (3) Distressed or underserved nonmetropolitan middle-income census 
tracts; and
    (4) Native Land Areas.
    (ii) Branch openings and closings. The [Agency] evaluates the 
bank's record of opening and closing branches since the previous 
examination to inform the degree of accessibility of banking services 
to low- and moderate-income individuals and low- and moderate-income 
census tracts.
    (iii) Branch hours of operation and services. The [Agency] 
evaluates the following:
    (A) The reasonableness of branch hours in low- and moderate-income 
census tracts compared to middle- and upper-income census tracts, 
including but not limited to whether branches offer extended and 
weekend hours.
    (B) The range of services provided at branches in low-, moderate-, 
middle-, and upper-income census tracts, respectively, including but 
not limited to:
    (1) Bilingual and translation services;
    (2) Free or low-cost check cashing services, including but not 
limited to government and payroll check cashing services;
    (3) Reasonably priced international remittance services; and
    (4) Electronic benefit transfer accounts.
    (C) The degree to which branch services are responsive to the needs 
of low- and moderate-income individuals in a bank's facility-based 
assessment areas.
    (2) Remote service facility availability. The [Agency] evaluates a 
bank's remote service facility availability in a facility-based 
assessment area based on the following:
    (i) Remote service facility distribution metrics. The [Agency] 
considers the number and percentage of the bank's remote service 
facilities within low-, moderate-, middle-, and upper-income census 
tracts.
    (ii) Benchmarks. The [Agency]'s consideration of the remote service 
facility distribution metrics is informed by the following benchmarks:
    (A) Percentage of census tracts in the facility-based assessment 
area by low-, moderate-, middle-, and upper-income census tracts, 
respectively;
    (B) Percentage of households in the facility-based assessment area 
by low-, moderate-, middle-, and upper-income census tracts, 
respectively; and
    (C) Percentage of total businesses in the facility-based assessment 
area by low-, moderate-, middle-, and upper-income census tracts, 
respectively.
    (iii) Access to out-of-network remote service facilities. The 
[Agency] reviews whether the bank offers customers fee-free access to 
out-of-network ATMs in low- and moderate-income census tracts.
    (3) Digital and other delivery systems. The [Agency] evaluates the 
availability and responsiveness of a bank's digital and other delivery 
systems, including to low- and moderate-income individuals, by 
reviewing the following:
    (i) Digital activity by individuals in low-, moderate-, middle-, 
and upper-income census tracts, respectively, such as:
    (A) The number of checking and savings accounts opened digitally in 
low-, moderate-, middle-, and upper-income census tracts, respectively;
    (B) Accountholder usage data by type of digital and other delivery 
systems in low-, moderate-, middle-, and upper-income census tracts, 
respectively;
    (ii) The range of digital and other delivery systems, including but 
not limited to online banking, mobile banking, and telephone banking; 
and
    (iii) The bank's strategy and initiatives to serve low- and 
moderate-income individuals with digital and other delivery systems.
    (c) Credit and deposit products. As provided in paragraph (c)(1) of 
this section, the [Agency] analyzes the responsiveness of credit 
products and programs not covered under paragraph (b) of this section 
to the needs of low- and moderate-income individuals, small businesses, 
and small farms. As provided in paragraph (c)(2) of this section, for a 
large bank that had average assets of over $10 billion in both of the 
prior two calendar years, based on the assets reported on its four 
quarterly Call Reports for each of those calendar years, the [Agency] 
also analyzes a bank's deposit products and other services not covered 
under paragraph (b) of this section. A large bank that had average 
assets of $10 billion or less in either of the prior two calendar 
years, based on the assets reported on its four quarterly Call Reports 
for each of those calendar years, may request additional consideration 
under the Retail Services and Products Test for its deposit products 
and other services under paragraph (c)(2) of this section.
    (1) Responsiveness of credit products and programs to the needs of 
low- and moderate-income individuals, small businesses, and small 
farms. The [Agency] evaluates whether a bank's credit products and 
programs are, in a safe and sound manner, responsive to the needs of 
low- and moderate-income individuals (including through low-cost 
education loans), small businesses, and small farms. Categories of 
responsive credit products and programs may include, but are not 
limited to, credit products and programs that:
    (i) Facilitate home mortgage and consumer lending targeted to low- 
or moderate-income borrowers in a safe and sound manner.
    (ii) Meet the needs of small businesses and small farms, including 
the smallest businesses and smallest farms, in a safe and sound manner; 
or
    (iii) Are conducted in cooperation with MDIs, WDIs, LICUs, or 
Treasury Department-certified CDFIs in a safe and sound manner.
    (2) Deposit products responsive to the needs of low- and moderate-
income individuals. (i) Availability of deposit products responsive to 
the needs of low- and moderate-income individuals. The [Agency] 
evaluates whether the bank offers deposit products that have features 
and cost characteristics responsive to the needs of low- and moderate-
income individuals, consistent with safe and sound operations, 
including but not limited to

[[Page 34028]]

deposit products with the following types of features:
    (A) Low-cost features, including but not limited to deposit 
products with no overdraft or insufficient funds fees, no or low 
minimum opening balance, no or low monthly maintenance fees, or free or 
low-cost check-cashing and bill-pay services;
    (B) Features facilitating broad functionality and accessibility, 
including but not limited to deposit products with in-network ATM 
access, debit cards for point-of-sale and bill payments, and immediate 
access to funds for customers cashing government, payroll, or bank-
issued checks; or
    (C) Features facilitating inclusivity of access by persons without 
banking or credit histories, or with adverse banking histories.
    (ii) Usage of deposit products responsive to the needs of low- and 
moderate-income individuals. The [Agency] evaluates the usage of a 
bank's deposit products that have features and cost characteristics 
responsive to the needs of low- and moderate-income individuals by 
considering, for example, the following:
    (A) The number of responsive deposit accounts opened and closed 
during each year of the evaluation period in low-, moderate-, middle-, 
and upper-income census tracts, respectively.
    (B) In connection with Sec.  __.23(c)(2)(ii)(A), the percentage of 
responsive deposit accounts compared to total deposit accounts for each 
year of the evaluation period.
    (C) Marketing, partnerships, and other activities that the bank has 
undertaken to promote awareness and use of responsive deposit accounts 
by low- and moderate-income individuals.
    (d) Retail Services and Products Test performance conclusions and 
ratings. (1) Conclusions. As provided in Sec.  __.28 and appendix C of 
this part, the [Agency] assigns conclusions for the retail services and 
products performance of a bank based upon the [Agency]'s assessment of 
the bank's performance in, as applicable, each facility-based 
assessment area, state, multistate MSA, and at the institution level.
    (2) Ratings. As provided in Sec.  __.28 and appendix D of this 
part, the [Agency] incorporates a bank's Retail Services and Products 
Test conclusions into, as applicable, its state, multistate MSA, and 
institution ratings.


Sec.  __.24  Community development financing test.

    (a) Scope of Community Development Financing Test. (1) In general. 
The Community Development Financing Test evaluates a bank's record of 
helping to meet the community development financing needs of the bank's 
facility-based assessment areas, states, multistate MSAs, and 
nationwide area, through its provision of community development loans 
and community development investments. In determining whether a bank's 
community development loans or community development investments serve 
a facility-based assessment area, state, multistate MSA, or nationwide 
area, the [Agency] considers information provided by the bank and, as 
needed, publicly available information and information provided by 
government or community sources that demonstrates that the activity 
includes serving individuals or census tracts located within the 
facility-based assessment area, state, multistate MSA, or nationwide 
area. Community development financing dollars will be allocated in 
accordance with section 13 of appendix B of this part.
    (2) Exclusion. (i) In general, a retail loan may only be considered 
under the Retail Lending Test in Sec.  __.22 and is not eligible for 
consideration under the Community Development Financing Test;
    (ii) A multifamily loan described in Sec.  __.13(b) may be 
considered both under the Retail Lending Test in Sec.  __.22 and under 
the Community Development Financing Test;
    (iii) An intermediate bank that is not required to report a home 
mortgage loan, a small business loan, or a small farm loan may opt to 
have the home mortgage loan, small business loan, or small farm loan 
considered either under the Retail Lending Test in Sec.  __.22 or, if 
the loan is a qualifying activity pursuant to Sec.  __.13, under the 
Community Development Financing Test or the intermediate bank community 
development evaluation in Sec.  __.29, as applicable.
    (b) Bank performance in a facility-based assessment area. The 
[Agency] evaluates the community development financing performance of a 
bank in a facility-based assessment area based on consideration of the 
numerical metrics under paragraph (b)(1) of this section and a review 
of the impact and responsiveness of the bank's activities in a 
facility-based assessment area under Sec.  __.15.
    (1) Bank Assessment Area Community Development Financing Metric. 
The Bank Assessment Area Community Development Financing Metric, as 
specified in section 2 of appendix B of this part, measures the dollar 
value of a bank's community development loans and community development 
investments that serve the facility-based assessment area for each 
year, averaged over the years of the evaluation period, against the 
dollar value of deposits from the bank's deposit accounts in the 
facility-based assessment area, averaged over the evaluation period.
    (2) Benchmarks. The Bank Assessment Area Community Development 
Financing Metric is compared to the following benchmarks:
    (i) Assessment Area Community Development Financing Benchmark. The 
Assessment Area Community Development Financing Benchmark, as specified 
in section 3 of appendix B of this part, measures the community 
development financing activity of large banks in the aggregate in the 
bank's facility-based assessment area against the total dollar value of 
deposits from large bank deposit accounts in the facility-based 
assessment area.
    (ii) Metropolitan and Nonmetropolitan Nationwide Community 
Development Financing Benchmarks. The Metropolitan and Nonmetropolitan 
Nationwide Community Development Financing Benchmarks, as specified in 
section 4 of appendix B of this part, measure the community development 
financing activity of large banks in the aggregate nationally for 
metropolitan areas (if the relevant facility-based assessment area is 
in a metropolitan area) or for nonmetropolitan areas (if the relevant 
facility-based assessment area is in a nonmetropolitan area) against 
the total dollar value of deposits from large bank deposit accounts in 
those areas, respectively.
    (c) Bank performance in a state, multistate MSA, and nationwide 
area. (1) In general. The [Agency] evaluates the community development 
financing performance of a bank in a state, multistate MSA, and 
nationwide area, as applicable, based on the two components in 
paragraph (c)(1)(i) and (c)(1)(ii) of this section. The [Agency] 
assigns a conclusion for the bank's performance at each state, 
multistate MSA, and nationwide area, respectively, based on a weighted 
combination of these components in accordance with section 15 of 
appendix B of this part:
    (i) A weighted average under paragraphs (c)(2)(i), (c)(3)(i), and 
(c)(4)(i) of this section of the bank's facility-based assessment area 
conclusions for each area where conclusions are assigned, as 
applicable, calculated in accordance with section 16 of appendix B of 
this part; and
    (ii) An assessment under paragraphs (c)(2)(ii), (c)(3)(ii), and 
(c)(4)(ii) of this section, respectively, which combines

[[Page 34029]]

consideration of the applicable metrics and benchmarks with a review of 
the impact of the bank's activities in those respective areas under 
Sec.  __.15.
    (2) Bank performance in a state. The two components of the 
[Agency]'s assessment of a bank's community development performance in 
a state are as follows:
    (i) Component one--weighted average of facility-based assessment 
area performance conclusions in a state. The [Agency] considers the 
weighted average of the bank's conclusions for its facility-based 
assessment areas within the state, calculated in accordance with 
section 16 of appendix B of this part.
    (ii) Component two--metrics and impact assessment in a state. The 
[Agency] considers the numerical metrics of this paragraph and the 
impact of the bank's activities in a state under Sec.  __.15. The 
[Agency] combines the results of the metrics and benchmarks and the 
impact review in accordance with section 15.iii of appendix B of this 
part.
    (A) Bank State Community Development Financing Metric. The Bank 
State Community Development Financing Metric, as specified in section 5 
of appendix B of this part, measures the dollar value of a bank's 
community development loans and community development investments that 
serve a state against the dollar value of deposits from the bank's 
deposit accounts in the state.
    (B) Benchmarks. The Bank State Community Development Financing 
Metric is compared to the following benchmarks:
    (1) State Community Development Financing Benchmark. The State 
Community Development Financing Benchmark, as specified in section 6 of 
appendix B of this part, measures the community development financing 
activity of large banks in the state in the aggregate against the total 
dollar value of deposits from large bank deposit accounts in the state.
    (2) State Weighted Assessment Area Community Development Financing 
Benchmark. The State Weighted Assessment Area Community Development 
Financing Benchmark, as specified in section 7 of appendix B of this 
part, is the average of the bank's Assessment Area Community 
Development Financing Benchmarks for each facility-based assessment 
area within the state, weighted in accordance with section 17 of 
appendix B of this part.
    (3) Bank performance in a multistate MSA. The two components of the 
[Agency]'s assessment of a bank's community development performance in 
a multistate MSA are as follows:
    (i) Component one--weighted average of facility-based assessment 
area performance in a multistate MSA. The [Agency] considers the 
weighted average of the bank's conclusions for its facility-based 
assessment areas within the multistate MSA, calculated in accordance 
with section 16 of appendix B of this part.
    (ii) Component two--metrics and impact assessment in a multistate 
MSA. The [Agency] considers the numerical metrics in this paragraph and 
the impact of the bank's activities in a multistate MSA under Sec.  
__.15. The [Agency] combines the results of the metrics and benchmarks 
and the impact review in accordance with section 15.iii of appendix B 
of this part.
    (A) Bank Multistate MSA Community Development Financing Metric. The 
Bank Multistate MSA Community Development Financing Metric, as 
specified in section 8 of appendix B of this part, measures the dollar 
value of a bank's community development loans and community development 
investments that serve a multistate MSA against the dollar value of 
deposits from deposit accounts in the multistate MSA.
    (B) Benchmarks. The Bank Multistate Community Development Financing 
Metric is compared to the following benchmarks:
    (1) Multistate MSA Community Development Financing Benchmark. The 
Multistate MSA Community Development Financing Benchmark, as specified 
in section 9 of appendix B of this part, measures the community 
development activity of large banks in the aggregate in the multistate 
MSA against the total dollar value of deposits from large bank deposit 
accounts in the multistate MSA.
    (2) Multistate MSA Weighted Assessment Area Community Development 
Financing Benchmark. The Multistate MSA Weighted Assessment Area 
Community Development Financing Benchmark, as specified in section 10 
of appendix B of this part, is the weighted average of the bank's Bank 
Assessment Area Community Development Financing Benchmarks for each 
facility-based assessment area within the multistate MSA, calculated in 
accordance with section 17 of appendix B of this part.
    (4) Bank performance in a nationwide area. The two components of 
the [Agency]'s assessment of a bank's community development performance 
in a nationwide area are as follows:
    (i) Component one--weighted average of facility-based assessment 
area performance in a nationwide area. The [Agency] considers the 
average of the bank's conclusions for its assessment areas within the 
nationwide area, weighted in accordance with section 16 of appendix B 
of this part.
    (ii) Component two--metrics and impact assessment in a nationwide 
area. The [Agency] considers the numerical metrics of this paragraph 
and the impact of the bank's activities in a nationwide area under 
Sec.  __.15. The [Agency] combines the results of the metrics and 
benchmarks and the impact review in accordance with section 15.iii of 
appendix B of this part.
    (A) Bank Nationwide Community Development Financing Metric. The 
Bank Nationwide Community Development Financing Metric, as specified in 
section 11 of appendix B of this part, measures the bank's total 
community development financing activity in a nationwide area for each 
year, averaged over the years of the evaluation period, divided by the 
total dollar amount of deposits from bank deposit accounts in a 
nationwide area, averaged over the years of the evaluation period.
    (B) Benchmarks. The Bank Nationwide Community Development Financing 
Metric is compared to the following benchmarks:
    (1) Nationwide Community Development Financing Benchmark. The 
Nationwide Community Development Financing Benchmark, as specified in 
section 12 of appendix B of this part, measures the community 
development financing activity of large banks in the aggregate in a 
nationwide area for each year, averaged over the years of the 
evaluation period, divided by the total dollar amount of deposits from 
large bank deposit accounts in a nationwide area, averaged over the 
years of the evaluation period.
    (2) Nationwide Weighted Assessment Area Community Development 
Financing Benchmark. The Nationwide Weighted Assessment Area Community 
Development Financing Benchmark, as specified in section 13 of appendix 
B of this part, is the weighted average of the bank's Bank Assessment 
Area Community Development Financing Benchmarks for each facility-based 
assessment area within the nationwide area, calculated in accordance 
with section 17 of appendix B of this part.
    (d) Community Development Financing Test performance conclusions 
and ratings. (1) Conclusions. As provided in Sec.  __.28 and appendix C 
of this part, the [Agency] assigns conclusions for the Community 
Development Financing Test performance of a bank based upon the 
[Agency]'s assessment of the bank's

[[Page 34030]]

performance in each facility-based assessment area, state, multistate 
MSA, and nationwide area.
    (2) Ratings. As provided in Sec.  __.28 and appendix D of this 
part, the [Agency] incorporates a bank's Community Development 
Financing Test conclusions into, as applicable, its state, multistate 
MSA, and institution ratings.


Sec.  __.25  Community development services test.

    (a) Scope of Community Development Services Test. The Community 
Development Services Test evaluates a bank's record of helping to meet 
the community development services needs of the bank's facility-based 
assessment areas, states, multistate MSAs, and nationwide area. 
Community development services are defined in paragraph (d) of this 
section. In determining whether a bank's community development services 
serve a facility-based assessment area, state, multistate MSA, or 
nationwide area, the [Agency] considers publicly available information 
and information provided by the bank or government or community sources 
that demonstrates that the activity includes serving individuals or 
census tracts located within the facility-based assessment area, state, 
multistate MSA, or nationwide area, as applicable.
    (b) Bank performance in a facility-based assessment area. The 
[Agency] evaluates the community development services performance of a 
bank in a facility-based assessment area based on a review of the 
bank's provision of community development services under paragraph 
(b)(1) of this section and, as applicable, a metric measuring the 
bank's community development services hours under paragraph (b)(2) of 
this section. The [Agency] also reviews the impact and responsiveness 
of a bank's community development services activities in a facility-
based assessment area under paragraph (b)(3) of this section.
    (1) Review of the provision of community development services. The 
[Agency] reviews the extent to which a bank provides community 
development services based on any relevant information provided to the 
[Agency] by a bank, including any information required to be collected 
under Sec.  __.42, as applicable. This review may include consideration 
of one or more of the following types of information:
    (i) The total number of hours for all community development 
services performed by a bank;
    (ii) The number and type of community development services offered;
    (iii) For nonmetropolitan areas, the number of activities related 
to the provision of financial services;
    (iv) The number and proportion of community development service 
hours completed by, respectively, executive and other employees of the 
bank;
    (v) The extent to which community development services are used, as 
demonstrated by information such as the number of low- and moderate-
income participants, organizations served, and sessions sponsored, as 
applicable; and
    (vi) Any other evidence that the bank's community development 
services benefit low- and moderate-income individuals or are otherwise 
responsive to community development needs.
    (2) Bank Assessment Area Community Development Service Hours 
Metric. For a large bank that had average assets of over $10 billion in 
both of the prior two calendar years, based on the assets reported on 
its four quarterly Call Reports for each of those calendar years, as of 
December 31, the [Agency] also considers the Bank Assessment Area 
Community Development Service Hours Metric. The Bank Assessment Area 
Community Development Service Hours Metric measures the total number of 
hours for all community development services performed by a bank in a 
facility-based assessment area during the evaluation period, divided by 
the total number of full-time equivalent bank employees in the 
facility-based assessment area, to obtain the average number of 
community development service hours per full-time equivalent employee.
    (3) Impact review. The [Agency] evaluates the impact and 
responsiveness of the bank's community development services in a 
facility-based assessment area under Sec.  __.15.
    (c) Bank performance in a state, multistate MSA, or nationwide 
area. The [Agency] evaluates the community development services 
performance of a bank in a state, multistate MSA, or nationwide area, 
as applicable under Sec.  __.18, based on two components:
    (1) Component one--weighted average of facility-based assessment 
area performance in a state, multistate MSA, or nationwide area. The 
[Agency] considers the weighted average of the bank's Community 
Development Services Test conclusions for its facility-based assessment 
areas within a state, multistate MSA, or nationwide area, as applicable 
under Sec.  __.18, calculated in accordance with section 16 of appendix 
B of this part.
    (2) Component two--evaluation of community development services 
outside of facility-based assessment areas. For each state, multistate 
MSA, or nationwide area, as applicable, the [Agency] may adjust the 
results of the weighted average derived under paragraph (c)(1) upward, 
based on an evaluation of the bank's community development services 
activities outside of its facility-based assessment areas, which may 
consider the following information:
    (i) The number, hours, and type of community development services 
conducted in the state, multistate MSA, or nationwide area;
    (ii) The proportion of activities related to the provision of 
financial services, as described in paragraph (d)(3) of this section; 
and
    (iii) The impact and responsiveness of the community development 
services in the state, multistate MSA, or nationwide area, consistent 
with the factors in paragraph (b)(3) of this section.
    (d) Community development services--defined. (1) In general. 
Community development services means activities that:
    (i) Have a primary purpose of community development, as defined in 
Sec.  __.13(a)(1);
    (ii) Are volunteer activities performed by bank board members or 
employees of the bank; and
    (iii) Are related to financial services as described in paragraph 
(d)(3) of this section, unless otherwise indicated in paragraph (d)(4) 
of this section.
    (2) Exclusions. Community development services do not include 
volunteer activities by bank board members or employees of the bank who 
are not acting in their capacity as representatives of the bank.
    (3) Activities related to the provision of financial services. 
Activities related to the provision of financial services are generally 
activities that relate to credit, deposit, and other personal and 
business financial services. Activities related to financial services 
include, but are not limited to:
    (i) Serving on the board of directors of an organization that has a 
primary purpose of community development;
    (ii) Providing technical assistance on financial matters to non-
profit, government, or tribal organizations or agencies supporting 
community development activities;
    (iii) Providing support for fundraising to organizations that have 
a primary purpose of community development;
    (iv) Providing financial literacy education as described in Sec.  
__.13(k); or

[[Page 34031]]

    (v) Providing services reflecting other areas of expertise at the 
bank, such as human resources, information technology, and legal 
services.
    (4) Community development services in nonmetropolitan areas. Banks 
may receive community development services consideration for volunteer 
activities undertaken in nonmetropolitan areas that otherwise meet the 
criteria for one or more of the community development definitions, as 
described in Sec.  __.13, even if unrelated to financial services. 
Examples of qualifying activities not related to financial services 
include, but are not limited to:
    (i) Assisting an affordable housing organization to construct 
homes;
    (ii) Volunteering at an organization that provides community 
support such as a soup kitchen, a homeless shelter, or a shelter for 
victims of domestic violence; and
    (iii) Organizing or otherwise assisting with a clothing drive or a 
food drive for a community service organization.
    (e) Community Development Services Test performance conclusions and 
ratings. (1) Conclusions. As provided in Sec.  __.28 and appendix C of 
this part, the [Agency] assigns conclusions for a bank's Community 
Development Services Test performance in, as applicable, each facility-
based assessment area, state, multistate MSA, and at the institution 
level.
    (2) Ratings. As provided in Sec.  __.28 and appendix D of this 
part, the [Agency] incorporates a bank's Community Development Services 
Test conclusions into, as applicable, its state, multistate MSA, and 
institution ratings.


Sec.  __.26  Wholesale or limited purpose banks.

    (a) Bank request for designation as a wholesale or limited purpose 
bank. To receive a designation as a wholesale or limited purpose bank, 
a bank must file a request, in writing, with the [Agency] at least 
three months prior to the proposed effective date of the designation. 
If the [Agency] approves the designation, it remains in effect until 
the bank requests revocation of the designation or until one year after 
the [Agency] notifies a wholesale or limited purpose bank that the 
[Agency] has revoked the designation on its own initiative.
    (b) Performance evaluation. (1) To evaluate a wholesale or limited 
purpose bank, the [Agency] applies the Community Development Financing 
Test for Wholesale or Limited Purpose Banks described in paragraphs (c) 
through (f) of this section.
    (2) A wholesale or limited purpose bank may request additional 
consideration for activities that would qualify for consideration under 
the Community Development Services Test. Based on a review of these 
activities, if warranted, the [Agency] may raise the bank's rating at 
the institution level from ``Satisfactory'' to ``Outstanding.''
    (c) Scope of Community Development Financing Test for Wholesale or 
Limited Purpose Banks. (1) The Community Development Financing Test for 
Wholesale or Limited Purpose Banks evaluates a wholesale or limited 
purpose bank's record of helping to meet the community development 
financing needs of the bank's facility-based assessment areas, states, 
multistate MSAs, and nationwide area, through its provision of 
community development loans and community development investments.
    (2) In determining whether a wholesale or limited purpose bank's 
community development financing activities serve a facility-based 
assessment area, state, multistate MSA, or nationwide area, the 
[Agency] considers information provided by the bank and, as needed, 
publicly available information and information provided by government 
or community sources that demonstrate that the activities include 
serving individuals or census tracts located within the bank's 
facility-based assessment area, state, multistate MSA, or nationwide 
area.
    (3) Community development financing dollars will be allocated in 
accordance with section 14 of appendix B of this part.
    (d) Wholesale or limited purpose bank performance in a facility-
based assessment area. The [Agency] evaluates the community development 
financing performance of a wholesale or limited purpose bank in a 
facility-based assessment area based on consideration of the total 
dollar value of a bank's community development loans and community 
development investments that serve the facility-based assessment area 
for each year and a review of the impact and responsiveness of the 
bank's activities in the facility-based assessment area under Sec.  
__.15.
    (e) Wholesale or limited purpose bank performance in a state or 
multistate MSA. The [Agency] evaluates the community development 
financing performance of a wholesale or limited purpose bank in a state 
or multistate MSA based on consideration of the following:
    (1) The bank's community development financing performance in its 
facility-based assessment areas in the state or multistate MSA; and
    (2) The dollar value of a bank's community development loans and 
community development investments that serve the state or multistate 
MSA during the evaluation period and a review of the impact of the 
bank's activities in the state or multistate MSA under Sec.  __.15.
    (f) Wholesale or limited purpose bank performance in a nationwide 
area. The [Agency] evaluates the community development financing 
performance of a wholesale or limited purpose bank in a nationwide area 
based on consideration of the following:
    (1) The bank's community development financing performance in all 
of its facility-based assessment areas; and
    (2) The Wholesale or Limited Purpose Bank Community Development 
Financing Metric and a review of the impact of the bank's nationwide 
activities under Sec.  __.15. The Wholesale or Limited Purpose Bank 
Community Development Financing Metric, as specified in section 18 of 
appendix B of this part, measures the average total dollar value of a 
bank's community development loans and community development 
investments over the evaluation period against the bank's quarterly 
average total assets over the evaluation period.
    (g) Community Development Financing Test for Wholesale or Limited 
Purpose Banks performance conclusions and ratings. (1) Conclusions. As 
provided in Sec.  __.28 and appendix C of this part, the [Agency] 
assigns conclusions for a wholesale or limited purpose bank's Community 
Development Financing Test performance in, as applicable, each 
facility-based assessment area, state, multistate MSA, and nationwide 
area.
    (2) Ratings. As provided in Sec.  __.28 and appendix D of this 
part, the [Agency] incorporates a wholesale or limited purpose bank's 
Community Development Financing Test conclusions into, as applicable, 
its state, multistate MSA, and institution ratings.


Sec.  __.27  Strategic plan.

    (a) Alternative election. The [Agency] will assess a bank's record 
of helping to meet the credit needs of its facility-based assessment 
areas and, as applicable, its retail lending assessment areas and other 
geographic areas served by the bank at the institution level under a 
strategic plan, if:
    (1) The bank has submitted the plan to the [Agency] as provided for 
in this section;
    (2) The [Agency] has approved the plan;
    (3) The plan is in effect; and

[[Page 34032]]

    (4) The bank has been operating under an approved plan for at least 
one year.
    (b) Data reporting. The [Agency]'s approval of a plan does not 
affect the bank's obligation, if any, to report data as required by 
Sec.  __.42.
    (c) Plans in general. (1) Term. A plan may have a term of no more 
than five years, and any multi-year plan must include annual interim 
measurable goals under which the [Agency] will evaluate the bank's 
performance.
    (2) Multiple assessment areas. A bank with more than one assessment 
area may prepare:
    (i) A single plan for all of its facility-based assessment areas 
and, as applicable, retail lending assessment areas and geographic 
areas outside of its facility-based assessment areas and retail lending 
assessment areas at the institution level, with goals for each 
geographic area; or
    (ii) Separate plans for one or more of its facility-based 
assessment areas and, as applicable, retail lending assessment areas, 
and geographic areas outside of its facility-based assessment areas and 
retail lending assessment areas at the institution level.
    (3) Treatment of [operations subsidiaries or operating 
subsidiaries] and affiliates. (i) The activities of a bank's 
[operations subsidiary or operating subsidiary] must be included in its 
plan(s) or be evaluated pursuant to the default evaluation methodology 
under which the bank would be examined in the absence of an approved 
plan, unless the [operations subsidiary or operating subsidiary] is 
subject to CRA requirements.
    (ii) Additionally, at a bank's option, activities of other 
affiliates may be included in a plan, if those activities are not 
claimed for purposes of this part by any other institution. Other 
affiliated institutions may prepare a joint plan if the plan provides 
measurable goals for each institution. Activities may be allocated 
among institutions at the institutions' option, provided that those 
activities are not claimed for purposes of this part by another bank.
    (iii) The method by which loans are allocated among affiliated 
institutions for CRA purposes must reflect a reasonable basis for the 
allocation of banking activities among the institutions and must not be 
designed solely to artificially enhance any institution's CRA 
evaluation.
    (d) Public participation in plan development. Before submitting a 
plan to the [Agency] for approval, a bank must:
    (1) Informally seek suggestions from members of the public in its 
facility-based assessment areas covered by the plan while developing 
the plan;
    (2) Once the bank has developed a draft plan, formally solicit 
public comment on the draft plan for at least 30 days by submitting the 
draft plan for publication on the [Agency]'s website and by publishing 
the draft plan on its website, or if the bank does not maintain a 
website by publishing notice in at least one print newspaper or digital 
publication of general circulation in each facility-based assessment 
area covered by the plan (or for military banks in at least one print 
newspaper or digital publication of general circulation targeted to 
members of the military). The draft plan should include both an 
electronic means by which, and a postal address where, members of the 
public can submit comments on the bank's plan; and
    (3) During the period when the bank is formally soliciting public 
comment on its draft plan, make copies of the draft plan available for 
review at no cost at all offices of the bank in any facility-based 
assessment area covered by the plan and provide copies of the draft 
plan upon request for a reasonable fee to cover copying and mailing, if 
applicable.
    (e) Submission of plan. The bank must submit its draft plan to the 
[Agency] at least three months prior to the proposed effective date of 
the plan. The bank must also submit with its draft plan a description 
of its efforts to seek suggestions from members of the public, 
including who was contacted and how information was gathered; any 
written or other public input received; and, if the plan was revised in 
light of the public input received, the initial draft plan as released 
for public comment.
    (f) Plan content. (1) Appropriateness of strategic plan election. A 
bank's draft plan must include the same performance tests and standards 
that would otherwise be applied under this part, unless the bank is 
substantially engaged in activities outside the scope of these tests. 
The draft plan must specify how these activities are outside the scope 
of the otherwise applicable performance tests and standards and why 
being evaluated pursuant to a plan would be a more appropriate means to 
assess its record of helping to meet the credit needs of its community 
than if it were evaluated pursuant to the otherwise applicable 
performance tests and standards.
    (2) Appropriateness of geographic coverage of plan. A bank's draft 
plan must incorporate measurable goals for all geographic areas that 
would be included pursuant to the performance tests and standards that 
would otherwise be applied in the absence of an approved plan.
    (3) Measurable goals. (i) As applicable, pursuant to the 
performance tests and standards that would otherwise be applied in the 
absence of an approved plan, a bank must specify measurable goals in 
its draft plan for helping to meet the:
    (A) Retail lending needs of, as applicable, its facility-based 
assessment areas, retail lending assessment areas, and outside retail 
lending area that are covered by the draft plan;
    (B) Retail services and products needs of its facility-based 
assessment areas and at the institution level that are covered by the 
draft plan;
    (C) Community development financing needs of its facility-based 
assessment areas, states, multistate MSAs, and nationwide areas that 
are covered by the draft plan; and
    (D) Community development services needs of its facility-based 
assessment areas and other geographic areas served by the bank that are 
covered by the draft plan.
    (ii) A bank must consider public comments and the bank's capacity 
and constraints, product offerings, and business strategy in developing 
measurable goals in its draft plan that are appropriate for its retail 
lending, retail services and products, community development financing, 
and community development services activities.
    (iii) A bank must include in its draft plan a focus on the credit 
needs of low- and moderate-income individuals, small businesses, small 
farms, and low- and moderate-income census tracts, and explain how its 
draft plan's measurable goals are responsive to the characteristics and 
credit needs of, as applicable, its assessment areas and other 
geographic areas served by the bank, considering public comment and the 
bank's capacity and constraints, product offerings, and business 
strategy;
    (iv) In developing measurable goals related to its retail lending, 
a bank must incorporate measurable goals in its draft plan for each 
retail lending major product line and may develop additional goals that 
cover other lending-related activities based on the bank's specific 
business strategy.
    (v) If a bank's draft plan's measurable goals related to its retail 
lending do not incorporate the Retail Lending Test's metrics-based 
methodology as described in Sec.  __.22, the bank must explain why 
measurable goals that do not incorporate the Retail Lending Test's 
metrics-based methodology are appropriate.
    (vi) If a bank's draft plan's measurable goals related to its 
community development financing do not

[[Page 34033]]

incorporate, as applicable, the Community Development Financing Test's 
or the Community Development Financing Test for Wholesale or Limited 
Purpose Banks' metrics-based methodology as described in Sec. Sec.  
__.24 and __.26, respectively, or for an intermediate bank address the 
community development performance standards for intermediate banks as 
provided in Sec.  __.29(b)(2), the bank must include an explanation as 
to why measurable goals do not incorporate, as applicable, the 
Community Development Financing Test or the Community Development 
Financing Test for Wholesale or Limited Purpose Banks' metrics-based 
methodology, or for intermediate banks address the community 
development performance standards for intermediate banks.
    (4) Confidential information. A bank may submit additional 
information to the [Agency] on a confidential basis, but the goals 
stated in the draft plan must be sufficiently specific to enable the 
public and the [Agency] to judge the merits of the plan.
    (5) ``Satisfactory'' and ``Outstanding'' ratings goals. A bank must 
specify in its draft plan measurable goals that constitute 
``Satisfactory'' performance and may specify measurable goals that 
constitute ``Outstanding'' performance. If a bank submits, and the 
[Agency] approves, both ``Satisfactory'' and ``Outstanding'' measurable 
goals, the [Agency] will consider the bank eligible for an 
``Outstanding'' rating.
    (6) Election if ``Satisfactory'' ratings goals not substantially 
met. A bank may elect in its draft plan that, if the bank fails to meet 
substantially its plan goals for a ``Satisfactory'' rating, the 
[Agency] will evaluate the bank's performance using the performance 
tests and standards that would otherwise be applied in the absence of 
an approved plan.
    (g) Plan approval. (1) Timing. The [Agency] will act upon a draft 
plan within 90 calendar days after the [Agency] receives the complete 
draft plan and other material required under paragraph (e) of this 
section. If the [Agency] fails to act within this time period, the 
draft plan will be deemed approved unless the [Agency] extends the 
review period for good cause.
    (2) Public participation. In evaluating the draft plan's goals, the 
[Agency] will consider:
    (i) The public's involvement in formulating the draft plan, 
including specific information regarding the members of the public and 
organizations the bank contacted, how the bank collected information 
relevant to the draft plan, the nature of the public input, and whether 
the bank revised the draft plan in light of public input;
    (ii) Written public comment on the draft plan; and
    (iii) Any response by the bank to public comment on the draft plan.
    (3) Criteria for evaluating plan. The [Agency] evaluates a draft 
plan's measurable goals, including the appropriateness of those goals 
and the information provided by the bank in Sec.  __.27(e) and (f), 
using the following criteria, as appropriate, and based on the bank's 
capacity and constraints, product offerings, and business strategy:
    (i) The extent and breadth of retail lending or retail lending-
related activities to address credit needs, including, as appropriate, 
the distribution of loans among different geographies, businesses and 
farms of different sizes, and individuals of different income levels 
and the qualitative aspects of the bank's retail lending programs, as 
described in Sec.  __.22;
    (ii) The dollar amount and qualitative aspects of the bank's 
community development loans and investments in light of community 
development needs;
    (iii) The availability of bank retail products and the 
effectiveness of the bank's systems for delivering retail banking 
services; and
    (iv) The number, hours, and type of community development services 
performed by the bank and the extent to which the bank's community 
development services are impactful.
    (h) Plan amendment. (1) Material change in circumstances. During 
the term of a plan, a bank must amend its plan goals if a material 
change in circumstances:
    (i) Impedes its ability to substantially meet approved plan goals, 
such as financial constraints caused by significant events that impact 
the local or national economy; or
    (ii) Significantly increases its financial capacity and ability, 
such as through a merger or consolidation, to engage in retail lending, 
retail services and products, community development financing, or 
community development services activities referenced in an approved 
plan.
    (2) Elective revision of plan. (i) During the term of a plan, a 
bank may request the [Agency] to approve an amendment to the plan in 
the absence of a material change in circumstances.
    (ii) A bank that requests the [Agency] to approve an amendment to a 
plan in the absence of a material change in circumstances must provide 
an explanation regarding why it is necessary and appropriate to amend 
its plan goals.
    (3) Public participation in plan revision. A bank must develop an 
amendment to a previously approved plan in accordance with the public 
participation requirements of paragraph (d) of this section.
    (i) Plan assessment. (1) In general. The [Agency] approves the 
goals and assesses performance under a plan as provided for in appendix 
D of this part.
    (2) In determining whether a bank has substantially met its plan 
goals, the [Agency] will consider:
    (i) The number of unmet goals;
    (ii) The degree to which the goals were not met;
    (iii) The importance of those unmet goals to the plan as a whole; 
and
    (iv) Any circumstances beyond the control of the bank, such as 
economic conditions or other market factors or events that have 
adversely impacted the bank's ability to perform.


Sec.  __.28  Assigned conclusions and ratings.

    (a) Conclusions. (1) In general. The [Agency] assigns conclusions 
for a bank's performance under the respective performance tests that 
apply to the bank, as provided in Sec. Sec.  __.21 through __.28, 
__.29(b), and appendix C of this part of ``Outstanding,'' ``High 
Satisfactory,'' ``Low Satisfactory,'' ``Needs to Improve,'' or 
``Substantial Noncompliance.''
    (2) Small banks. The [Agency] assigns performance conclusions for 
the performance of a small bank evaluated under Sec.  __.29(a), as 
provided in Sec.  __.28 and appendix C of this part, of 
``Outstanding,'' ``Satisfactory,'' ``Needs to Improve,'' or 
``Substantial Noncompliance.''
    (b) Ratings. (1) In general. Subject to paragraph (d) of this 
section, the [Agency] assigns ratings for a bank's overall performance 
at the state, multistate MSA, and institution level under Sec. Sec.  
__.21 through __.27 and __.29, as applicable, of ``Outstanding,'' 
``Satisfactory,'' ``Needs to Improve,'' or ``Substantial 
Noncompliance.''
    (2) Performance score. Other than for a small bank evaluated under 
the small bank performance standards in Sec.  __.29(a), a wholesale or 
limited purpose bank under the Community Development Financing Test for 
Wholesale or Limited Purpose Banks in Sec.  __.26, a bank evaluated 
based on a strategic plan under Sec.  __.27, the [Agency] assigns a 
rating for the bank's overall performance at the state, multistate MSA, 
and institution levels, respectively, in connection with a performance 
score, derived as provided in appendix D of this part, and any

[[Page 34034]]

adjustments in accordance with paragraph (d) of this section, Sec.  
__.28, and appendix D of this part.
    (c) States and multistate MSAs. Regarding the [Agency]'s evaluation 
of a bank's performance in a state or multistate MSA under this part, 
the following applies:
    (1) States. (i) The [Agency] evaluates a bank's performance in any 
state in which the bank maintains one or more facility-based assessment 
areas.
    (ii) In assigning conclusions and ratings for a state, the [Agency] 
does not consider a bank's activities in that state that take place in 
the portion of the state comprising any multistate MSA identified in 
paragraph (c)(2) of this section.
    (2) Multistate MSAs. The [Agency] evaluates a bank's performance 
under this part in any multistate MSA in which the bank maintains a 
branch in two or more states located within that multistate MSA.
    (d) Effect of evidence of discriminatory or other illegal 
practices. (1) Scope. At the state, multistate MSA, and institution 
levels, the [Agency]'s evaluation of a bank's performance under this 
part is adversely affected by evidence of discriminatory or other 
illegal practices:
    (i) In any census tract by the bank, including by [an operations 
subsidiary or operating subsidiary] of the bank; or
    (ii) In any facility-based assessment area, retail lending 
assessment area, or outside retail lending area by any affiliate whose 
retail loans are considered as part of the bank's lending performance.
    (2) Evidence of discriminatory or other illegal practices. Evidence 
of discriminatory or other practices that violate an applicable law, 
rule, or regulation includes, but is not limited to:
    (i) Discrimination against applicants on a prohibited basis in 
violation, for example, of the Equal Credit Opportunity Act or the Fair 
Housing Act;
    (ii) Violations of the Home Ownership and Equity Protection Act;
    (iii) Violations of section 5 of the Federal Trade Commission Act;
    (iv) Violations of 12 U.S.C. 5531 (regarding unfair, deceptive, or 
abusive acts or practices in connection with consumer financial 
products or services);
    (v) Violations of section 8 of the Real Estate Settlement 
Procedures Act;
    (vi) Violations of the Truth in Lending Act provisions regarding a 
consumer's right of rescission;
    (vii) Violations of the Military Lending Act; and
    (viii) Violations of the Servicemembers Civil Relief Act.
    (3) Agency considerations. In determining the effect of evidence of 
practices described in paragraph (d)(2) of this section on the bank's 
assigned state, multistate MSA, and institution ratings, the [Agency] 
will consider: The root cause or causes of any violations of law; the 
severity of any consumer harm resulting from violations of law; the 
duration of time over which the violations occurred; the pervasiveness 
of the violations; the degree to which the bank, [operations subsidiary 
or operating subsidiary], or affiliate, as applicable, has established 
an effective compliance management system across the institution to 
self-identify risks and to take the necessary actions to reduce the 
risk of non-compliance and consumer harm.
    (e) Consideration of past performance. When assigning ratings, the 
[Agency] considers a bank's past performance. If a bank's prior rating 
was ``Needs to Improve,'' the [Agency] may determine that a 
``Substantial Noncompliance'' rating is appropriate where the bank 
failed to improve its performance since the previous evaluation period, 
with no acceptable basis for such failure.


Sec.  __.29   Performance standards for small banks and intermediate 
banks.

    (a) Small bank performance criteria. Unless a small bank opts to be 
evaluated under the Retail Lending Test in Sec.  __.22, the [Agency] 
evaluates a small bank's performance in helping to meet the credit 
needs of its facility-based assessment areas pursuant to the criteria 
in this section.
    (1) Lending evaluation. A small bank's retail lending performance 
is evaluated pursuant to the following criteria:
    (i) The bank's loan-to-deposit ratio, adjusted for seasonal 
variation, and, as appropriate, other retail and community development 
lending-related activities, such as loan originations for sale to the 
secondary markets, community development loans, or community 
development investments;
    (ii) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's facility-based assessment 
areas;
    (iii) The bank's record of lending to and, as appropriate, engaging 
in other retail and community development lending-related activities 
for borrowers of different income levels and businesses and farms of 
different sizes;
    (iv) The bank's geographic distribution of retail loans; and
    (v) The bank's record of taking action, if warranted, in response 
to written complaints about its performance in helping to meet credit 
needs in its facility-based assessment areas.
    (2) Additional consideration. The [Agency] may adjust a small bank 
rating of ``Satisfactory'' to ``Outstanding'' at the institution level, 
where a small bank requests and receives additional consideration for 
its performance in making community development investments and 
services and its performance in providing branches and other services 
and delivery systems that enhance credit availability in its facility-
based assessment areas.
    (3) Small bank performance ratings. The [Agency] rates the 
performance of a small bank evaluated under this section as provided in 
appendix E of this part.
    (b) Intermediate bank performance criteria. (1) Retail Lending Test 
and optional Community Development Financing Test. The [Agency] 
evaluates an intermediate bank under the Retail Lending Test in Sec.  
__.22 and the community development performance standards as provided 
in Sec.  __.29(b)(2), unless an intermediate bank chooses to be 
evaluated under the Community Development Financing Test in Sec.  
__.24.
    (2) Intermediate bank community development evaluation. An 
intermediate bank's community development performance is evaluated 
pursuant to the following criteria:
    (i) The number and amount of community development loans;
    (ii) The number and amount of community development investments;
    (iii) The extent to which the bank provides community development 
services; and
    (iv) The bank's responsiveness through such activities to community 
development lending, investment, and services needs.
    (3) Additional consideration. For an intermediate bank that opts to 
be evaluated under the Community Development Financing Test in Sec.  
__.24, the [Agency] may adjust an intermediate bank rating of 
``Satisfactory'' to ``Outstanding'' at the institution level if the 
bank requests and receives additional consideration for activities that 
qualify under the Retail Services and Products Test in Sec.  __.23, the 
Community Development Services Test in Sec.  __.25, or both.
    (4) Intermediate bank performance ratings. The [Agency] rates the 
performance of an intermediate bank evaluated under this section as 
provided in appendices D and E of this part.

[[Page 34035]]

Sec.  __.31  [Reserved]

Subpart D--Records, Reporting, Disclosure, and Public Engagement 
Requirements


Sec.  __.42  Data collection, reporting, and disclosure.

    (a) Information required to be collected and maintained. (1) Small 
business and small farm loans data. A bank, except a small bank or an 
intermediate bank, must collect and maintain in machine readable form, 
as prescribed by the [Agency], until the completion of its next CRA 
examination, the following data, for each small business or small farm 
loan originated or purchased by the bank during the evaluation period:
    (i) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
    (ii) An indicator for the loan type as reported on the bank's Call 
Report;
    (iii) The date of the loan origination or purchase;
    (iv) The loan amount at origination or purchase;
    (v) The loan location, including state, county, and census tract;
    (vi) An indicator for whether the loan was originated or purchased 
by the bank; and
    (vii) An indicator for whether the loan was to a business or farm 
with gross annual revenues of $1 million or less.
    (2) Consumer loans data--automobile loans. A bank that had average 
assets of over $10 billion in both of the prior two calendar years, 
based on the assets reported on its four quarterly Call Reports for 
each of those calendar years, must collect and maintain in machine 
readable form, as prescribed by the [Agency], until the completion of 
its next CRA examination, the following data, for each automobile loan 
originated or purchased by the bank during the evaluation period:
    (i) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
    (ii) The date of the loan origination or purchase;
    (iii) The loan amount at origination or purchase;
    (iv) The loan location, including state, county, and census tract;
    (v) An indicator for whether the loan was originated or purchased 
by the bank; and
    (vi) The borrower annual income on which the bank relied when 
making the credit decision.
    (3) Home mortgage loans. If a bank, except a small or an 
intermediate bank, is subject to reporting under 12 CFR part 1003, the 
bank must collect and maintain, in machine readable form, as prescribed 
by the [Agency], until the completion of its next CRA examination, the 
location of each home mortgage loan application, origination, or 
purchase outside the MSAs in which the bank has a home or branch office 
(or outside any MSA) in accordance with the requirements of 12 CFR part 
1003.
    (4) Retail services and products data. (i) A large bank must 
collect and maintain in machine readable form, as prescribed by the 
[Agency], until completion of the bank's next CRA examination, the 
following data with respect to retail services and products offered and 
provided by the bank during the evaluation period:
    (A) Number and location of branches and remote service facilities. 
As applicable, location information must include:
    (1) Street address;
    (2) City;
    (3) County;
    (4) State; and
    (5) Zip code;
    (B) An indicator for whether each branch is full-service or 
limited-service, and for each remote service facility whether it is 
deposit-taking, cash-advancing, or both;
    (C) Locations and dates of branch and remote service facility 
openings and closings, as applicable;
    (D) Hours of operation of each branch and remote service facility, 
as applicable;
    (E) Services offered at each branch that are responsive to low- and 
moderate-income individuals and low- and moderate-income census tracts;
    (ii) A large bank that had average assets of over $10 billion in 
both of the prior two calendar years (based on the assets reported on 
its four quarterly Call Reports for each of those calendar years) and a 
large bank that had average assets of $10 billion or less in either of 
the prior two calendar years (based on the assets reported on its four 
quarterly Call Reports for each of those calendar years) that requests 
additional consideration for digital and other delivery systems under 
Sec.  __.23(b)(3), must collect and maintain in machine readable form, 
as prescribed by the [Agency], until completion of the bank's next CRA 
examination, the following data:
    (A) The range of services and products offered through digital and 
other delivery systems;
    (B) Digital activity by individuals in low-, moderate-, middle-, 
and upper-income census tracts, respectively, such as:
    (1) Number of savings and checking accounts opened through digital 
and other delivery systems, by census tract income level for each 
calendar year;
    (2) Accountholder usage data by type of digital and other delivery 
systems, by census tract income level for each calendar year; and
    (C) Optionally, additional information that demonstrates that 
digital and other delivery systems serve low- and moderate-income 
individuals and low- and moderate-income census tracts.
    (iii) A large bank that had average assets of over $10 billion in 
both of the prior two calendar years (based on the assets reported on 
its four quarterly Call Reports for each of those calendar years) and a 
large bank that had average assets of $10 billion or less in either of 
the prior two calendar years (based on the assets reported on its four 
quarterly Call Reports for each of those calendar years) that requests 
additional consideration for deposit products responsive to the needs 
of low- and moderate- income individuals under Sec.  __.23(c)(2), must 
collect and maintain in machine readable form, as prescribed by the 
[Agency], until completion of the bank's next CRA examination, the 
following data:
    (A) The number of responsive deposit accounts opened and closed 
during each year of the evaluation period in low-, moderate-, middle-, 
and upper-income census tracts, respectively;
    (B) In connection with Sec.  __.23(c)(2)(ii)(A), the percentage of 
responsive deposit accounts compared to total deposit accounts for each 
year of the evaluation period;
    (C) Optionally, additional information regarding the responsiveness 
of deposit products to the needs of low- and moderate-income 
individuals and low- and moderate-income census tracts.
    (5) Community development loans and community development 
investments data. (i)(A) A bank, except a small or an intermediate 
bank, must collect and maintain in machine readable form, as prescribed 
by the [Agency], until the completion of the bank's next CRA 
examination, the data listed in paragraph (a)(5)(ii) of this section 
for community development loans and community development investments 
originated or purchased by the bank.
    (B) An intermediate bank that opts to be evaluated under the 
Community Development Financing Test in Sec.  __.24 must collect and 
maintain in the format used by the bank in the normal course of 
business, until the completion of the bank's next CRA examination, the 
data listed in paragraph (a)(5)(ii) of this section for community 
development loans and community development

[[Page 34036]]

investments originated or purchased by the bank.
    (C) Pursuant to Sec.  __.42(a)(5)(i)(A) and (B), a bank must 
collect and maintain, on an annual basis, data for loans and 
investments originated or purchased during the evaluation period and 
for loans and investments from prior years that are held on the bank's 
balance sheet at the end of each quarter (March 31, June 30, September 
30, December 31) of the calendar year.
    (ii) Pursuant to Sec.  __.42(a)(5)(i)(A) and (B), a bank must 
collect and maintain the following data:
    (A) General information on the loan or investment:
    (1) A unique number or alpha-numeric symbol that can be used to 
identify the loan or investment;
    (2) Date of origination, purchase, or transaction of the loan or 
investment;
    (3) Date the loan or investment was sold or paid off; and
    (4) (i) For the first year of the loan or investment, the loan or 
investment amount at origination or purchase for originations or 
purchases as of December 31 of the calendar year; and
    (ii) For all years following the first year of the loan or 
investment, the loan or investment amount reflected on the bank's 
balance sheet as of the end of each quarter (March 31, June 30, 
September 30, December 31) of the calendar year.
    (B) Community development loan or investment activity information:
    (1) Name of organization or entity;
    (2) Activity type (loan or investment);
    (3) Community development purpose, as described in Sec.  
__.13(a)(2); and
    (4) Activity detail, such as the specific type of financing and 
type of entity supported (e.g., low-income housing tax credit, New 
Markets Tax Credit, Small Business Investment Company, multifamily 
mortgage, private business, non-profit or mission-driven organization, 
mortgage-backed security, or other).
    (C) Indicators of the impact of the activity, as applicable:
    (1) Activity serves persistent poverty counties;
    (2) Activity serves geographic areas with low levels of community 
development financing;
    (3) Activity supports an MDI, WDI, LICU, or Treasury Department-
certified CDFI;
    (4) Activity serves low-income individuals and families;
    (5) Activity supports small businesses or small farms with gross 
annual revenues of $250,000 or less;
    (6) Activity directly facilitates the acquisition, construction, 
development, preservation, or improvement of affordable housing in High 
Opportunity Areas;
    (7) Activity benefits Native communities, such as qualifying 
activities in Native Land Areas under Sec.  _.13(l);
    (8) Activity is a qualifying grant or donation;
    (9) Activity reflects bank leadership through multi-faceted or 
instrumental support; and
    (10) Activity results in a new community development financing 
product or service that addresses community development needs for low- 
or moderate-income individuals and families.
    (D) Location information:
    (1) Street address;
    (2) City;
    (3) County;
    (4) State;
    (5) Zip code; and
    (6) Whether a bank is seeking consideration at the assessment area, 
statewide, or nationwide levels;
    (E) Other information relevant to determining that an activity 
meets the standards under Sec.  __.13; and
    (F) Allocation of dollar value of activity to counties served by 
the community development activity (if available):
    (1) Specific information about the dollar value of the activity 
that was allocated to each county served by the activity; and
    (2) A list of the geographic areas served by the activity, 
specifying any county, counties, state, states, or nationwide area 
served.
    (6) Community development services data. A large bank that had 
average assets of over $10 billion in both of the prior two calendar 
years, based on the assets reported on its four quarterly Call Reports 
for each of those calendar years, must collect and maintain in machine 
readable form, as prescribed by the [Agency], until the completion of 
the bank's next CRA examination, the following community development 
services data:
    (i) Bank information:
    (A) Number of full-time equivalent employees at the facility-based 
assessment area, state, multistate MSA, and institution levels; and
    (B) Total number of community development services hours performed 
by the bank in each facility-based assessment area, state, multistate 
MSA, and in total.
    (ii) Community development services activity information:
    (A) Date of activity;
    (B) Name of organization or entity;
    (C) Community development purpose, as described in Sec.  
__.13(a)(2);
    (D) Capacity served (e.g., board member, technical assistance, 
financial education, general volunteer); and
    (E) Whether the activity is related to the provision of financial 
services.
    (iii) Location information:
    (A) Street address;
    (B) City;
    (C) County;
    (D) State;
    (E) Zip code; and
    (F) Whether bank is seeking consideration at the assessment area, 
statewide, or nationwide level.
    (7) Deposits data. A large bank that had average assets of over $10 
billion in both of the prior two calendar years, based on the assets 
reported on its four quarterly Call Reports for each of those calendar 
years, must collect and maintain annually, in machine readable form as 
prescribed by the [Agency], until the completion of its next CRA 
examination, the dollar amount of its deposits at the county level, 
based upon the address associated with the individual account (except 
for account types where an address is not available), calculated based 
on average daily balances as provided in statements such as monthly or 
quarterly statements. A large bank that had average assets of $10 
billion or less in either of the prior two calendar years, based on the 
assets reported on its four quarterly Call Reports for each of those 
calendar years, that opts to collect and maintain the data in this 
paragraph must do so in machine readable form, as prescribed by the 
[Agency], until completion of the bank's next CRA examination.
    (b) Information required to be reported. (1) Small business and 
small farm loan data. A bank, except a small bank or an intermediate 
bank, must report annually by April 1 to the [Agency] in machine 
readable form, as prescribed by the [Agency], the data listed in 
paragraphs (b)(1)(i) through (b)(1)(iv) of this section for the prior 
calendar year. For each census tract in which the bank originated or 
purchased a small business or small farm loan, the bank must report the 
aggregate number and amount of small business and small farm loans:
    (i) With an amount at origination of $100,000 or less;
    (ii) With an amount at origination of more than $100,000 but less 
than or equal to $250,000;
    (iii) With an amount at origination of more than $250,000; and
    (iv) To businesses and farms with gross annual revenues of $1 
million or less (using the revenues that the bank considered in making 
its credit decision).

[[Page 34037]]

    (2) Consumer loans--automobile loans data. A bank that had average 
assets of over $10 billion in both of the prior two calendar years, 
based on the assets reported on its four quarterly Call Reports for 
each of those calendar years, must report annually by April 1 to the 
[Agency] in machine readable form, as prescribed by the [Agency], for 
each census tract in which the bank originated or purchased an 
automobile loan, the aggregate number and amount of automobile loans 
and the number and amount of those loans made to low- and moderate-
income borrowers. The [Agency] will not make automobile lending data 
reported under this paragraph publicly available in the form of a data 
set for all reporting banks.
    (3) Community development loans and community development 
investments data. A bank, except a small or an intermediate bank, must 
report annually by April 1 to the [Agency] community development loan 
and community development investment data described in paragraph 
(a)(5)(ii) of this section, except for the data described in paragraph 
(a)(5)(ii)(B)(1) of this section.
    (4) Community development services data. A large bank that had 
average assets of over $10 billion in both of the prior two calendar 
years, based on the assets reported on its four quarterly Call Reports 
for each of those calendar years, must report annually by April 1 to 
the [Agency] the community development services data listed in 
paragraph (a)(6)(i) of this section.
    (5) Deposits data. A large bank that had average assets of over $10 
billion in both of the prior two calendar years, based on the assets 
reported on its four quarterly Call Reports for each of those calendar 
years, must report annually by April 1 to the [Agency] in machine 
readable form, as prescribed by the [Agency], the deposits data for the 
previous calendar year collected and maintained in accordance with 
paragraph (a)(7) of this section. This reporting must include, for each 
county, state, and multistate MSA and for the institution overall, the 
average annual deposit balances (calculated based on average daily 
balances as provided in statements such as monthly or quarterly 
statements, as applicable), in aggregate, of deposit accounts with 
associated addresses located in such county, state, or multistate MSA 
where available, and for the institution overall. The [Agency] will not 
make deposits data reported under this paragraph publicly available in 
the form of a data set for all reporting banks.
    (c) Data on [operations subsidiaries or operating subsidiaries]. To 
the extent that [operations subsidiaries or operating subsidiaries] 
engage in retail lending, retail services, community development 
financing, or community development services activities, a bank must 
collect, maintain, and report such activities of its [operations 
subsidiaries or operating subsidiaries] pursuant to paragraphs (a) and 
(b) of this section, as applicable, for purposes of evaluating the 
bank's performance. For home mortgage loans, the bank must identify the 
home mortgage loans reported by the [operations subsidiary or operating 
subsidiary] under 12 CFR part 1003, if applicable, or collect and 
maintain home mortgage loans by the [operations subsidiary or operating 
subsidiary] that the bank would have collected and maintained under 
paragraphs (a)(3) of this section had the loans been originated or 
purchased by the bank.
    (d) Data on other affiliates. A bank that elects to have the 
[Agency] consider loans by an affiliate, for purposes of this part must 
collect, maintain, and report the lending and investments data that the 
bank would have collected, maintained, and reported pursuant to 
paragraphs (a) and (b) of this section had the loans or investments 
been originated or purchased by the bank. For home mortgage loans, the 
bank must also identify the home mortgage loans reported by affiliates 
under 12 CFR part 1003, if applicable, or collect and maintain home 
mortgage loans by the affiliate that the bank would have collected and 
maintained under paragraphs (a)(3) of this section had the loans been 
originated or purchased by the bank.
    (e) Data on community development financing by a consortium or a 
third party. A bank that elects to have the [Agency] consider community 
development loans and community development investments by a consortium 
or third party for purposes of this part must collect, maintain, and 
report the lending and investments data that the bank would have 
collected, maintained, and reported under paragraphs (a)(5) and (b)(3) 
of this section had the loans or investments been originated or 
purchased by the bank.
    (f) Assessment area data. (1) Facility-based assessment areas. A 
bank, except a small bank or an intermediate bank, must collect and 
report to the [Agency] annually by April 1 a list for each facility-
based assessment area showing the states, MSAs, counties or county-
equivalents, and metropolitan divisions within the facility-based 
assessment area.
    (2) Retail lending assessment areas. A large bank must collect and 
report to the [Agency] annually by April 1 a list for each retail 
lending assessment area showing the MSAs and counties within the retail 
lending assessment area, as applicable.
    (g) CRA Disclosure Statement. The [Agency] prepares annually, for 
each bank that reports data pursuant to this section, a CRA Disclosure 
Statement that contains, on a state-by-state basis:
    (1) For each county (and for each facility-based assessment area 
and each retail lending assessment area smaller than a county, if 
applicable) with a population of 500,000 persons or fewer in which the 
bank reported a small business or a small farm loan:
    (i) The number and amount of small business loans and small farm 
loans reported as originated or purchased located in low-, moderate-, 
middle-, and upper-income geographies;
    (ii) A list grouping each census tract according to whether the 
census tract is low-, moderate-, middle-, or upper-income;
    (iii) A list showing each census tract in which the bank reported a 
small business loan or a small farm loan; and
    (iv) The number and amount of small business loans and small farm 
loans to businesses and farms with gross annual revenues of $1 million 
or less;
    (2) For each county (and for each facility-based assessment area 
and retail lending assessment area smaller than a county, if 
applicable) with a population in excess of 500,000 persons in which the 
bank reported a small business loan or a small farm loan:
    (i) The number and amount of small business loans and small farm 
loans reported as originated or purchased located in census tracts with 
median income relative to the area median income of less than 10 
percent, 10 or more but less than 20 percent, 20 or more but less than 
30 percent, 30 or more but less than 40 percent, 40 or more but less 
than 50 percent, 50 or more but less than 60 percent, 60 or more but 
less than 70 percent, 70 or more but less than 80 percent, 80 or more 
but less than 90 percent, 90 or more but less than 100 percent, 100 or 
more but less than 110 percent, 110 or more but less than 120 percent, 
and 120 percent or more;
    (ii) A list grouping each census tract in the county, facility-
based assessment area, or retail lending assessment area according to 
whether the median income in the census tract relative to the area 
median income is less than 10 percent, 10 or more but less than 20 
percent, 20 or more but less than 30 percent, 30 or more but less than 
40 percent, 40 or more but less than 50 percent, 50 or more but less 
than 60

[[Page 34038]]

percent, 60 or more but less than 70 percent, 70 or more but less than 
80 percent, 80 or more but less than 90 percent, 90 or more but less 
than 100 percent, 100 or more but less than 110 percent, 110 or more 
but less than 120 percent, and 120 percent or more; and
    (iii) A list showing each census tract in which the bank reported a 
small business loan or a small farm loan; and
    (3) The number and amount of small business loans and small farm 
loans located inside each facility-based assessment area and retail 
lending assessment area reported by the bank and the number and amount 
of small business loans and small farm loans located outside of the 
facility-based assessment areas and retail lending assessment areas 
reported by the bank;
    (4) The number and amount of community development loans and 
community development investments reported as originated or purchased 
inside each facility-based assessment area, each state in which the 
bank has a branch, each multistate MSA in which a bank has a branch in 
two or more states of the multistate MSA, and nationwide outside of 
these states and multistate MSAs.
    (h) Aggregate disclosure statements. The [Agency], in conjunction 
with the [other Agencies], prepares annually, for each MSA or 
metropolitan division (including an MSA or metropolitan division that 
crosses a state boundary) and the nonmetropolitan portion of each 
state, an aggregate disclosure statement of reported small business 
lending, small farm lending, community development lending, and 
community development investments by all banks subject to reporting 
under 12 CFR parts 25, 228, or 345. These disclosure statements 
indicate, for each census tract and with respect to community 
development loans, and community development investments for each 
county, the number and amount of all small business loans, small farm 
loans, community development loans, and community development 
investments, originated or purchased by reporting banks, except that 
the [Agency] may adjust the form of the disclosure if necessary, 
because of special circumstances, to protect the privacy of a borrower 
or the competitive position of a bank.
    (i) Central data depositories. The [Agency] makes the aggregate 
disclosure statements, described in paragraph (h) of this section, and 
the individual bank CRA Disclosure Statements, described in paragraph 
(g) of this section, available on the FFIEC's website at www.ffiec.gov.
    (j) Race and ethnicity disclosure. (1) In general. The [Agency] 
includes in a large bank's CRA performance evaluation the information 
in paragraph (j)(2) of this section concerning the distribution of a 
bank's originations and applications of home mortgage loans by race and 
ethnicity in each of the bank's assessment areas. This information is 
disclosed for each year of the evaluation period based on data reported 
under the Home Mortgage Disclosure Act (HMDA).
    (2) Data disclosed in CRA performance evaluations. For each of the 
bank's facility-based assessment areas, and as applicable, its retail 
lending assessment areas, the [Agency] discloses the number and 
percentage of originations and applications of a bank's home mortgage 
loans by borrower race and ethnicity, and compares such data to the 
aggregate mortgage lending of all lenders in the assessment area and 
the demographic data in that assessment area.
    (3) Effect on CRA conclusions and ratings. The disclosures made 
under paragraphs (j)(1) and (j)(2) of this section do not impact the 
conclusions or ratings of the bank.


Sec.  __.43  Content and availability of public file.

    (a) Information available to the public. A bank must maintain a 
public file, in either paper or digital format, that includes the 
following information:
    (1) All written comments received from the public for the current 
year and each of the prior two calendar years that specifically relate 
to the bank's performance in helping to meet community credit needs, 
and any response to the comments by the bank, if neither the comments 
nor the responses contain statements that reflect adversely on the good 
name or reputation of any persons other than the bank or publication of 
which would violate specific provisions of law;
    (2) A copy of the public section of the bank's most recent CRA 
performance evaluation prepared by the [Agency]. The bank must include 
this copy in the public file within 30 business days after its receipt 
from the [Agency];
    (3) A list of the bank's branches, their street addresses, and 
census tracts;
    (4) A list of branches opened or closed by the bank during the 
current year and each of the prior two calendar years, their street 
addresses, and census tracts;
    (5) A list of retail banking services (including hours of 
operation, available loan and deposit products, and transaction fees) 
generally offered at the bank's branches and descriptions of material 
differences in the availability or cost of services at particular 
branches, if any. A bank may elect to include information regarding the 
availability of other systems for delivering retail banking services 
(for example, mobile or online banking, loan production offices, and 
bank-at-work or mobile branch programs);
    (6) A map of each facility-based assessment area and retail lending 
assessment area showing the boundaries of the area and identifying the 
census tracts contained within the area, either on the map or in a 
separate list; and
    (7) Any other information the bank chooses.
    (b) Additional information available to the public--(1) Banks other 
than small banks and intermediate banks. A bank subject to the data 
reporting requirements described in Sec.  __.42 must include in its 
public file a written notice that the bank's CRA Disclosure Statement 
pertaining to the bank, its [operations subsidiaries or operating 
subsidiaries], and its other affiliates, if applicable, may be obtained 
on the FFIEC's website at https://www.ffiec.gov/craadweb/disrptmain.aspx. The bank must include the written notice in the public 
file within three business days after receiving notification from the 
FFIEC of the availability of the disclosure statement.
    (2) Banks required to report HMDA data. A bank required to report 
home mortgage loan data pursuant to 12 CFR part 1003 must include in 
its public file a written notice that the bank's HMDA Disclosure 
Statement may be obtained on the Consumer Financial Protection Bureau's 
(CFPB's) website at www.consumerfinance.gov/hmda. In addition, if the 
[Agency] considered the home mortgage lending of a bank's [operations 
subsidiaries or operating subsidiaries] or, at a bank's election, the 
[Agency] considered the home mortgage lending of other bank affiliates, 
the bank must include in its public file the names of the [operations 
subsidiaries or operating subsidiaries] and the names of the affiliates 
and a written notice that the [operations subsidiaries' or operating 
subsidiaries'] and other affiliates' HMDA Disclosure Statements may be 
obtained at the CFPB's website. The bank must include the written 
notices in the public file within three business days after receiving 
notification from the FFIEC of the availability of the disclosure 
statements.
    (3) Small banks. A small bank or a bank that was a small bank 
during the prior calendar year must include in its public file: The 
bank's loan-to-deposit ratio for each quarter of the prior calendar 
year and, at its option, additional data on its loan-to-deposit ratio.

[[Page 34039]]

    (4) Banks with strategic plans. A bank that has been approved to be 
assessed under a strategic plan must include in its public file a copy 
of that plan. A bank need not include information submitted to the 
[Agency] on a confidential basis in conjunction with the plan.
    (5) Banks with less than ``Satisfactory'' ratings. A bank that 
received a less than ``Satisfactory'' rating during its most recent 
examination must include in its public file a description of its 
current efforts to improve its performance in helping to meet the 
credit needs of its entire community. The bank must update the 
description quarterly, by March 31, June 30, September 30, and December 
31, respectively.
    (c) Location of public information. A bank must make available to 
the public for inspection upon request and at no cost the information 
required in this section as follows:
    (1) All information required for the bank's public file under this 
section must be maintained on the bank's website. If the bank does not 
maintain a website, the information must be maintained at the main 
office and, if an interstate bank, at one branch office in each state; 
and
    (2) The public file must contain the following information:
    (i) A copy of the public section of the bank's most recent CRA 
performance evaluation and a list of services provided by the branch; 
and
    (ii) Within five calendar days of the request, all the information 
that the bank is required to maintain under this section in the public 
file relating to the facility-based assessment area in which the branch 
is located.
    (d) Copies. Upon request, a bank must provide copies, either on 
paper or in digital form acceptable to the person making the request, 
of the information in its public file. The bank may charge a reasonable 
fee not to exceed the cost of copying and mailing (if not provided in 
digital form).
    (e) Timing requirements. Except as otherwise provided in this 
section, a bank must ensure that its public file contains the 
information required by this section for each of the previous three 
calendar years, with the most recent calendar year included in its file 
annually by April 1 of the current calendar year.


Sec.  __.44  Public notice by banks.

    A bank must provide in the public area of its main office and each 
of its branches the appropriate public notice set forth in appendix F 
of this part. Only a branch of a bank having more than one facility-
based assessment area must include the bracketed material in the notice 
for branch offices. Only a bank that is an affiliate of a holding 
company must include the next to the last sentence of the notices. A 
bank must include the last sentence of the notices only if it is an 
affiliate of a holding company that is not prevented by statute from 
acquiring additional banks.


Sec.  __.45  Publication of planned examination schedule.

    The [Agency] publishes on its public website, at least 60 days in 
advance of the beginning of each calendar quarter, a list of banks 
scheduled for CRA examinations for the next two quarters.


Sec.  __.46  Public engagement.

    (a) In general. The [Agency] encourages communication between 
members of the public and banks, including through members of the 
public submitting written public comments regarding community credit 
needs and opportunities as well as regarding a bank's record of helping 
to meet community credit needs. The [Agency] will take these comments 
into account in connection with the bank's next scheduled CRA 
examination.
    (b) Submission of public comments. Members of the public may submit 
public comments regarding community credit needs and a bank's CRA 
performance by submitting comments to the [Agency] electronically at 
[Agency contact information].
    (c) Timing of public comments. If the [Agency] receives a public 
comment before the close date of a bank's CRA examination, the public 
comment will be considered in connection with that CRA examination. If 
the [Agency] receives a public comment after the close date of a bank's 
CRA examination, it will be considered in connection with the bank's 
subsequent CRA examination.
    (d) Distribution of public comments. The [Agency] will forward all 
public comments received regarding a bank's CRA performance to the 
bank. The [Agency] may also publish the public comments on its public 
website.

Subpart E--Transition Rules


Sec.  __.51  Applicability dates, and transition provisions.

    (a) Applicability dates. (1) In general. Except as provided in 
paragraphs (a)(2), (b), and (c) of this section, this part is 
applicable to banks, and banks must comply with any requirements in 
this part, beginning on the first day of the first calendar quarter 
that is at least 60 days after publication of the final rule.
    (2) Specific applicability dates. The following sections are 
applicable to banks, and banks must comply with any requirements in 
these sections, on the following dates:
    (i) On [DATE ONE YEAR AFTER DATE OF PUBLICATION IN THE FEDERAL 
REGISTER]: Sec. Sec.  __.12, excluding the definitions of ``small 
business'' and ``small farm,'' through __.15; __.17 through __.28; 
__.29(b)(1) and (b)(3); __.42(a), (c), (d), (e), and (f); and 
appendices A through F.
    (ii) On [DATE TWO YEARS AFTER DATE OF PUBLICATION IN THE FEDERAL 
REGISTER], Sec.  __.12 with respect to the definitions of ``small 
business'' and ``small farm''; and Sec.  __.42(b), (g), (h) and (i).
    (b) Examinations. (1) Start Date for CRA Examinations under New 
Tests. The [Agency] will begin conducting CRA examinations pursuant to 
the relevant performance tests described in Sec. Sec.  __.22 through 
__.28, as applicable, and Sec.  .42(j), after [DATE TWO YEARS AFTER 
DATE OF PUBLICATION IN THE FEDERAL REGISTER].
    (2) Consideration of Bank Activities. (i) In assessing a bank's CRA 
performance, the [Agency] will consider any loan, investment, or 
service that was eligible for CRA consideration at the time the bank 
conducted the activity.
    (ii) Notwithstanding paragraph (i), in assessing a bank's CRA 
performance the [Agency] will consider any loan or investment that was 
eligible for CRA consideration at the time that the bank entered into a 
legally binding commitment to make the loan or investment.
    (c) Strategic Plans. (1) New and replaced strategic plans. The CRA 
regulatory requirements in effect on [DATE ONE DAY BEFORE DATE OF 
PUBLICATION DATE IN THE FEDERAL REGISTER] applies to any new strategic 
plan, including a plan that replaces an expired strategic plan, 
submitted to the [Agency] for approval on or after [DATE OF PUBLICATION 
IN THE FEDERAL REGISTER] but before [DATE ONE YEAR AFTER DATE OF 
PUBLICATION IN THE FEDERAL REGISTER]. Strategic plans approved under 
this paragraph remain in effect until the expiration date of the plan.
    (2) Existing strategic plans. A strategic plan in effect as of 
[DATE OF PUBLICATION IN THE FEDERAL REGISTER] remains in effect until 
the expiration date of the plan.

[[Page 34040]]

Appendix A to Part __--Calculations for the Retail Tests

    Appendix A, based on requirements described in Sec. Sec.  __.22, 
__.23, and __.28, includes the following sections:
    Retail Lending Volume Screen;
    Geographic Distribution and Borrow Distribution Metrics and 
Benchmarks--In General
    Geographic Distribution Metrics and Benchmarks;
    Borrower Distribution Metrics and Benchmarks;
    Recommended Retail Lending Test Conclusions; and
    Retail Lending Test and Retail Services and Products Test 
Weighting and Conclusions in States, Multistate MSAs, and at the 
Institution Level.

I. Retail Lending Volume Screen

    Section __.22(c)(3) provides that a large bank must have a Bank 
Volume Metric of 30 percent or greater of the Market Volume 
Benchmark, or the [Agency] must determine that there is an 
acceptable basis for the bank failing to meet this threshold after 
reviewing the additional factors described in Sec.  
__.22(c)(2)(iii), to be eligible for a recommended Retail Lending 
Test conclusion of ``Outstanding,'' ``High Satisfactory,'' or ``Low 
Satisfactory'' in a facility-based assessment area. An intermediate 
bank, or a small bank that opts to be evaluated under the Retail 
Lending Test, that does not have a Bank Volume Metric of 30 percent 
or greater of the Market Volume Benchmark, where the [Agency] does 
not determine that there is an acceptable basis for the bank failing 
to meet the metric after reviewing the additional factors in Sec.  
__.22(c)(2)(iii), remains eligible for all possible recommended 
Retail Lending Test conclusions in a facility-based assessment area, 
with the [Agency] assessing the bank's performance relative to the 
Retail Lending Volume Threshold as one factor in assigning a 
conclusion.
    The [Agency] calculates the Bank Volume Metric and the Market 
Volume Benchmark for a facility-based assessment area, and 
determines whether the bank has passed the Retail Lending Volume 
Threshold in that facility-based assessment area, as set forth 
below.
    1. Bank Volume Metric. The [Agency] calculates the Bank Volume 
Metric by dividing the annual average of the year-end total dollar 
amount of the bank's originated and purchased automobile, closed-end 
home mortgage, open-end home mortgage, multifamily, small business, 
and small farm loans in the facility-based assessment area by the 
annual average of the bank's deposits in that facility-based 
assessment area over the evaluation period. For a bank that collects 
and maintains deposits data as provided in Sec.  __.42, the dollar 
amount of its deposits in each assessment area is the annual average 
of deposits over the evaluation period. For banks that do not 
collect and maintain deposits data as provided in Sec.  __.42, the 
[Agency] measures the dollars of deposits in each assessment area as 
the annual average of deposits assigned to branches that the bank 
operates in its assessment area, as reported in the FDIC's Summary 
of Deposits, available at www.FDIC.gov, over the evaluation period.
    Example: Assume that the year-end total dollar amount of a 
bank's originated and purchased loans in a facility-based assessment 
area, averaged over the years considered in the evaluation period, 
is $1 million. Assume further that the evaluation period annual 
average of deposits in that facility-based assessment area is $5 
million. The Bank Volume Metric for that facility-based assessment 
area would be $1 million divided by $5 million, or 20 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.014

    2. Market Volume Benchmark. For each facility-based assessment 
area, the [Agency] calculates the Market Volume Benchmark. The 
numerator of the Market Volume Benchmark is the annual average of 
the year-end total dollar amount of all originated automobile, 
closed-end home mortgage, open-end home mortgage, multifamily, small 
business, and small farm loans in counties wholly or partially 
within the facility-based assessment area originated and reported by 
large banks that operated a branch in those counties at the end of 
that year. This numerator is divided by the annual average of the 
deposits of those banks from those counties. The deposits in the 
facility-based assessment area is the sum of: (i) The annual average 
of deposits in counties in the facility-based assessment area 
reported by all large banks with assets of over $10 billion that 
operate a branch in the assessment area in the years of the 
evaluation period during which they operated a branch at the end of 
the year; and (ii) the annual average of deposits assigned to 
branches in the facility-based assessment area by all large banks 
with assets of $10 billion or less, according to the FDIC's Summary 
of Deposits, over the evaluation period.
    Example: Assume that the annual average of the year-end total 
dollar amount of all retail loans originated in counties wholly or 
partially within the facility-based assessment area by banks that 
operated a branch in that assessment area is $20 million. Assume 
further that the deposits sourced by those banks wholly or partially 
within the facility-based assessment area is $50 million. The Market 
Volume Benchmark for that facility-based assessment area would be 
$20 million divided by $50 million, or 40 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.015

    3. Retail Lending Volume Threshold. For each facility-based 
assessment area, the [Agency] calculates a Retail Lending Volume 
Threshold by multiplying the Market Volume Benchmark for that 
facility-based assessment area by 30 percent (or 0.3). The bank 
passes the Retail Lending Volume Threshold in a facility-based 
assessment area if the Bank Volume Metric is greater than or equal 
to the Retail Lending Volume Threshold.
    Example: Based on the above examples, the Retail Lending Volume 
Threshold would be calculated by multiplying the Market Volume 
Benchmark of 40 percent by 0.3 for a result of 12 percent. The Bank 
Volume Metric, 20 percent, is greater than the Retail Lending Volume 
Threshold. Accordingly, the bank passes the Retail Lending Volume 
Threshold.
    Bank Volume Metric (20%) <ls-thn-eq> Retail Lending Volume 
Threshold {(40%) x 0.3 = 12%{time} 

II. Geographic Distribution and Borrower Distribution Metrics and 
Benchmarks--in General

    1. The distribution metrics and benchmarks in this section 
apply: In a bank's facility-based assessment areas and, as 
applicable, in retail lending assessment areas, and outside retail 
lending area. As applicable, the [Agency] assesses a bank's Retail 
Lending Test performance in an outside retail lending area only at 
the institution level, using benchmarks tailored to the bank's 
specific geographic areas served.
    2. An intermediate bank's retail lending in an outside retail 
lending area is only evaluated if the bank originates and purchases 
over 50 percent of its retail loans, by dollar amount, outside of 
its facility-based assessment areas over the relevant evaluation 
period.
    3. A bank's retail lending performance in the specified 
geographies is compared against applicable retail lending 
performance ranges, using geographic and borrower retail loan 
distribution metrics, as calculated in paragraphs III and IV of this 
appendix.

[[Page 34041]]

    4. With the exception of the facility-based assessment area of a 
large bank in which it failed to meet the Retail Lending Volume 
Threshold and the [Agency] did not find an acceptable basis for the 
bank failing to meet the threshold, a bank will be assigned a 
recommended Retail Lending Test conclusion in the specified 
geographic areas of ``Outstanding,'' ``High Satisfactory,'' ``Low 
Satisfactory,'' ``Needs to Improve,'' or ``Substantial 
Noncompliance.''

III. Geographic Distribution Metrics and Benchmarks

    For each of the bank's major product lines in applicable 
geographic areas, a bank's geographic distribution performance will 
be measured by means of a comparison of the Geographic Bank Metric 
to the Geographic Market Benchmark and the Geographic Community 
Benchmark. The relevant calculations are described below.
    1. Calculation of Geographic Bank Metrics. For each of a bank's 
major product lines, the [Agency] measures the bank's geographic 
distribution of retail lending, originated and purchased, in the 
applicable geographic area. For this measure, the [Agency] derives 
Geographic Bank Metrics, as set out below.
    The [Agency] calculates a Geographic Bank Metric for each of the 
bank's major product lines in low-income census tracts and moderate-
income census tracts by dividing the total number of the bank's 
originated and purchased loans in low-income census tracts and 
moderate-income census tracts, respectively, by the total number of 
the bank's originated and purchased loans in the geographic area 
overall for that product line.
    Example: Assume that a bank originated and purchased 25 small 
farm loans in one of its facility-based assessment areas during the 
evaluation period, and that five of these were located in low-income 
census tracts. The Geographic Bank Metric for small farm loans in 
low-income census tracts would be five divided by 25, for a result 
of 20 percent. Assume that the bank originated and purchased six 
small farm loans in moderate-income census tracts. The Geographic 
Bank Metric for small farm loans in moderate-income census tracts 
would be six divided by 25, for a result of 24 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.019

    2. Calculation of Geographic Market Benchmarks and Geographic 
Community Benchmarks. For each of a bank's major product lines in an 
applicable geographic area, the [Agency] compares the bank's 
geographic distribution of retail lending, originated and purchased, 
in the geographic area, as measured by the Geographic Bank Metric, 
to benchmarks set by overall lending activity in the area, as well 
as other information. The [Agency] derives Geographic Market 
Benchmarks and Geographic Community Benchmarks, as set out below. 
The method for calculating the Geographic Market Benchmarks and 
Geographic Community Benchmarks in outside retail lending areas 
includes additional steps to tailor the benchmarks to the geographic 
areas in which the bank's retail lending is concentrated.
    a. Geographic Market Benchmarks in Facility-Based Assessment 
Areas and Retail Lending Assessment Areas. The [Agency] calculates 
the Geographic Market Benchmark for each of the bank's major product 
lines, in low-income census tracts and moderate-income census tracts 
respectively, by dividing the total number of loans in each major 
product line that were originated by lenders that report relevant 
data for that product line by the total number of loans in that 
product line in the geographic area overall that were originated by 
lenders that report relevant data for that product line.
    Example: Assume that lenders that report small farm loan data 
originated 100 small farm loans in the counties within the 
assessment area, and that 40 of these were located in low-income 
census tracts. The Geographic Market Benchmark for small farm loans 
in low-income census tracts would be 40 divided by 100, or 40 
percent. Assume that an additional 30 of these were located in 
moderate-income census tracts. The Geographic Market Benchmark for 
small farm loans in moderate-income census tracts would be 30 
divided by 100, or 30 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.010

    b. Geographic Community Benchmarks in Facility-Based Assessment 
Areas and Retail Lending Assessment Areas. The [Agency] calculates 
the Geographic Community Benchmark for each major product line, in 
low-income census tracts and moderate-income census tracts 
respectively, as follows:
    i. For closed-end home mortgage loans and open-end home mortgage 
loans, by dividing the total number of owner-occupied residential 
units in low-income census tracts and moderate-income census tracts, 
respectively, by the total number of owner-occupied residential 
units in the geographic area overall.
    ii. For multifamily loans, by dividing the total number of 
residential units in multifamily buildings in low-income census 
tracts and moderate-income census tracts, respectively, by the total 
number of residential units in multifamily buildings in the 
geographic area overall.
    iii. For small business loans, by dividing the total number of 
small businesses in low-income census tracts and moderate-income 
census tracts, respectively, by the total

[[Page 34042]]

number of small businesses in the geographic area overall.
    iv. For small farm loans, by dividing the total number of small 
farms in low-income census tracts and moderate-income census tracts, 
respectively, by the total number of small farms in the geographic 
area overall.
    v. For automobile loans, by dividing the total number of 
households in low-income census tracts and moderate-income census 
tracts, respectively, by the total number of households in the 
geographic area overall.
    Example: Assume that there were 4,000 small business 
establishments in the assessment area, and that 500 of these were in 
low-income census tracts. The Geographic Community Benchmark for 
small business loans in low-income census tracts would be 500 
divided by 4,000, or 12.5 percent. Assume that an additional 1,000 
of these were in moderate-income census tracts. The Geographic 
Community Benchmark for small business loans in moderate-income 
census tracts would be 1,000 divided by 4,000, or 25 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.011

    c. Tailored Geographic Market Benchmarks in Outside Retail 
Lending Areas. The [Agency] calculates the Tailored Geographic 
Market Benchmark for each of the bank's major product lines, in low-
income census tracts and moderate-income census tracts respectively, 
in outside retail lending areas. The Tailored Geographic Market 
Benchmark is calculated by means of a weighted average of the 
Geographic Market Benchmark from every MSA and the nonmetropolitan 
portion of every state, weighted by the percentage, in dollars, of 
the bank's retail lending outside of facility-based assessment areas 
and retail lending assessment areas in each of those MSAs and 
nonmetropolitan portions of states. Specifically:
    i. The [Agency] calculates the Geographic Market Benchmarks for 
each major product line and income group separately for each MSA and 
for the nonmetropolitan portion of each state, following the formula 
described in section III.2.a of this appendix.
    ii. The [Agency] calculates local weights as the dollar amount 
of the bank's retail lending that occurred outside of its facility-
based assessment areas and retail lending assessment areas in each 
MSA and the nonmetropolitan portion of each state, as a percentage 
of the bank's total dollar amount of retail lending in its outside 
retail lending area.
    iii. The [Agency] then calculates the Tailored Geographic Market 
Benchmarks as the weighted average of the benchmarks calculated in 
section III.2.c.i of this appendix, using the weights calculated in 
section III.2.c.ii.
    For retail lending in outside retail lending areas, the [Agency] 
will use the Tailored Geographic Market Benchmark as the relevant 
Geographic Market Benchmark for calculating the Performance Ranges 
described in section V of this appendix.
    d. Tailored Geographic Community Benchmarks in Outside Retail 
Lending Areas. The [Agency] calculates the Tailored Geographic 
Community Benchmark for each of the bank's major product lines, in 
low-income census tracts and moderate-income census tracts 
respectively, in outside retail lending areas. The Tailored 
Geographic Community Benchmark is calculated by means of a weighted 
average of the Geographic Community Benchmark from every MSA and the 
nonmetropolitan portion of every state, weighted by the percentage, 
in dollars, of the bank's retail lending outside of facility-based 
assessment areas and retail lending assessment areas in each of 
those MSAs and nonmetropolitan portions of states. Specifically:
    i. The [Agency] calculates the Geographic Community Benchmarks 
for each major product line and income group separately for each MSA 
and for the nonmetropolitan portion of each state, following the 
formula described in section III.2.b of this appendix.
    ii. The [Agency] calculates local weights as the dollar amount 
of the bank's retail lending that occurred outside of its facility-
based assessment areas and retail lending assessment areas in each 
MSA and the nonmetropolitan portion of each state, as a percentage 
of the bank's total dollar amount of retail lending in outside 
retail lending areas.
    iii. The [Agency] then calculates the Tailored Geographic 
Community Benchmarks as the weighted average of the benchmarks 
calculated in section III.2.d.i of this appendix, using the weights 
calculated in section III.2.d.ii.
    For retail lending in outside retail lending areas, the [Agency] 
will use the Tailored Geographic Community Benchmark as the relevant 
Geographic Community Benchmark for calculating the Performance 
Ranges described in section V of this appendix.

IV. Borrower Distribution Metrics and Benchmarks

    For each of the bank's major product lines, excluding 
multifamily lending, in applicable geographic areas, a bank's 
borrower distribution performance will be measured by means of a 
comparison of the Borrower Bank Metric to the Borrower Market 
Benchmark and the Borrower Community Benchmark.
    The relevant calculations for applicable geographic areas are 
described below.
    1. Calculation of Borrower Bank Metrics. The [Agency] calculates 
the Borrower Bank Metric for each major product line, excluding 
multifamily loans, in an applicable geographic area as follows:
    i. For closed-end home mortgage loans, by dividing the total 
number of the bank's originated and purchased closed-end home 
mortgage loans to low-income borrowers or moderate-income borrowers, 
respectively, in the geographic area by the total number of the 
bank's originated and purchased closed-end home mortgage loans in 
that geographic area overall.
    ii. For open-end home mortgage loans, by dividing the total 
number of the bank's originated and purchased open-end home mortgage 
loans to low-income borrowers or moderate-income borrowers, 
respectively, in the geographic area by the total number of the 
bank's originated and purchased open-end home mortgage loans in that 
geographic area overall.
    iii. For small business loans, by dividing the total number of 
the bank's originated and purchased small business loans to small 
businesses with gross annual revenues of $250,000 or less or small 
businesses with gross annual revenues of more than $250,000 but less 
than or equal to $1 million, respectively, in the geographic area by 
the total number of the bank's originated and purchased small 
business loans in that geographic area overall. (Until such time as 
the data reported under the CFPB's Section 1071 Rulemaking is 
available, the Borrower Bank Metric would instead be the total 
number of small business loans to businesses with gross annual 
revenues of less than or equal to $1 million divided by the total 
number of small business loans.)
    iv. For small farm loans, by dividing the total number of the 
bank's originated and purchased small farm loans to small farms with 
gross annual revenues of $250,000 or

[[Page 34043]]

less or small farms with gross annual revenues of more than $250,000 
but less than or equal to $1 million, respectively, in the 
geographic area by the total number of the bank's originated and 
purchased small farm loans in that geographic area overall. (Until 
such time as the data reported under the CFPB's Section 1071 
Rulemaking is available, the Borrower Bank Metric would instead be 
the total number of small farm loans to farms with gross annual 
revenues of less than or equal to $1 million divided by the total 
number of small farm loans.)
    v. For automobile loans, by dividing the total number of the 
bank's originated and purchased automobile loans to low-income 
borrowers or moderate-income borrowers, respectively, in the 
geographic area by the total number of the bank's originated and 
purchased automobile loans in that geographic area overall.
    Example: Assume that a bank originated and purchased 100 closed-
end home mortgage loans in one of its facility-based assessment 
areas during the evaluation period, and that 20 of these went to 
low-income borrowers. The Borrower Bank Metric for closed-end home 
mortgage loans to low-income borrowers would be 20 divided by 100, 
or 20 percent. Assume that an additional 30 of these went to 
moderate-income borrowers. The Borrower Bank Metric for closed-end 
home mortgage loans to moderate-income borrowers would be 30 divided 
by 100, or 30 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.012

    2. Calculation of Borrower Market Benchmarks and Borrower 
Community Benchmarks. For each of a bank's major product lines in an 
applicable geographic area, the [Agency] compares the bank's 
borrower distribution of retail lending, originated and purchased, 
in the geographic area, as measured by the Borrower Bank Metric, to 
benchmarks set by overall lending activity in the area, as well as 
other information. The [Agency] derives Borrower Market Benchmarks 
and Borrower Community Benchmarks, as set out below. The method for 
calculating the Borrower Market Benchmarks and Borrower Community 
Benchmarks in outside retail lending areas includes additional steps 
to tailor the benchmarks to the regions in which the bank's retail 
lending is concentrated.
    a. Borrower Market Benchmarks in Facility-Based Assessment Areas 
and Retail Lending Assessment Areas. The [Agency] calculates the 
Borrower Market Benchmark for each of the bank's major product 
lines, excluding multifamily loans, for borrowers of each applicable 
income level in an applicable geographic area as follows.
    i. For closed-end home mortgage loans, by dividing the total 
number of closed-end home mortgage loans to low-income borrowers or 
moderate-income borrowers, respectively, in the geographic area 
overall that were originated by all lenders that report home 
mortgage loan data by the total number of closed-end home mortgage 
loans in that geographic area overall that were originated by all 
lenders that report home mortgage loan data.
    ii. For open-end home mortgage loans, by dividing the total 
number of open-end home mortgage loans to low-income borrowers or 
moderate-income borrowers, respectively, in the geographic area 
overall that were originated by all lenders that report home 
mortgage loan data by the total number of open-end home mortgage 
loans in that geographic area overall that were originated by all 
lenders that report home mortgage loan data.
    iii. For small business loans, by dividing the total number of 
small business loans to small businesses with gross annual revenues 
of $250,000 or less or small businesses with gross annual revenues 
of more than $250,000 but less than or equal to $1 million, 
respectively, in the geographic area overall that were originated by 
all lenders that report small business loan data by the total number 
of small business loans in that geographic area overall that were 
originated by all lenders that report small business loan data. 
(Until such time as the data reported under the CFPB's Section 1071 
Rulemaking is available, the Borrower Market Benchmark would instead 
be the total number of small business loans to businesses with gross 
annual revenues of less than or equal to $1 million divided by the 
total number of small business loans.)
    iv. For small farm loans, by dividing the total number of small 
farm loans to small farms with gross annual revenues of $250,000 or 
less or small farms with gross annual revenues of more than $250,000 
but less than or equal to $1 million, respectively, in the 
geographic area overall that were originated by all lenders that 
report small farm loan data by the total number of small farm loans 
in that geographic area overall that were originated by all lenders 
that report small farm loan data. (Until such time as the data 
reported under the CFPB's Section 1071 Rulemaking is available, the 
Borrower Market Benchmark would instead be the total number of small 
farm loans to farms with gross annual revenues of less than or equal 
to $1 million divided by the total number of small farm loans.)
    v. For automobile loans, by dividing the total number of the 
automobile loans to low-incomer borrowers or moderate-income 
borrowers, respectively, in the geographic area overall that were 
originated by all lenders that report automobile loan data by the 
total number of automobile loans in that geographic area overall 
that were originated by all lenders that report automobile loan 
data.
    Example: Assume that all lenders that report home mortgage loan 
data originated and purchased 1,000 closed-end home mortgage loans 
in the counties that encompass the bank's facility-based assessment 
area during the evaluation period, and that 100 of these went to 
low-income borrowers. The Borrower Market Benchmark for closed-end 
home mortgage loans to low-income borrowers would be 100 divided by 
1,000, or 10 percent. Assume that an additional 200 of these went to 
moderate-income borrowers. The Borrower Market Benchmark for closed-
end home mortgage loans to moderate-income borrowers would be 200 
divided by 1,000, or 20 percent.

[[Page 34044]]

[GRAPHIC] [TIFF OMITTED] TP03JN22.013

    b. Borrower Community Benchmarks in Facility-Based Assessment 
Areas and Retail Lending Assessment Areas. The [Agency] calculates 
the Borrower Community Benchmark for each of the bank's major 
product lines, excluding multifamily loans, in an applicable 
geographic area as follows.
    i. For closed-end home mortgage loans and open-end home mortgage 
loans, by dividing the total number of low-income families or 
moderate-income families, respectively, in the geographic area by 
the total number of families in that geographic area overall.
    ii. For small business loans, by dividing the total number of 
small businesses with gross annual revenues of $250,000 or less or 
small businesses with gross annual revenues of more than $250,000 
but less than or equal to $1 million, respectively, in the 
geographic area by the total number of small businesses in that 
geographic area overall. (Until such time as the data reported under 
the CFPB's Section 1071 Rulemaking is available, the Borrower 
Community Benchmark would instead be the total number of businesses 
with gross annual revenues of less than or equal to $1 million 
divided by the total number of small businesses.)
    iii. For small farm loans, by dividing the total number of small 
farms with gross annual revenues of $250,000 or less or small farms 
with gross annual revenues of more than $250,000 but less than or 
equal to $1 million, respectively, in the geographic area by the 
total number of small farms in that geographic area overall. (Until 
such time as the data reported under the CFPB's Section 1071 
Rulemaking is available, the Borrower Community Benchmark would 
instead be the total number of farms with gross annual revenues of 
less than or equal to $1 million divided by the total number of 
small farms.)
    iv. For automobile loans, by dividing the total number of low-
income households or moderate-income households, respectively, in 
the geographic area by the total number of households in that 
geographic area overall.
    Example: Assume that there were 4,000 families in the facility-
based assessment area, and that 1,000 of these were low-income 
families. The facility-based assessment area Borrower Community 
Benchmark for, respectively, closed-end home mortgages and open-end 
home mortgages for low-income families would be 1,000 divided by 
4,000, or 25 percent. Assume that an additional 1,200 of these were 
moderate-income families. The facility-based assessment area 
Borrower Community Benchmark for, respectively, closed-end home 
mortgages and open-end home mortgages for moderate-income families 
would be 1,200 divided by 4,000, or 30 percent.
[GRAPHIC] [TIFF OMITTED] TP03JN22.016

    c. Tailored Borrower Market Benchmarks in Outside Retail Lending 
Areas. The [Agency] calculates the Tailored Borrower Market 
Benchmark for each of the bank's major product lines, excluding 
multifamily loans, to borrowers of different income categories 
respectively, in outside retail lending areas. The Tailored Borrower 
Market Benchmark is calculated by means of a weighted average of the 
Borrower Market Benchmark from every MSA and the nonmetropolitan 
portion of every state, weighted by the percentage, in dollars, of 
the bank's retail lending outside of facility-based assessment areas 
and retail lending assessment areas in each of those MSAs and 
nonmetropolitan portions of states. Specifically:
    i. The [Agency] calculates the Borrower Market Benchmarks for 
each major product line and income group separately for each MSA and 
for the nonmetropolitan portion of each state, following the formula 
described in section IV.2.a of this appendix.
    ii. The [Agency] calculates local weights as the dollar amount 
of the bank's retail lending that occurred in outside retail lending 
areas in each MSA and the nonmetropolitan portion of each state, as 
a percentage of the bank's total dollar amount of retail lending in 
outside retail lending areas.
    iii. The [Agency] then calculates the Tailored Borrower Market 
Benchmarks as the weighted average of the Benchmarks calculated in 
section IV.2.c.i of this appendix, using the weights calculated in 
section IV.2.c.ii.
    For retail lending in outside retail lending areas, the [Agency] 
will use the Tailored Borrower Market Benchmark as the relevant 
Borrower Market Benchmark for calculating the Performance Ranges 
described in section V of this appendix.
    d. Tailored Borrower Community Benchmarks in Outside Retail 
Lending Areas. The [Agency] calculates the Tailored Borrower 
Community Benchmark for each of the bank's major product lines, 
except for multifamily loans, to borrowers of different income 
categories respectively, in the bank's outside retail lending area. 
The Tailored Borrower Community Benchmark is calculated by means of 
a weighted average of the Borrower Community Benchmark from every 
MSA and the nonmetropolitan portion of every state, weighted by the 
percentage, in dollars, of the bank's retail lending outside of 
facility-based assessment areas and retail lending assessment areas 
in each of those MSAs and nonmetropolitan portions of states. 
Specifically:
    i. The [Agency] calculates the Borrower Community Benchmarks for 
each major product line and income group separately for each MSA and 
for the nonmetropolitan portion of each state, following the formula 
described in section IV.2.b of this appendix.
    ii. The [Agency] calculates local weights as the dollar amount 
of the bank's retail lending that occurred in outside retail lending 
areas in each MSA and the nonmetropolitan portion of each state, as 
a percentage of the bank's total dollar amount of retail lending in 
outside retail lending areas.
    iii. The [Agency] then calculates the Tailored Borrower 
Community Benchmarks as the weighted average of the Benchmarks 
calculated in section IV.2.d.i of this appendix, using the weights 
calculated in section IV.2.d.ii.

[[Page 34045]]

    For retail lending in a bank's outside retail lending area, the 
[Agency] will use the Tailored Borrower Community Benchmark as the 
relevant Borrower Community Benchmark for calculating the 
Performance Ranges described in section V of this appendix.

V. Recommended Retail Lending Test Conclusions

    1. The [Agency] calculates an eligible bank's recommended Retail 
Lending Test performance conclusion in each facility-based 
assessment area, excluding the facility-based assessment areas of a 
large bank in which it failed to meet or surpass the Retail Lending 
Volume Threshold and the [Agency] did not find an acceptable basis 
for that failure, and, as applicable, each retail lending assessment 
area, and in its outside retail lending area by comparing a bank's 
borrower and geographic distribution metrics for each major product 
line to a set of performance ranges determined by the market and 
community benchmarks. For facility-based assessment areas, the 
[Agency] will then consider the additional factors described in 
Sec.  __.22(e) to adjust a bank's recommended Retail Lending Test 
conclusion in those assessment areas, as appropriate. For facility-
based assessment areas of a large bank in which it failed to meet 
the Retail Lending Volume Threshold and the [Agency] did not find an 
acceptable basis for that failure, the [Agency] will use the 
recommended conclusion developed in this section along with other 
factors to determine whether the bank should be assigned a ``Needs 
to Improve'' or ``Substantial Noncompliance'' conclusion in that 
facility-based assessment area.
    2. In evaluating a bank's Retail Lending Test performance in any 
applicable geographic area:
    a. For each major product line, the [Agency] will develop 
separate supporting conclusions for each of the categories outlined 
below regarding retail lending performance in the geographic area. 
These conclusions are based upon a comparison of the bank's 
performance to the applicable set of performance ranges. Each 
supporting conclusion in the categories outlined below will receive 
a Performance Score: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs 
to Improve'' (3 points); ``Substantial Noncompliance'' (0 points).

    Table 1 to Appendix A--Retail Lending Test Conclusion Categories
------------------------------------------------------------------------
                                    Lending in      Lending in numerator
      Major product line        numerator of bank     of bank borrower
                                geographic metric          metric
------------------------------------------------------------------------
Closed-End Home Mortgage Loans  Low-Income Census  Low-Income Borrowers.
                                 Tracts.
                                Moderate-Income    Moderate-Income
                                 Census Tracts.     Borrowers.
Open-End Home Mortgage Loans..  Low-Income Census  Low-Income Borrowers.
                                 Tracts.
                                Moderate-Income    Moderate-Income
                                 Census Tracts.     Borrowers.
Multifamily Loans.............  Low-Income Census  N/A.
                                 Tracts.
                                Moderate-Income    N/A.
                                 Census Tracts.
Home Mortgage Loans...........  Low-Income Census  Low-Income Borrowers.
                                 Tracts.
                                Moderate-Income    Moderate-Income
                                 Census Tracts.     Borrowers.
Small Business Loans..........  Low-Income Census  Small Businesses with
                                 Tracts.            Gross Annual
                                                    Revenues of $250,000
                                                    or Less.
                                Moderate-Income    Small Businesses with
                                 Census Tracts.     Gross Annual
                                                    Revenues of More
                                                    than $250,000 but
                                                    Less Than or Equal
                                                    to $1 million.
Small Farm Loans..............  Low-Income Census  Small Farms with
                                 Tracts.            Gross Annual
                                                    Revenues of $250,000
                                                    or Less.
                                Moderate-Income    Small Farms with
                                 Census Tracts.     Gross Annual
                                                    Revenues of More
                                                    than $250,000 but
                                                    Less Than or Equal
                                                    to $1 million.
Automobile Loans..............  Low-Income Census  Low-Income
                                 Tracts.            Households.
                                Moderate-Income    Moderate-Income
                                 Census Tracts.     Households.
------------------------------------------------------------------------

    b. Geographic Distribution Performance Ranges. For assessing 
geographic distribution, for each major product line the [Agency] 
will compare the bank's performance as measured by the relevant 
Geographic Bank Metrics in connection with, as applicable, lending 
in low-income census tracts and moderate-income census tracts to a 
set of Geographic Performance Ranges associated with each potential 
recommended Retail Lending Test conclusion for that income level.
    The Geographic Performance Ranges are each defined by the 
minimum Geographic Performance Threshold that the Geographic Bank 
Metric must meet or surpass to fall within a given Geographic 
Performance Range. The Geographic Performance Thresholds are 
determined by the values of the Geographic Market Benchmark and 
Geographic Community Benchmark, as well as set of Market Multipliers 
and Community Multipliers associated with each conclusion category. 
The [Agency] will calculate the Geographic Performance Thresholds 
and the resulting Geographic Performance Ranges in any applicable 
geographic area as follows:
    i. The Geographic Performance Threshold for a recommended 
``Outstanding'' Retail Lending Test conclusion is the minimum of 
either:
    A. The product of 1.0 times the Geographic Community Benchmark; 
or
    B. The product of 1.25 times the Geographic Market Benchmark.
    The Outstanding Geographic Performance Range is all potential 
values of the Geographic Bank Metric equal to or above the 
Outstanding Geographic Performance Threshold.
    ii. The Geographic Performance Threshold for a recommended 
``High Satisfactory'' Retail Lending Test conclusion is the minimum 
of either:
    A. The product of 0.9 times the Geographic Community Benchmark; 
or
    B. The product of 1.1 times the Geographic Market Benchmark.
    The High Satisfactory Geographic Performance Range is all 
potential values of the Geographic Bank Metric equal to or above the 
High Satisfactory Geographic Performance Threshold but below the 
Outstanding Geographic Performance Threshold.
    iii. The Geographic Performance Threshold for a recommended 
``Low Satisfactory'' Retail Lending Test conclusion is the minimum 
of either:
    A. The product of 0.65 times the Geographic Community Benchmark; 
or
    B. The product of the 0.8 times the Geographic Market Benchmark.
    The Low Satisfactory Geographic Performance Range is all 
potential values of the Geographic Bank Metric equal to or above the 
Low Satisfactory Geographic Performance Threshold but below the High 
Satisfactory Geographic Performance Threshold.
    iv. The Geographic Performance Threshold for a recommended 
``Needs to Improve'' Retail Lending Test conclusion is the minimum 
of either:
    A. The product of 0.33 times the Geographic Community Benchmark; 
or
    B. The product of 0.33 times the Geographic Market Benchmark.
    The Needs to Improve Geographic Performance Range is all 
potential values of the Geographic Bank Metric equal to or above the 
Needs to Improve Geographic Performance Threshold but below the Low 
Satisfactory Geographic Performance Threshold.
    v. The Substantial Noncompliance Geographic Performance Range is 
all

[[Page 34046]]

potential values of the Geographic Bank Metric below the Needs to 
Improve Geographic Performance Threshold.
    c. Geographic Distribution Recommended Retail Lending Test 
Conclusions and Performance Scores. The [Agency] will compare the 
Geographic Bank Metric to the Geographic Performance Ranges 
described in paragraphs V.2.b.i through V.2.b.v of this appendix. 
The recommended Retail Lending Test conclusion for the geographic 
distribution performance will be the Geographic Performance Range 
the Geographic Bank Metric falls within. Based on this recommended 
Retail Lending Test conclusion, geographic performance for the 
product and income group is assigned a numerical performances score 
using the following points values: ``Outstanding'' (10 points); 
``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); 
``Needs to Improve'' (3 points); ``Substantial Noncompliance'' (0 
points).
    d. Borrower Distribution Performance Ranges. For assessing 
borrower distribution, for each major product line, apart from 
multifamily lending, the [Agency] will compare the bank's 
performance as measured by the relevant Borrower Bank Metrics in 
connection with, as applicable, lending to low-income borrowers, 
moderate-income borrowers, small businesses with annual revenues of 
$250,000 or less and small businesses with annual revenues of more 
than $250,000 but less than or equal to $1 million, and small farms 
with annual revenues of $250,000 or less and small farms with annual 
revenues of more than $250,000 but less than or equal to $1 million, 
to a set of Borrower Performance Ranges associated with each 
potential recommended Retail Lending Test conclusion for that 
borrower segment.
    The Borrower Performance ranges are each defined by the minimum 
Borrower Performance Threshold that the Borrower Bank Metric must 
meet or surpass to fall within a given Borrower Performance Range. 
The Borrower Performance Thresholds are determined by the values of 
the Borrower Market Benchmark and Borrower Community Benchmark, as 
well as the set of Market Multipliers and Community Multipliers 
associated with each conclusion category. The [Agency] will 
calculate the Borrower Performance Thresholds and the resulting 
Borrower Performance Ranges in any applicable geographic area, as 
follows:
    i. The Borrower Performance Threshold for a recommended 
``Outstanding'' Retail Lending Test conclusion is the minimum of 
either:
    A. The product of 1.0 times the Borrower Community Benchmark; or
    B. The product of 1.25 times the Borrower Market Benchmark.
    The Outstanding Borrower Performance Range is all potential 
values of the Borrower Bank Metric equal to or above the Outstanding 
Borrower Performance Threshold.
    ii. The Borrower Performance Threshold for a recommended ``High 
Satisfactory'' Retail Lending Test conclusion is the minimum of 
either:
    A. The product of 0.9 times the Borrower Community Benchmark; or
    B. The product of 1.1 times the Borrower Market Benchmark.
    The High Satisfactory Borrower Performance Range is all 
potential values of the Borrower Bank Metric equal to or above the 
High Satisfactory Borrower Performance Threshold but below the 
Outstanding Borrower Performance Threshold.
    iii. The Borrower Performance Threshold for a recommended ``Low 
Satisfactory'' Retail Lending Test conclusion is the minimum of 
either:
    A. The product of 0.65 times the Borrower Community Benchmark; 
or
    B. The product of 0.8 times the Borrower Market Benchmark.
    The Low Satisfactory Borrower Performance Range is all potential 
values of the Borrower Bank Metric equal to or above the Low 
Satisfactory Borrower Performance Threshold but below the High 
Satisfactory Borrower Performance Threshold.
    iv. The Borrower Performance Threshold for a recommended ``Needs 
to Improve'' Retail Lending Test conclusion is the minimum of 
either:
    A. The product of 0.33 times the Borrower Community Benchmark; 
or
    B. The product of 0.33 times the Borrower Market Benchmark.
    The Needs to Improve Borrower Performance Range is all potential 
values of the Borrower Bank Metric equal to or above the Needs to 
Improve Borrower Performance Threshold but below the Low 
Satisfactory Borrower Performance Threshold.
    v. The Substantial Noncompliance Borrower Performance Range is 
all potential values of the Borrower Bank Metric below the Needs to 
Improve Borrower Performance Threshold.
    e. Borrower Distribution Recommended Conclusions and Performance 
Scores. The [Agency] will compare the Borrower Bank Metric to the 
Borrower Performance Ranges described in V.2.d.i through V.2.d.v 
above. The recommended Retail Lending Test conclusion for the 
borrower distribution performance, for each product and income 
group, will be that of the Borrower Performance Range the Borrower 
Bank Metric falls within. Based on this recommended Retail Lending 
Test conclusion, borrower performance for the product and income 
group is assigned a numerical performance score using the following 
points values: ``Outstanding'' (10 points); ``High Satisfactory'' (7 
points); ``Low Satisfactory'' (6 points); ``Needs to Improve'' (3 
points); ``Substantial Noncompliance'' (0 points).
    3. To determine a bank's recommended Retail Lending Test 
conclusion for an applicable geography, the [Agency] utilizes a 
weighted average of a bank's performance for the following 
categories with regard to each major product line:

 Table 2 to Appendix A--Retail Lending Test Major Product Line Weighting
------------------------------------------------------------------------
                                    Lending in
                                numerator of bank   Lending in numerator
      Major product line            geographic        of bank borrower
                                      metric               metric
------------------------------------------------------------------------
Closed-End Home Mortgage Loans  Low-Income Census  Low-Income Borrowers.
                                 Tracts.
                                Moderate-Income    Moderate-Income
                                 Census Tracts.     Borrowers.
Open-End Home Mortgage Loans..  Low-Income Census  Low-Income Borrowers.
                                 Tracts.
                                Moderate-Income    Moderate-Income
                                 Census Tracts.     Borrowers.
Multifamily Loans.............  Low-Income Census  N/A.
                                 Tracts.
                                Moderate-Income    N/A.
                                 Census Tracts.
Home Mortgage Loans...........  Low-Income Census  Low-Income Borrowers.
                                 Tracts.
                                Moderate-Income    Moderate-Income
                                 Census Tracts.     Borrowers.
Small Business Loans..........  Low-Income Census  Small Businesses with
                                 Tracts.            Gross Annual
                                                    Revenues of $250,000
                                                    or Less.
                                Moderate-Income    Small Businesses with
                                 Census Tracts.     Gross Annual
                                                    Revenues of More
                                                    Than $250,000 but
                                                    Less Than or Equal
                                                    to $1 million.
Small Farm Loans..............  Low-Income Census  Small Farms with
                                 Tracts.            Gross Annual
                                                    Revenues of $250,000
                                                    or Less.
                                Moderate-Income    Small Farms with
                                 Census Tracts.     Gross Annual
                                                    Revenues of More
                                                    than $250,000 but
                                                    Less than or Equal
                                                    to $1 million.
Automobile Loans..............  Low-Income Census  Low-Income
                                 Tracts.            Households.
                                Moderate-Income    Moderate-Income
                                 Census Tracts.     Households.
------------------------------------------------------------------------


[[Page 34047]]

    a. The [Agency] follows the below steps to create a weighted 
average performance score for each major product line.
    i. First, for each major product line, the [Agency] creates a 
geographic income average of the bank's Geographic Performance 
Scores and a borrower income average of the bank's Borrower 
Performance Scores.
    ii. For the geographic income average of each major product 
line, the relevant Community Benchmark is used to weight together 
the bank's Geographic Performance Scores. These benchmarks are 
outlined in the following table:

 Table 3 to Appendix A--Retail Lending Test Community Benchmark Used to
          Weight Together Bank's Geographic Performance Scores
------------------------------------------------------------------------
                                    Geographic
                                   distribution     Geographic community
      Major product line        performance score     benchmark weight
                                    component
------------------------------------------------------------------------
Closed-End Home Mortgage and    Low-Income Census  Percentage of Owner-
 Open End Home Mortgage Loans.   Tracts.            Occupied Units in
                                                    Low-Income Census
                                                    Tracts.
                                Moderate-Income    Percentage of Owner-
                                 Census Tracts.     Occupied Units in
                                                    Moderate-Income
                                                    Census Tracts.
Multifamily Loans.............  Low-Income Census  Percentage of
                                 Tracts.            Multifamily Units in
                                                    Low-Income Census
                                                    Tracts.
                                Moderate-Income    Percentage of
                                 Census Tracts.     Multifamily Units in
                                                    Moderate-Income
                                                    Census Tracts.
Small Business Loans..........  Low-Income Census  Percentage of Small
                                 Tracts.            Businesses in Low-
                                                    Income Census
                                                    Tracts.
                                Moderate-Income    Percentage of Small
                                 Census Tracts.     Businesses in
                                                    Moderate-Income
                                                    Census Tracts.
Small Farm Loans..............  Low-Income Census  Percentage of Small
                                 Tracts.            Farms in Low-Income
                                                    Census Tracts.
                                Moderate-Income    Percentage of Small
                                 Census Tracts.     Farms in Moderate-
                                                    Income Census
                                                    Tracts.
Automobile Loans..............  Low-Income Census  Percentage of
                                 Tracts.            Households in Low-
                                                    Income Census
                                                    Tracts.
                                Moderate-Income    Percentage of
                                 Census Tracts.     Households in
                                                    Moderate-Income
                                                    Census Tracts.
------------------------------------------------------------------------

    iii. For the borrower income average of each major product line, 
excluding multifamily lending, the relevant Community Benchmark is 
used to weight together the bank's Borrower Performance Scores. 
These benchmarks are outlined in the following table:

 Table 4 to Appendix A--Retail Lending Test Community Benchmark Used to
           Weight Together Bank's Borrower Performance Scores
------------------------------------------------------------------------
                                    Borrower
                                  distribution       Borrower community
     Major product line        performance  score         benchmark
                                    component
------------------------------------------------------------------------
Closed-End Home Mortgage and  Low-Income Borrowers  Percentage of Low-
 Open-End Home Mortgage                              Income Families.
 Loans.
                              Moderate-Income       Percentage of
                               Borrowers.            Moderate-Income
                                                     Families.
Multifamily Loans...........  N/A.................  N/A.
                              N/A.................  N/A.
Small Business Loans........  Small Businesses      Percentage of Small
                               with Gross Annual     Businesses with
                               Revenues of           Gross Annual
                               $250,000 or Less.     Revenues of
                                                     $250,000 or Less.
                              Small Businesses      Percentage of Small
                               with Gross Annual     Businesses with
                               Revenues of More      Gross Annual
                               Than $250,000 and     Revenues of More
                               Less Than or Equal    Than $250,00 and
                               to $1 Million.        Less Than or Equal
                                                     to $1 Million.
Small Farm Loans............  Small Farms with      Percentage of Small
                               Gross Annual          Farms with Gross
                               Revenues of           Annual Revenues of
                               $250,000 or Less.     $250,000 or Less.
                              Small Farms with      Percentage of Small
                               Gross Annual          Farms with Gross
                               Revenues of More      Annual Revenues of
                               Than $250,000 and     More Than $250,00
                               Less Than or Equal    and Less Than or
                               to $1 Million.        Equal to $1
                                                     Million.
Automobile Loans............  Low-Income Borrowers  Percentage of Low-
                                                     Income Households.
                              Moderate-Income       Percentage of
                               Borrowers.            Moderate-Income
                                                     Households.
------------------------------------------------------------------------

    In the case of an assessment area that contains no low-income 
census tracts and no moderate-income census tracts, the bank will 
not receive a geographic income average for that assessment area
    Example: Suppose that a bank originates and purchases closed-end 
home mortgage loans in a facility-based assessment area. Assume that 
owner-occupied housing in moderate-income census tracts represent 80 
percent of all owner-occupied units in low- and moderate-income 
census tracts combined, and accordingly closed-end home mortgage 
loans in moderate-income census tracts receive an 80 percent weight 
and closed-end home mortgage loans in low-income census tracts 
receive a 20 percent weight. Additionally, assume that for closed-
end home mortgage loans, the bank's geographic distribution 
conclusion in connection with low-income census tracts was ``High 
Satisfactory'' (Performance Score of 7 points) and its geographic 
distribution conclusion in connection with moderate-income census 
tracts was ``Needs to Improve'' (Performance Score of 3 points).
    For geographic distribution: The bank's geographic income 
average for closed-end home mortgage loans would be 3.8 [(7 points

[[Page 34048]]

x 0.2 weight = 1.4) + (3 points x 0.8 weight = 2.4)].
    Assume also that low-income families account for 70 percent of 
the total low- and moderate-income families in the assessment area, 
and that accordingly closed-end home mortgage lending to low-income 
families receives a 70 percent weight and closed-end home mortgage 
lending to moderate-income families receives a 30 percent weight. 
Additionally assume that the bank's borrower distribution conclusion 
in connection with low-income borrowers was ``Outstanding'' 
(Performance Score of 10 points) and its borrower distribution 
conclusion in connection with moderate-income borrowers was ``Low 
Satisfactory'' (Performance Score of 6 points).
    For borrower distribution: The bank's borrower income average 
for closed-end home mortgage loans would be 8.8 [(10 points x 0.7 
weight = 7.0) + (6 points x 0.3 weight = 1.8)].
    b. Second, for each major product line, the [Agency] then uses 
the simple mean of the geographic income average and the borrower 
income average to develop a product line average. For multifamily 
lending, banks do not receive borrower income performance 
conclusions so the product line average is set equal to the 
geographic income average. If a bank has no geographic income 
average for a product (due to the absence of both low-income census 
tracts and moderate-income census tracts in the geographic area), 
then the product line average is set equal to the borrower income 
average.
    Example: Based on the illustration above:
    For closed-end home mortgage loans: The bank's product line 
average for closed-end home mortgage loans would be 6.3 [(3.8 
geographic income average x 0.5 weight = 1.9) + (8.8 borrower income 
average x 0.5 weight = 4.4)].
    c. Third, the [Agency] uses the volume of retail lending 
(measured in dollars of originations and purchases) that the bank 
made in each major product line in a relevant geographic area to 
assign a weight to that major product line. A weighted average taken 
across products then produces a geographic product average.
    Example: Suppose that, in addition to the closed-end home 
mortgage lending described in the illustration above, the example 
bank also engaged in small business lending in its assessment area. 
Assume that, among major product lines, 60 percent of the banks 
loans in that assessment area were closed-end home mortgages and 40 
percent were small business loans (by dollar volume). Accordingly, 
closed-end home mortgage lending would receive a 60 percent weight 
and small business lending would receive a 40 percent weight. Assume 
further that, based on steps V.3.a.i-iii, the bank's product line 
average for small business lending in the assessment area was 4.2.
    For all retail loans: The bank's geographic product average for 
all retail lending is 5.46 [(6.3 closed-end home mortgage product 
line average x 0.6 weight = 3.78) + (4.2 small business product line 
average x 0.4 weight = 1.68)].
    d. Fourth, the [Agency] takes the geographic product average and 
translates it into a recommended Retail Lending Test conclusion for 
the relevant geographic area by rounding to the nearest conclusion 
score using the following points values: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); ``Substantial 
Noncompliance'' (0 points). The rounding procedure works as follows:
    i. A geographic product average of less than 1.5 results in a 
conclusion of ``Substantial Noncompliance'';
    ii. A geographic product average of 1.5 or more but less than 
4.5 results in a conclusion of ``Needs to Improve'';
    iii. A geographic product average of 4.5 or more but less than 
6.5 results in a conclusion of ``Low Satisfactory'';
    iv. A geographic product average of 6.5 or more but less than 
8.5 results in a conclusion of ``High Satisfactory'';
    v. A geographic product average of 8.5 or more results in a 
conclusion of ``Outstanding.''
    For small banks evaluated pursuant to the Retail Lending Test, 
recommended Retail Lending Test conclusions of ``High Satisfactory'' 
and ``Low Satisfactory'' both result in a recommended Retail Lending 
Test conclusion of ``Satisfactory'' in any applicable state, 
multistate MSA, or at the institution level.
    Example: Based on the illustration above, the bank's geographic 
product average of 5.46 is closest to the conclusion score (6) 
associated with a ``Low Satisfactory,'' so the bank's recommended 
Retail Lending Test conclusion is ``Low Satisfactory'' for the 
assessment area. Finally, the [Agency] will review additional 
factors in described in Sec.  __.22(e) to determine whether and how 
to adjust a bank's recommended Retail Lending Test conclusion in 
this facility-based assessment area.

VI. Retail Lending Test and Retail Services and Products Test Weighting 
and Conclusions in States, Multistate MSAS, and at the Institution 
Level

    1. Retail Lending Test conclusions in states and multistate MSAs 
are based on Retail Lending Test conclusions for facility-based 
assessment areas and, as applicable, retail lending assessment 
areas.
    Facility-based assessment area and retail lending assessment 
area conclusions are translated into numerical performance scores 
using the following mapping: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs 
to Improve'' (3 points); ``Substantial Noncompliance'' (0 points). 
The [Agency] takes a weighted average of these performance scores 
across assessment areas. Each assessment area is weighted by the 
simple average of:
    a. The dollars of deposits the bank draws from that assessment 
area, measured as a percentage of all dollars of deposits that the 
bank draws from assessment areas in the relevant geographic area 
(i.e., state where the bank has a branch, multistate MSA where the 
bank has a branch in two or more states of the multistate MSA, and 
nationwide at the institution level); and
    b. The dollars of retail loans the bank made in that assessment 
area over the evaluation period, measured as a percentage of all of 
the retail loans that the bank made in assessment areas in the 
relevant geographic area over the evaluation period.
    For banks that collect and maintain deposits data as provided in 
Sec.  __.42, the dollars of deposits in each assessment area are the 
annual average daily balance of deposits as provided in bank 
statements (for example, monthly, quarterly) for the bank's deposits 
associated with an address in that assessment area over the 
evaluation period. For banks that do not collect and maintain 
deposits data as provided in Sec.  __.42, the [Agency] measures the 
dollars of deposits in each assessment area as the annual average of 
deposits assigned to branches that the bank operates in its 
assessment area, as reported in the FDIC's Summary of Deposits.
    The [Agency] calculates the weighted average of facility-based 
assessment area performance scores and, as applicable, retail 
lending assessment area performance scores to produce the Retail 
Lending Test performance score for each state, multistate MSA, and 
at the institution level. The [Agency] assigns a conclusion 
corresponding with the conclusion category that is nearest to the 
performance score, as follows: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs 
to Improve'' (3 points); ``Substantial Noncompliance'' (0 points). 
For performance scores at the exact mid-point between two 
conclusions categories, the [Agency] rounds up to assign the 
conclusion (i.e., a performance score of 8.5 is ``Outstanding''). 
These performance scores are then each rounded to the nearest 
conclusion score to produce a Retail Lending Test conclusion for 
each state, multistate MSA, and at the institution level using the 
following corresponding points values: ``Outstanding'' (10 points); 
``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); 
``Needs to Improve'' (3 points); ``Substantial Noncompliance'' (0 
points).
    2. The Retail Lending Test conclusion at the institution level 
is based on Retail Lending Test conclusions for all facility-based 
assessment areas and, as applicable, retail lending assessment areas 
and in outside retail lending areas. Facility-based assessment area, 
retail lending assessment area, and outside retail lending area 
conclusions are translated into numerical performance scores using 
the following mapping: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs 
to Improve'' (3 points); ``Substantial Noncompliance'' (0 points).
    The [Agency] takes a weighted average of these performance 
scores across facility-based assessment areas and, as applicable, 
retail lending areas and outside retail lending areas. Each 
assessment area and the outside retail lending area is weighted by 
the simple average of:
    a. The dollars of deposits the bank draws from that assessment 
area or outside retail lending area, measured as a percentage of all 
of the bank's dollars of deposits; and
    b. The dollars of retail loans the bank made in that assessment 
area or outside retail lending area over the evaluation period, 
measured as a percentage of all the retail

[[Page 34049]]

loans the bank made over the evaluation period.
    For banks that collect and maintain deposits data as provided in 
Sec.  __.42, the dollars of deposits in each geographic area are the 
annual average daily balance of deposits as provided in bank 
statements (for example, monthly, quarterly) for the bank's deposits 
associated with an address in that assessment area or outside retail 
lending area over the evaluation period. For banks that do not 
collect and maintain deposits data as provided in Sec.  __.42, the 
[Agency] measures the dollars of deposits in each geographic area as 
the annual average of deposits assigned to branches the bank 
operates in its assessment area, as reported in the FDIC's Summary 
of Deposits.
    The [Agency] calculates the weighted average of facility-based 
assessment area performance scores and, as applicable, retail 
lending assessment area performance scores and outside retail 
lending area performance scores to produce the Retail Lending Test 
performance score for bank at the institution level. This 
institution-level performance score is then rounded to the nearest 
conclusion score to produce a Retail Lending Test conclusion for the 
institution using the following points values: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); ``Substantial 
Noncompliance'' (0 points).
    Example 1: Assume that a large bank operates in one state only, 
and has two facility-based assessment areas and one retail lending 
assessment area in that state, and also engages in retail lending 
activity in an outside retail lending area.
    Assume also that:
    i. In facility-based assessment area 1, the bank received a 
``Needs to Improve'' (3 points) Retail Lending Test conclusion, and 
that it is associated with 75 percent of the bank's deposits and 10 
percent of the bank's retail loans (both, by dollar amount);
    ii. In facility-based assessment area 2, the bank received a 
``Low Satisfactory'' (6 points) Retail Lending Test conclusion, and 
that it is associated with 15 percent of the bank's deposits and 20 
percent of the bank's retail loans;
    iii. In its retail lending assessment area, the bank received an 
``Outstanding'' (10 points) Retail Lending Test conclusion, and that 
it is associated with 8 percent of the bank's deposits and 68 
percent of the bank's retail loans; and
    iv. In the outside retail lending area, the bank received a 
``High Satisfactory'' (7 points) Retail Lending Test conclusion, and 
that these areas are associated with 2 percent of the bank's 
deposits and 2 percent of the bank's retail loans.

Calculating Weights

    i. For facility-based assessment area 1: weight = 42.5 percent 
[(75 percent of deposits + 10 percent of retail loans)/2];
    ii. For facility-based assessment area 2: weight = 17.5 percent 
[(15 percent of deposits + 20 percent of retail loans)/2];
    iii. For the retail lending assessment area: weight = 38 percent 
[(8 percent of deposits + 68 percent of retail loans)/2]; and
    iv. For the outside retail lending area: weight = 2 percent [(2 
percent of deposits + 2 percent of loans)/2].
    Institution Retail Lending Test Score and Recommended Retail 
Lending Test Conclusion: Using the relevant points values--
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory'' (6 points); ``Needs to Improve'' (3 points); 
``Substantial Noncompliance'' (0 points)--and based on the 
illustration above, the bank's recommended Retail Lending Test 
performance score at the institution level is 6.3 [(0.425 weight x 3 
points in facility-based assessment area 1) + (0.175 weight x 6 
points in facility-based assessment area 2) + (0.38 weight x 10 
points in retail lending assessment area) + (0.02 weight 7 points in 
outside retail lending area)].
    A performance score of 6.3 is closest to the conclusion score 
(6) associated with ``Low Satisfactory,'' so the bank's recommended 
Retail Lending Test conclusion at the institution level is ``Low 
Satisfactory.''
    Example 2: Assume that an intermediate bank operates in one 
state only, and has two facility-based assessment areas, and also 
engages in retail lending activity in an outside retail lending 
area, having originated or purchased over 50 percent of its retail 
loans outside of its facility-based assessment areas.
    Assume also that:
    i. In facility-based assessment area 1, the bank received an 
``Outstanding'' (10 points) Retail Lending Test conclusion, and that 
it is associated with 60 percent of the bank's deposits and 30 
percent of the bank's retail loans (both, by dollar amount);
    ii. In facility-based assessment area 2, the bank received a 
``High Satisfactory'' (7 points) Retail Lending Test conclusion, and 
that it is associated with 40 percent of the bank's deposits and 10 
percent of the bank's retail loans; and
    iii. In the outside retail lending area, the bank received a 
``Needs to Improve'' (3 points) Retail Lending Test conclusion, and 
that these areas are associated with 0 percent of the bank's 
deposits (as the bank did not voluntarily collect and maintain 
depositor location data, so deposit location is based on branch 
assignment and all branches are necessarily located within facility-
based assessment areas) and 60 percent of the bank's retail loans.
    Calculating weights:
    i. For facility-based assessment area 1: weight = 45 percent 
[(60 percent of deposits + 30 percent of retail loans)/2];
    ii. For facility-based assessment area 2: weight = 25 percent 
[(40 percent of deposits + 10 percent of retail loans)/2]; and
    iii. For the outside retail lending area: weight = 30 percent 
[(0 percent of deposits + 60 percent of loans)/2].
    Institution Retail Lending Test Score and Recommended Retail 
Lending Test Conclusion: Using the relevant points values--
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory'' (6 points); ``Needs to Improve'' (3 points); 
``Substantial Noncompliance'' (0 points)--and based on the 
illustration above, the bank's recommended Retail Lending Test 
performance score at the institution level is 7.2 [(0.45 weight x 10 
points in facility-based assessment area 1) + (0.25 weight x 7 
points in facility-based assessment area 2) + (0.3 weight x 3 points 
in outside retail lending area)].
    A performance score of 7.2 is closest to the conclusion score 
(7) associated with ``High Satisfactory,'' so the bank's recommended 
Retail Lending Test conclusion at the institution level is ``High 
Satisfactory.''

VII. Retail Services and Products Test Weighting and Conclusions in 
States, Multistate MSAS, and at the Institution Level

    1. State and multistate MSA. Retail Services and Products Test 
conclusions in a state or multistate MSA are based on Services and 
Products Test conclusions for facility-based assessment areas in the 
relevant state or multistate MSA. Facility-based assessment area 
conclusions are translated into numerical performance scores using 
the following mapping: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs 
to Improve'' (3 points); ``Substantial Noncompliance'' (0 points).
    The [Agency] then calculates a weighted average of these 
performance scores across assessment areas in each relevant state or 
multistate MSA. Each facility-based assessment area is weighted by 
the simple average of:
    a. The dollars of deposits the bank draws from that assessment 
area, measured as a percentage of all dollars of deposits that the 
bank draws from facility-based assessment areas in the relevant 
state or multistate MSA; and
    b. The dollars of retail loans the bank made in that assessment 
area over the evaluation period, measured as a percentage of all of 
the retail loans that the bank made in facility-based assessment 
areas in the relevant state or multistate MSA over the evaluation 
period.
    For banks that collect and maintain deposits data as provided in 
Sec.  __.42, the dollars of deposits in each assessment area are the 
annual average daily balance of deposits as provided in bank 
statements (for example, monthly, quarterly) for the bank's deposits 
associated with an address in that assessment area over the 
evaluation period. For banks that do not collect and maintain 
deposits data as provided in Sec.  __.42, the [Agency] measures the 
dollars of deposits in each assessment area as the annual average of 
deposits assigned to branches the bank operates in its assessment 
area, as reported in the FDIC's Summary of Deposits.
    The raw number resulting from the weighted average calculation 
is the bank's performance score for its Retail Services and Products 
Test performance in a state or multistate MSA. The [Agency] assigns 
a conclusion corresponding with the conclusion category that is 
nearest to the performance score, as follows: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); ``Substantial 
Noncompliance'' (0 points). For performance scores at the exact mid-
point between two conclusions categories, the [Agency] rounds up to 
assign the conclusion (i.e., a performance score of 8.5 is 
``Outstanding'').

[[Page 34050]]

    Example: Assume that a large bank operates two facility-based 
assessment areas in a particular state.
    Assume also that:
    i. In facility-based assessment area 1, the bank received a 
``Low Satisfactory'' (6 points) Retail Services and Products Test 
conclusion, and that it is associated with 75 percent of the bank's 
deposits and 80 percent of the bank's retail loans (both, by dollar 
amount) in its facility-based assessment areas in the state;
    ii. In facility-based assessment area 2, the bank received a 
``Needs to Improve'' (3 points) Retail Services and Products Test 
conclusion, and that it is associated with 25 percent of the bank's 
deposits and 20 percent of the bank's retail loans in its facility-
based assessment areas the state
    Calculating weights:
    i. For facility-based assessment area 1: Weight = 77.5 percent 
[(75 percent of deposits + 80 percent of retail loans)/2];
    ii. For facility-based assessment area 2: Weight = 22.5 percent 
[(25 percent of deposits + 20 percent of retail loans)/2].
    State-Level Performance Score and Conclusion for the Retail 
Services and Products Test: Using the relevant points values--
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory'' (6 points); ``Needs to Improve'' (3 points); 
``Substantial Noncompliance'' (0 points)--and based on the 
illustration above, the bank's weighted average of facility-based 
assessment area conclusions at the state level is 5.325 [(0.775 
weight x 6 points in facility-based assessment area 1) + (0.225 
weight x 3 points in facility-based assessment area 2).]
    A performance score of 5.325 is closest to the conclusion score 
(6) associated with ``Low Satisfactory,'' so the bank's Retail 
Services and Products Test conclusion at the state level is ``Low 
Satisfactory.''
    2. Institution. The Retail Services and Products Test conclusion 
at the institution level is based on a combined assessment of the 
bank's delivery systems performance under Sec.  __.23(b) and its 
credit and deposit products performance under Sec.  __.23(c). The 
delivery systems evaluation comprises two parts:
    a. The weighted average of a bank's Retail Services and Products 
Test performances scores for its conclusions in all of its facility-
based assessment areas, calculated in accordance with section VII.1 
but including all of the bank's facility-based assessment areas; and
    b. As applicable, the bank's performance regarding digital and 
other delivery systems under Sec.  __.23(b)(3).
    Based on an evaluation of the components of the bank's delivery 
systems performance and the credit and deposit products performance, 
as applicable, the [Agency] assigns a Retail Services and Products 
Test conclusion for the bank at the institution level. The 
institution-level conclusion is translated into a numerical 
performance score using the following mapping: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); ``Substantial 
Noncompliance'' (0 points).

Appendix B to Part __--Calculations for the Community Development Tests

    Appendix B includes information and calculations for metrics, 
benchmarks, combining test elements to derive performance scores and 
conclusions, and weighting conclusions for, as applicable, the 
Community Development Financing Test as provided in Sec.  __.24, the 
Community Development Services Test as provided in Sec.  __.25, and 
the Community Development Financing Test for Wholesale or Limited 
Purpose Banks as provided in Sec.  __.26.
    1. Community development loans and community development 
investments included in the community development financing metrics 
and benchmarks--in general. The community development financing 
metrics and benchmarks in Sec.  __.24 are based on annual community 
development financing activity. Community development financing 
activity for each calendar year in an evaluation period comprises 
the following:
    a. The dollar amount of all community development loans 
originated and community development investments made in that year;
    b. The dollar amount of any increase in an existing community 
development loan that is renewed or modified in that year; and
    c. The outstanding value of community development loans 
originated or purchased and community development investments made 
in previous years that remain on the bank's balance sheet on the 
last day of each quarter of the year, averaged across the four 
quarters of the year.
    To calculate the community development financing metric for an 
evaluation period, the [Agency] uses the annual average of community 
development financing activity for each year, and the annual average 
of bank deposits over the evaluation period.
    For the facility-based assessment area, state, and multistate 
MSA, and nationwide area community development financing metrics in 
Sec.  __.24(c), all community development financing activities that 
are attributed to the specific facility-based assessment area, 
state, multistate MSA, or nationwide area, respectively, are 
included. See section 13 of this appendix for an explanation of how 
the [Agency] allocates community development financing dollars to a 
facility-based assessment area, state, multistate MSA, or nationwide 
area, respectively.
    2. Bank Assessment Area Community Development Financing Metric. 
Section __.24(b)(1) provides that, to assist the [Agency] in 
evaluating a bank's community development financing activity in a 
facility-based assessment area, the [Agency] considers a Bank 
Assessment Area Community Development Financing Metric. The Bank 
Assessment Area Community Development Financing Metric for a 
facility-based assessment area for the evaluation period is 
calculated by dividing the annual average of the bank's community 
development financing activity for each year, over the evaluation 
period, by the annual average dollar value of deposits from the 
bank's deposit accounts in the facility-based assessment area over 
the evaluation period.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits in each assessment 
area are the annual average of deposits over the evaluation period. 
For a bank that does not collect and maintain deposits data as 
provided in Sec.  __.42, the [Agency] measures the dollars of 
deposits in each assessment area as the annual average of deposits 
assigned to branches that the bank operates in its assessment area, 
as reported in the FDIC's Summary of Deposits, over the evaluation 
period.
    Example: Assume that the annual average dollar amount of a 
bank's community development financing activity in a facility-based 
assessment area over the bank's three-year evaluation period is 
$100,000. Assume further that the annual average dollar value of 
deposits from the bank's deposit accounts located in the facility-
based assessment, reported each year by the bank as the average of 
monthly deposit statements, is $10 million. The Bank Assessment Area 
Community Development Financing Metric for that facility-based 
assessment area would be $100,000 divided by $10 million, or 0.01 
(equivalently, 1 percent).
    3. Assessment Area Community Development Financing Benchmark. 
Section __.24(b)(2)(i) provides that the [Agency] uses an Assessment 
Area Community Development Financing Benchmark for evaluating a 
bank's community development financing activity in each facility-
based assessment area. The Assessment Area Community Development 
Financing Benchmark is calculated by dividing the total annual 
community development financing activity for all large banks in the 
facility-based assessment area for each year, averaged over the 
years of the evaluation period, by the total dollar value of all 
large bank deposit accounts in that facility-based assessment area, 
averaged over the years of the evaluation period.
    The deposits in the facility-based assessment area are the sum 
of: (i) The annual average of deposits in counties in the facility-
based assessment area reported by all large banks with assets of 
over $10 billion over the evaluation period; and (ii) the annual 
average of deposits assigned to branches in the facility-based 
assessment area by all large banks with assets of $10 billion or 
less, according to the FDIC's Summary of Deposits, over the 
evaluation period.
    Example: Assume that the total dollar amount of all large banks' 
community development financing activity in the facility-based 
assessment area, average annually over the years of the evaluation 
period is $10 million. Assume further that the total reported dollar 
value of all large bank deposit accounts in that facility-based 
assessment, averaged annually over the years of the evaluation 
period, is $1 billion. The Assessment Area Community Development 
Financing Benchmark for the facility-based assessment area would be 
$10 million divided by $1 billion, or 0.01 (equivalently, 1 
percent).

[[Page 34051]]

    4. Metropolitan and Nonmetropolitan Nationwide Community 
Development Financing Benchmarks. Section __.24(b)(2)(ii) provides 
that the [Agency] uses Nationwide Community Development Financing 
Benchmarks for evaluating a bank's community development financing 
activity in each facility-based assessment area. The [Agency] 
calculates a Metropolitan Nationwide Community Development Financing 
Benchmark for metropolitan areas when the relevant facility-based 
assessment area is in a metropolitan area. The [Agency] calculates a 
Nonmetropolitan Nationwide Community Development Financing Benchmark 
for nonmetropolitan areas when the relevant facility-based 
assessment area is in a nonmetropolitan area.
    i. Metropolitan Nationwide Community Development Financing 
Benchmark. The Metropolitan Nationwide Community Development 
Financing Benchmark is derived by dividing the total dollar amount 
of all large banks' annual community development financing activity 
in all metropolitan areas in a nationwide area for each year, 
averaged over the years of the evaluation period, by the total 
dollar amount of all deposits from large bank deposit accounts in 
all metropolitan areas in a nationwide area, averaged over the years 
of the evaluation period.
    The deposits in all metropolitan areas in a nationwide area is 
the sum of: (i) The annual average of deposits in counties in all 
metropolitan areas in a nationwide area reported by all large banks 
with assets of over $10 billion over the evaluation period; and (ii) 
the annual average of deposits assigned to branches in all 
metropolitan areas in a nationwide area by all large banks with 
assets of $10 billion or less, according to the FDIC's Summary of 
Deposits, over the evaluation period.
    Example: Assume that the total dollar amount of all large banks' 
community development financing activity in metropolitan areas, 
averaged over the years of the evaluation period, is $100 billion. 
Assume further that the total dollar value of all large bank deposit 
accounts in metropolitan areas in the nation as reported by those 
banks, averaged over the years of the evaluation period, is $5 
trillion. The Metropolitan Nationwide Community Development 
Financing Benchmark would be $100 billion divided by $5 trillion, or 
0.02 (equivalently, 2 percent).
    ii. Nonmetropolitan Nationwide Community Development Financing 
Benchmark. The Nonmetropolitan Nationwide Community Development 
Financing Benchmark is derived by dividing the total dollar amount 
of all large banks' annual community development financing activity 
in all nonmetropolitan areas in the nationwide area for each year, 
averaged over the years of the evaluation period, by the reported 
total dollar amount of all deposits from large bank deposit accounts 
in all nonmetropolitan areas in a nationwide area, averaged over the 
years of the evaluation period.
    The deposits in all nonmetropolitan areas in a nationwide area 
is the sum of: (i) The annual average of deposits in counties in all 
nonmetropolitan areas in a nationwide area reported by all large 
banks with assets of over $10 billion over the evaluation period; 
and (ii) the annual average of deposits assigned to branches in all 
nonmetropolitan areas in a nationwide area by all large banks with 
assets of $10 billion or less, according to the FDIC's Summary of 
Deposits, over the evaluation period.
    Example: Assume that the average annual dollar amount of all 
large banks' community development financing activity in 
nonmetropolitan areas over the evaluation period is $10 billion. 
Assume further that the total dollar value of all large bank deposit 
accounts in nonmetropolitan areas, averaged over the years of the 
evaluation period, is $1 trillion. The Nonmetropolitan Nationwide 
Community Development Financing Benchmark would be $10 billion 
divided by $1 trillion, or 0.01 (equivalently, 1 percent).
    5. Bank State Community Development Financing Metric. Section 
__.24(c)(2)(ii)(A) provides that, to assist the [Agency] in 
evaluating a bank's community development financing activity in each 
state, the [Agency] considers a Bank State Community Development 
Financing Metric. For each state, the [Agency] calculates a Bank 
State Community Development Financing Metric for that state for the 
evaluation period. The Bank State Community Development Financing 
Metric is calculated by dividing a bank's total community 
development financing activity within an state for each year, 
averaged over the years of the evaluation period, including all 
activities within the bank's facility-based assessment areas and 
outside of its facility-based assessment areas but within the state, 
by the total dollar amount of deposits from the bank's deposit 
accounts in the state at the end of each calendar year, averaged 
over the years of the evaluation period.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in the state. For a 
bank that does not collect and maintain deposits data as provided in 
Sec.  __.42, the [Agency] measures the dollars of deposits as the 
annual average of deposits assigned to branches that the bank 
operates in the state, as reported in the FDIC's Summary of 
Deposits, over the evaluation period.
    Example: Assume that the bank's total community development 
financing activity within a state, averaged over the years of its 
evaluation period is $50 million. Assume further that the total 
dollar amount of deposits from the bank's deposit accounts in the 
state for each calendar year, averaged over the years of the 
evaluation period, is $5 billion. The Bank State Community 
Development Financing Metric would be $50 million divided by $5 
billion, or 0.01 (equivalently, 1 percent).
    6. State Community Development Financing Benchmark. Section 
__.24(c)(2)(ii)(B)(1) provides that the [Agency] uses a State 
Community Development Financing Benchmark for evaluating a bank's 
community development financing activity in each state. The State 
Community Development Financing Benchmark is calculated by dividing 
the total community development financing activity in a state by all 
large banks for each year, averaged over the years of the evaluation 
period, by the total dollar amount of all deposits from large bank 
deposit accounts in the state at the end of each calendar year, 
averaged over the years of the evaluation period.
    The deposits in the state is the sum of: (i) The annual average 
of deposits in counties in the state reported by all large banks 
with assets of over $10 billion over the evaluation period; and (ii) 
the annual average of deposits assigned to branches in the state by 
all large banks with assets of $10 billion or less, according to the 
FDIC's Summary of Deposits, over the evaluation period.
    Example: Assume that the total dollar amount of all large banks' 
community development financing activity in a state, averaged over 
the years of the evaluation period, is $75 million. Assume further 
that the total dollar value of all large bank deposit accounts in 
the state at the end of each calendar year, averaged over the years 
of the evaluation period, is $500 billion. The State Community 
Development Financing Benchmark for the facility-based assessment 
area would be $75 billion divided by $500 billion, or 0.015 
(equivalently, 1.5 percent).
    7. State Weighted Assessment Area Community Development 
Financing Benchmark. Section __.24(c)(2)(ii)(B)(2) provides that the 
[Agency] uses a State Weighted Assessment Area Community Development 
Financing Benchmark for evaluating a bank's community development 
financing activity in each state. The State Weighted Assessment Area 
Community Development Financing Benchmark is calculated by averaging 
all of the bank's Assessment Area Community Development Financing 
Benchmarks (see section 3) in a state, after weighting each in 
accordance with section 17 of this appendix B.
    Example: Assume that a bank has two facility-based assessment 
areas in a state. (Whether the bank also has retail lending 
assessment areas or lending activity outside of its assessment areas 
in the state has no bearing on this benchmark.)
    Assume also that:
    a. In facility-based assessment area 1, the bank's Assessment 
Area Community Development Financing Benchmark is 3 percent. Out of 
the total of the bank's deposits and retail loans that are 
associated with either of the two assessment areas in the state, 
this assessment area is associated with 70 percent of the bank's 
deposits and 60 percent of the bank's retail loans (both, by dollar 
amount);
    b. In facility-based assessment area 2, the bank's Assessment 
Area Community Development Financing Benchmark is 5 percent. Out of 
the total of the bank's deposits and retail loans that are 
associated with either of the two assessment areas in the state, 
this assessment area is associated with 30 percent of the bank's 
deposits and 40 percent of the bank's retail loans (both, by dollar 
amount).
    Calculating weights:
    a. For facility-based assessment area 1: weight = 65 percent 
[(70 percent of deposits + 60 percent of retail loans)/2];
    b. For facility-based assessment area 2: weight = 35 percent 
[(30 percent of deposits + 40 percent of retail loans)/2].

[[Page 34052]]

    State Weighted Assessment Area Community Development Financing 
Benchmark: The bank's State Weighted Assessment Area Community 
Development Financing Benchmark is 3.7 percent [(0.65 weight x 3 
percent in facility-based assessment area 1) + (0.35 weight x 5 
percent in facility-based assessment area 2)].
    8. Bank Multistate MSA Community Development Financing Metric. 
Section __.24(c)(3)(ii)(A) provides that, to assist the [Agency] in 
evaluating a bank's community development financing activity in a 
multistate MSA, the [Agency] considers a Bank Multistate MSA 
Community Development Financing Metric. For each multistate MSA, the 
[Agency] calculates a Bank Multistate MSA Community Development 
Financing Metric for that multistate MSA for the evaluation period. 
The Bank Multistate MSA Community Development Financing Metric is 
calculated by dividing the total community development financing 
activity within the multistate MSA for each year, averaged together 
over the years of the evaluation period, including all activities 
within the bank's facility-based assessment areas and outside of its 
facility-based assessment areas but within the multistate MSA, by 
the total dollar amount of deposits from the bank's deposit accounts 
in the multistate MSA, averaged together over the years of the 
evaluation period.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in the multistate 
MSA. For a bank that does not collect and maintain deposits data as 
provided in Sec.  __.42, the [Agency] measures the dollars of 
deposits as the annual average of deposits assigned to branches that 
the bank operates in the multistate MSA, as reported in the FDIC's 
Summary of Deposits, over the evaluation period.
    Example: Assume that the bank's total community development 
financing activity within a multistate MSA, averaged over the years 
of its evaluation period, is $150 million. Assume further that the 
total dollar amount of deposits from the bank's deposit accounts in 
the multistate MSA, averaged over the years of the evaluation 
period, is $10 billion. The Bank Multistate MSA Community 
Development Financing Metric for that multistate MSA would be $150 
million divided by $10 billion, or 0.015 (equivalently, 1.5 
percent).
    9. Multistate MSA Community Development Financing Benchmark. 
Section __.24(c)(3)(ii)(B)(1) provides that the [Agency] uses a 
Multistate MSA Community Development Financing Benchmark for 
evaluating a bank's community development financing activity in each 
multistate MSA. The Multistate MSA Community Development Financing 
Benchmark is calculated by dividing the total community development 
financing activity in the multistate MSA by all large banks for each 
year, averaged over the years of the evaluation period, by the total 
dollar amount of all deposits from large bank deposit accounts in 
the multistate MSA, averaged over the years of the evaluation 
period.
    The deposits in the multistate MSA is the sum of: (i) The annual 
average of deposits in counties in the multistate MSA reported by 
all large banks with assets of over $10 billion over the evaluation 
period; and (ii) the annual average of deposits assigned to branches 
in the multistate MSA by all large banks with assets of $10 billion 
or less, according to the FDIC's Summary of Deposits, over the 
evaluation period.
    Example: Assume that the total dollar amount of all large banks' 
community development financing activity in a multistate MSA, 
averaged over the years of the evaluation period, is $125 million. 
Assume further that the total dollar value of all large bank deposit 
accounts in the multistate MSA, averaged over the years of the 
evaluation period, is $1.5 billion. The Multistate MSA Community 
Development Financing Benchmark for the facility-based assessment 
area would be $125 million divided by $1.5 billion, or 0.083 
(equivalently, 8.3 percent).
    10. Multistate MSA Weighted Assessment Area Community 
Development Financing Benchmark. Section __.24 (c)(3)(ii)(B)(2) 
provides that the [Agency] uses a Multistate MSA Weighted Assessment 
Area Community Development Financing Benchmark for evaluating a 
bank's community development financing activity in each multistate 
MSA. The Multistate MSA Weighted Assessment Area Community 
Development Financing Benchmark is calculated by averaging all of 
the bank's Assessment Area Community Development Financing 
Benchmarks (see section 3) in a multistate MSA, after weighting each 
in accordance with section 17 of this appendix.
    Example: Assume that a bank has two facility-based assessment 
areas in a multistate MSA. (Whether the bank also has retail lending 
assessment areas or lending activity outside of its assessment areas 
in the multistate MSA has no bearing on this benchmark.)
    Assume also that:
    a. In facility-based assessment area 1, the bank's Assessment 
Area Community Development Financing Benchmark is 3 percent. Out of 
the total of the bank's deposits and retail loans that are 
associated with either of the two assessment areas in the multistate 
MSA, this assessment area is associated with 70 percent of the 
bank's deposits and 60 percent of the bank's retail loans (both, by 
dollar amount);
    b. In facility-based assessment area 2, the bank's Assessment 
Area Community Development Financing Benchmark is 5 percent. Out of 
the total of the bank's deposits and retail loans that are 
associated with either of the two assessment areas in the multistate 
MSA, this assessment area is associated with 30 percent of the 
bank's deposits and 40 percent of the bank's retail loans (both, by 
dollar amount).
    Calculating weights:
    a. For facility-based assessment area 1: Weight = 65 percent 
[(70 percent of deposits + 60 percent of retail loans)/2];
    b. For facility-based assessment area 2: Weight = 35 percent 
[(30 percent of deposits + 40 percent of retail loans)/2].
    Multistate MSA Weighted Assessment Area Community Development 
Financing Benchmark: The bank's Multistate MSA Weighted Assessment 
Area Community Development Financing Benchmark is 3.7 percent [(0.65 
weight x 3 percent in facility-based assessment area 1) + (0.35 
weight x 5 percent in facility-based assessment area 2)].
    11. Bank Nationwide Community Development Financing Metric. 
Section __.24(c)(4)(ii)(A) provides that the [Agency] uses a Bank 
Nationwide Community Development Financing Metric for evaluating a 
bank's community development financing activity in a nationwide 
area. The Bank Nationwide Community Development Financing Metric is 
calculated by dividing the bank's total community development 
financing activity in a nationwide area for each year, averaged over 
the years of the evaluation period, by the total dollar amount of 
deposits from bank deposit accounts in a nationwide area, averaged 
over the years of the evaluation period.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in the nationwide 
area. For a bank that does not collect and maintain deposits data as 
provided in Sec.  __.42, the [Agency] measures the dollars of 
deposits as the annual average of deposits assigned to branches that 
the bank operates in the nationwide area, as reported in the FDIC's 
Summary of Deposits, over the evaluation period.
    Example: Assume that the bank's total community development 
financing activity nationwide, averaged over the years of the 
evaluation period, is $200 million. Assume further that the total 
dollar amount of deposits from the bank's deposit accounts 
nationwide for each calendar year, averaged over the years of the 
evaluation period, is $8 billion. The Bank Nationwide Community 
Development Financing Metric would be $200 million divided by $8 
billion, or 0.025 (equivalently, 2.5 percent).
    12. Nationwide Community Development Financing Benchmark. 
Section __.24(c)(4)(ii)(B)(1) provides that the [Agency] uses a 
Nationwide Community Development Financing Benchmark for evaluating 
a bank's total community development financing activity. The 
Nationwide Community Development Financing Benchmark is calculated 
by dividing the total community development financing activity for 
all large banks in a nationwide area for each year, averaged over 
the years of the evaluation period, by the total dollar amount of 
all deposits from large bank deposit accounts in a nationwide area, 
averaged over the years of the evaluation period.
    The deposits in a nationwide area is the sum of: (i) The annual 
average of deposits in counties in a nationwide area reported by all 
large banks with assets of over $10 billion over the evaluation 
period; and (ii) the annual average of deposits assigned to branches 
in a nationwide area by all large banks with assets of $10 billion 
or less, according to the FDIC's Summary of Deposits, over the 
evaluation period.
    Example: Assume that the total dollar amount of all large banks' 
community development financing activity nationwide,

[[Page 34053]]

averaged over the years of the evaluation period, is $110 billion. 
Assume further that the total dollar value of all large bank deposit 
accounts nationwide, averaged over the years of the evaluation 
period, is $6 trillion. The Nationwide Community Development 
Financing Benchmark would be $110 billion divided by $6 trillion, or 
0.0183 (equivalently, 1.83 percent).
    13. Nationwide Weighted Assessment Area Community Development 
Financing Benchmark. Section __.24(c)(4)(ii)(B)(2) provides that the 
[Agency] uses a Nationwide Weighted Assessment Area Community 
Development Financing Benchmark for evaluating a bank's community 
development financing activity in a nationwide area. The Nationwide 
Weighted Assessment Area Community Development Financing Benchmark 
is calculated by averaging all of the bank's Assessment Area 
Community Development Financing Benchmarks (see section 3) in a 
nationwide area, after weighting each in accordance with section 17 
of this appendix.
    Example: Assume that a bank has three facility-based assessment 
areas nationwide. (Whether the bank also has retail lending 
assessment areas or lending activity outside of its assessment areas 
in the nationwide has no bearing on this benchmark.)
    Assume also that:
    a. In facility-based assessment area 1, the bank's Assessment 
Area Community Development Financing Benchmark is 2 percent. Out of 
the total of the bank's deposits and retail loans that are 
associated with any of the three facility-based assessment areas 
nationwide, this assessment area is associated with 60 percent of 
the bank's deposits and 50 percent of the bank's retail loans (both, 
by dollar amount);
    b. In facility-based assessment area 2, the bank's Assessment 
Area Community Development Financing Benchmark is 3 percent. Out of 
the total of the bank's deposits and retail loans that are 
associated with any of the three facility-based assessment areas 
nationwide, this assessment area is associated with 30 percent of 
the bank's deposits and 40 percent of the bank's retail loans (both, 
by dollar amount);
    c. In facility-based assessment area 3, the bank's Assessment 
Area Community Development Financing Benchmark is 4 percent. Out of 
the total of the bank's deposits and retail loans that are 
associated with any of the three facility-based assessment areas 
nationwide, this assessment area is associated with 10 percent of 
the bank's deposits and 10 percent of the bank's retail loans (both, 
by dollar amount).
    Calculating weights:
    a. For facility-based assessment area 1: Weight = 55 percent 
[(60 percent of deposits + 50 percent of retail loans)/2];
    b. For facility-based assessment area 2: Weight = 35 percent 
[(30 percent of deposits + 40 percent of retail loans)/2];
    c. For facility-based assessment area 3: Weight = 10 percent 
[(10 percent of deposits + 10 percent of retail loans)/2].
    Nationwide Weighted Assessment Area Community Development 
Financing Benchmark: The bank's Nationwide Weighted Assessment Area 
Community Development Financing Benchmark is 2.55 percent [(0.55 
weight x 2 percent in facility-based assessment area 1) + (0.35 
weight x 3 percent in facility-based assessment area 2) + (0.10 
weight x 4 percent in facility-based assessment area 3)].
    14. Allocation of community development financing dollars. In 
developing conclusions for a bank's performance under the Community 
Development Financing Test in Sec. Sec.  __.24 and __.26, the 
[Agency] allocates community development financing dollars to a 
facility-based assessment area, state, multistate MSA, or nationwide 
area as follows:
    Activities that provide a benefit to only one county, and not to 
any areas beyond that one county, would have the full dollar amount 
of the activity allocated to that county.
    Activities that benefit multiple counties will be allocated 
according to the geographic scope of the activity and any 
documentation that the bank can provide regarding the dollar amount 
allocated to each county, as follows:
    a. A bank may opt to produce documentation for an activity 
specifying the appropriate dollar amount to assign to each county, 
such as specific addresses and dollar amounts associated with 
projects at each address, or other accounting information that 
indicates the specific dollar amount of the activity that benefitted 
each county. The activity will then be allocated accordingly.
    b. If a bank does not produce such documentation for an 
activity, then:
    i. An activity with a geographic scope of less than an entire 
state will be allocated to the county level based on the proportion 
of low- and moderate-income families in each county;
    ii. Activities with a scope of one or more entire states, but 
not the entire nation, will be allocated to the state level based on 
the proportion of low- and moderate-income families in each state; 
and
    iii. Activities with a scope of the entire nation would be 
allocated to the institution level.

    Table 1 to Appendix B--Community Development Financing Allocation
------------------------------------------------------------------------
                                  Documentation
                                 ties activity to   No documentation to
                                  counties with     indicate specific $
                                    specific $        amounts for each
                                     amounts               county
------------------------------------------------------------------------
Serving or benefitting one      Allocate to        NA.
 county.                         county.
Serving or benefitting multi-   Allocate to        Allocate to counties
 county, part of one state.      counties.          proportionate to the
                                                    number of low- and
                                                    moderate-income
                                                    families.
Serving or benefitting multi-   Allocate to        Allocate to counties
 county, part of multiple        counties.          proportionate to the
 states.                                            number of low- and
                                                    moderate-income
                                                    families.
Entire statewide area.........  Allocate to        Allocate to state.
                                 counties.
Multiple entire states........  Allocate to        Allocate to states
                                 counties.          proportionate to the
                                                    number of low- and
                                                    moderate-income
                                                    families.
Entire nation.................  Allocate to        Allocate to
                                 counties.          nationwide area.
------------------------------------------------------------------------

    15. Combined score for assessment area conclusions and metrics 
analysis/impact review. As described in Sec.  __.24(c), the [Agency] 
assigns a conclusion for a bank's performance under the Community 
Development Financing Test in a state, multistate MSA, and 
nationwide area, respectively and as applicable, based on a score 
combining the following:
    i. Weighted average of the bank's facility-based assessment area 
conclusions. For each state, multistate MSA, and nationwide area, 
respectively, the [Agency] derives a weighted average of the 
conclusions for facility-based assessment areas in each respective 
state, multistate MSA, or nationwide areas, calculated in accordance 
with section 16 of this appendix.
    ii. Bank score for metrics and benchmark analysis and impact 
review. For each state, multistate MSA, and nationwide area, 
respectively, the [Agency] determines a score by considering the 
metrics and benchmarks and the impact review, corresponding with the 
following conclusion categories: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs 
to Improve'' (3 points); ``Substantial Noncompliance'' (0 points).
    iii. Combined score. The [Agency] derives a performance score, 
which is then associated with a conclusion category, by calculating 
a weight for each of components described in sections 15.i and 
15.ii, and adding the two weighted results together. The weights for 
each component are determined by calculating the simple average of 
the bank's share of deposits associated with facility-based 
assessment areas out of all of the bank's deposits in the state, 
multistate MSA, or nationwide area, respectively, and the bank's 
share of retail loans in facility-based assessment areas out of all 
of the banks retail loans in the state, multistate MSA, or 
nationwide area, respectively.
    A. If the average of the bank's share of loans and deposits in 
facility-based assessment areas is 80 percent to 100 percent,

[[Page 34054]]

then the component in section 15.i receives a 50 percent weight and 
the component in section 15.ii receives a 50 percent weight.
    B. If the average of bank's share of loans and deposits in 
facility-based assessment areas is at least as much as 60 percent 
but less than 80 percent, then the component in section 15.i 
receives a 40 percent weight and the component in section 15.ii 
receives a 60 percent weight.
    C. If the average of the bank's share of loans and deposits in 
facility-based assessment areas is at least as much as 40 percent 
but less than 60 percent, then the component in section 15.i 
receives a 30 percent weight and the component in section 15.ii 
receives a 70 percent weight.
    D. If the average of the bank's share of loans and deposits in 
facility-based assessment areas is at least as much as 20 percent 
but less than 40 percent, then the component in section 15.i 
receives a 20 percent weight and the component in section 15.ii 
receives an 80 percent weight.
    E. If the average of the bank's share of loans and deposits in 
facility-based assessment areas is below 20 percent, then the 
component in section 15.i receives a 10 percent weight and the 
component in section 15.ii receives a 90 percent weight.
    Example: Assume that the weighted average of the bank's 
facility-based assessment area conclusions nationwide (section 15.i) 
is 7.5. Assume further that the bank score for metrics and benchmark 
analysis and impact review nationwide (section 15.ii) is 6.
    Assume further that 95 percent of the bank's deposits, and 75 
percent of the bank's retail loans (both, by dollar amount) are 
associated with its facility-based assessment areas, with the 
remaining 5 percent of the bank's deposits, and 25 percent of retail 
loans, associated with areas outside of the bank's facility-based 
assessment areas.
    Calculating weights:
    The weights for each component are assigned based on the bank's 
share of deposits and loans that are associated with its facility-
based assessment areas, which falls in the range of 80 percent--100 
percent, corresponding to weights of 50 percent for the first 
component, and 50 percent for the second component: [(95 percent of 
deposits + 75 percent of retail loans)/2 = 85 percent, which is 
between 80 percent and 100 percent]. Thus, the weighted average of 
the bank's facility-based assessment area conclusions nationwide 
(section 15.i) receives a weight of 50 percent, and the bank score 
for metrics and benchmark analysis and impact review nationwide 
(section 15.ii) receives a weight of 50 percent.
    Institution Community Development Financing Test Conclusion: 
Using the relevant point values--``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs 
to Improve'' (3 points); ``Substantial Noncompliance'' (0 points)--
and based on the example above, the bank's Community Development 
Financing Test conclusion at the institution level is a ``High 
Satisfactory'': [(0.50 weight x 7.5 points for the weighted average 
of the bank's facility-based assessment area conclusions nationwide) 
+ (0.50 weight x 6 points for the bank score for metrics and 
benchmark analysis and impact review nationwide)] results in a 
performance score of 6.75, which is closest to the point value (7) 
associated with ``High Satisfactory.''
    16. Weighting of conclusions. In developing conclusions for a 
bank's performance under the Community Development Financing Test in 
Sec.  __.24 and the Community Development Services Test in Sec.  
__.25, the [Agency] weights conclusions in a state, multistate MSA, 
and nationwide area as follows:
    i. State. In a state, the [Agency] weights the bank's 
performance test conclusion in each facility-based assessment area 
using the simple average of the percentages of, respectively, 
statewide bank deposits associated with the facility-based 
assessment area and statewide retail loans that the bank originated 
or purchased in the facility-based assessment area. The statewide 
percentages of deposits and retail loans associated with each 
facility-based assessment area will be based upon, respectively, the 
dollar volumes of deposits and loans in each facility-based 
assessment area compared with, respectively, the statewide dollar 
totals of deposits and loans within facility-based assessment areas 
of that state.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in each facility-
based assessment area and state. For a bank that does not collect 
and maintain deposits data as provided in Sec.  __.42, the [Agency] 
measures the dollars of deposits as the annual average of deposits 
assigned to branches that the bank operates in each facility-based 
assessment area and state, as reported in the FDIC's Summary of 
Deposits, over the evaluation period.
    ii. Multistate MSA. In a multistate MSA, the [Agency] weights 
the bank's performance test conclusion in each facility-based 
assessment area using the simple average of the percentages of, 
respectively, multistate MSA bank deposits associated with the 
facility-based assessment area and multistate MSA bank retail loans 
originated or purchased in the facility-based assessment area. The 
multistate MSA percentages of deposits and loans associated with 
each facility-based assessment area will be based upon, 
respectively, the dollar volumes of deposits and loans in each 
facility-based assessment area compared with, respectively, the 
multistate MSA dollar totals of deposits and loans within facility-
based assessment areas of that multistate MSA.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in each facility-
based assessment area and multistate MSA. For a bank that does not 
collect and maintain deposits data as provided in Sec.  __.42, the 
[Agency] measures the dollars of deposits as the annual average of 
deposits assigned to branches that the bank operates in each 
facility-based assessment area and multistate MSA, as reported in 
the FDIC's Summary of Deposits, over the evaluation period.
    iii. Institution. At the institution level, the [Agency] weights 
the bank's performance test conclusion in each facility-based 
assessment area using the simple average of the percentages of, 
respectively, nationwide bank deposits associated with the facility-
based assessment area and nationwide bank retail loans originated or 
purchased in the facility-based assessment area. The nationwide 
percentages of deposits and loans associated with each facility-
based assessment area will be based upon, respectively, the dollar 
volumes of deposits and loans in each facility-based assessment area 
compared with, respectively, the nationwide dollar totals of 
deposits and loans within facility-based assessment areas of the 
nationwide area.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in each facility-
based assessment area and nationwide area. For a bank that does not 
collect and maintain deposits data as provided in Sec.  __.42, the 
[Agency] measures the dollars of deposits as the annual average of 
deposits assigned to branches that the bank operates in each 
facility-based assessment area and nationwide area, as reported in 
the FDIC's Summary of Deposits, over the evaluation period.
    17. Weighting of benchmarks. In developing benchmarks for 
assessing a bank's performance under the Community Development 
Financing Test in Sec.  __.24 the [Agency] calculates a weighted 
average of the Assessment Area Community Development Financing 
Benchmarks pertaining to a bank's facility-based assessment areas in 
a state, multistate MSA, and nationwide area as follows:
    i. State Weighted Assessment Area Community Development 
Financing Benchmark. To calculate the State Weighted Assessment Area 
Community Development Financing Benchmark for a state, the [Agency] 
weights the bank's Assessment Area Community Development Financing 
Benchmark in each facility-based assessment area using the simple 
average of the percentages of, respectively, statewide bank deposits 
associated with the facility-based assessment area and statewide 
retail loans that the bank originated or purchased in the facility-
based assessment area. The statewide percentages of deposits and 
retail loans associated with each facility-based assessment area 
will be based upon, respectively, the dollar volumes of deposits and 
loans in each facility-based assessment area compared with, 
respectively, the statewide dollar totals of deposits and loans 
within facility-based assessment areas of that state.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in each facility-
based assessment area and state. For a bank that does not collect 
and maintain deposits data as provided in Sec.  __.42, the [Agency] 
measures the dollars of deposits as the annual average of deposits 
assigned to branches that the bank operates in each facility-based 
assessment area and state, as reported in the FDIC's Summary of 
Deposits, over the evaluation period.

[[Page 34055]]

    ii. Multistate MSA Weighted Assessment Area Community 
Development Financing Benchmark. To calculate the Multistate MSA 
Weighted Assessment Area Community Development Financing Benchmark 
for a Multistate MSA, the [Agency] weights the bank's Assessment 
Area Community Development Financing Benchmark in each facility-
based assessment area using the simple average of the percentages 
of, respectively, multistate MSA bank deposits associated with the 
facility-based assessment area and multistate MSA bank retail loans 
originated or purchased in the facility-based assessment area. The 
multistate MSA percentages of deposits and loans associated with 
each facility-based assessment area will be based upon, 
respectively, the dollar volumes of deposits and loans in each 
facility-based assessment area compared with, respectively, the 
multistate MSA dollar totals of deposits and loans within facility-
based assessment areas of that multistate MSA.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in each facility-
based assessment area and multistate MSA. For a bank that does not 
collect and maintain deposits data as provided in Sec.  __.42, the 
[Agency] measures the dollars of deposits as the annual average of 
deposits assigned to branches that the bank operates in each 
facility-based assessment area and multistate MSA, as reported in 
the FDIC's Summary of Deposits, over the evaluation period.
    iii. Nationwide Weighted Assessment Area Community Development 
Financing Benchmark. To calculate the Nationwide Weighted Assessment 
Area Community Development Financing Benchmark for a nationwide 
area, the [Agency] weights the bank's Assessment Area Community 
Development Financing Benchmark in each facility-based assessment 
area using the simple average of the percentages of, respectively, 
nationwide bank deposits associated with the facility-based 
assessment area and nationwide bank retail loans originated or 
purchased in the facility-based assessment area. The nationwide 
percentages of deposits and loans associated with each facility-
based assessment area will be based upon, respectively, the dollar 
volumes of deposits and loans in each facility-based assessment area 
compared with, respectively, the nationwide dollar totals of 
deposits and loans within facility-based assessment areas of the 
nationwide area.
    For a bank that collects and maintains deposits data as provided 
in Sec.  __.42, the dollar amount of its deposits is the annual 
average of deposits over the evaluation period in each facility-
based assessment area and nationwide area. For a bank that does not 
collect and maintain deposits data as provided in Sec.  __.42, the 
[Agency] measures the dollars of deposits as the annual average of 
deposits assigned to branches that the bank operates in each 
facility-based assessment area and nationwide area, as reported in 
the FDIC's Summary of Deposits, over the evaluation period.
    18. Wholesale or Limited Purpose Bank Community Development 
Financing Metric. Section __.26(f) provides that, to assist the 
[Agency] in evaluating a wholesale or limited purpose bank's 
community development financing activity in a nationwide area, the 
[Agency] considers a Wholesale or Limited Purpose Bank Community 
Development Financing Metric. The Wholesale or Limited Purpose Bank 
Community Development Financing Metric is calculated as follows:
    i. The [Agency] calculates the annual average of the bank's 
community development financing activity of the bank over the years 
of the evaluation period.
    ii. The [Agency] calculates the quarterly average of the bank's 
total assets for the same years for which the annual average of the 
bank's community development financing activity is calculated under 
section 18.i of this appendix.
    iii. The [Agency] divides the annual average of the bank's 
community development financing activity calculated under section 
18.i of this appendix by the quarterly average of the bank's total 
assets calculated under section 18.ii of this appendix.

Appendix C to Part __--Performance Test Conclusions

    a. Performance test conclusions in general. The [Agency] assigns 
conclusions for a bank's performance under, as applicable, the 
Retail Lending Test, the Retail Services and Products Test, the 
Community Development Financing Test, the Community Development 
Services Test, and the Community Development Financing Test for 
Wholesale or Limited Purpose Banks.
    b. Retail Lending Test conclusions. The [Agency] assigns 
conclusions for a bank's Retail Lending Test performance in, as 
applicable, facility-based assessment areas, retail lending 
assessment areas, and its outside retail lending area. Conclusions 
assigned for a bank's performance in facility-based assessment areas 
and, as applicable, retail lending assessment areas are the basis 
for assigned conclusions at the state, multistate MSA, and 
institution levels, as provided in paragraphs (b)(3) and (b)(4) 
below. As applicable, pursuant to Sec.  __.22(a) a bank's 
performance conclusion at the institution level is also informed by 
the bank's retail lending activities in its outside retail lending 
area.
    1. Facility-based assessment area. i. Failure to meet retail 
lending volume threshold without an acceptable basis for such 
failure. A. For each facility-based assessment area in which a bank 
fails to meet the retail lending volume threshold provided in Sec.  
__.22 and is not deemed to have an acceptable basis for failing to 
meet the threshold, the [Agency] develops a Retail Lending Test 
conclusion based on the bank's geographic distribution metrics, 
borrower distribution metrics, and performance ranges as provided in 
Sec.  __.22 and calculated in sections III, IV, and V of appendix A 
of this part and the applicable additional factors described in 
Sec.  __.22(e).
    B. For large banks, in each such facility-based assessment area, 
the [Agency] assigns one of the following Retail Lending Test 
conclusions and corresponding performance score: ``Needs to 
Improve'' (3 points) or ``Substantial Noncompliance'' (0 points).
    C. For intermediate banks, in each such facility-based 
assessment area, the [Agency] assigns one of the following Retail 
Lending Test conclusions and corresponding performance score: 
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory,'' (6 points); ``Needs to Improve'' (3 points); or 
``Substantial Noncompliance'' (0 points).
    ii. Meeting the retail lending volume threshold or having an 
acceptable basis for not meeting such threshold. A. For each 
facility-based assessment area in which a bank meets the retail 
lending volume threshold provided in Sec.  __.22 or is deemed to 
have an acceptable basis for failing to meet the threshold, the 
[Agency] develops a Retail Lending Test conclusion based on the 
bank's geographic distribution metrics, borrower distribution 
metrics, and performance ranges provided in Sec.  __.22 and 
calculated in accordance with sections III, IV, and V of appendix A 
of this part and the additional factors described in Sec.  __.22(e).
    B. For the bank's performance in each such facility-based 
assessment area, the [Agency] assigns one of the following Retail 
Lending Test conclusions and corresponding performance score: 
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory,'' (6 points); ``Needs to Improve'' (3 points); or 
``Substantial Noncompliance'' (0 points).
    2. Retail lending assessment area. i. For each retail lending 
assessment area, the [Agency] develops a Retail Lending Test 
conclusion based on the bank's geographic distribution metrics, 
borrower distribution metrics, and performance ranges provided in 
Sec.  __.22 and calculated in accordance with sections III, IV, and 
V of appendix A of this part.
    ii. For the bank's performance in each retail lending assessment 
area, the [Agency] assigns one of the following Retail Lending Test 
conclusions and corresponding performance score: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory,'' (6 
points); ``Needs to Improve'' (3 points); or ``Substantial 
Noncompliance'' (0 points).
    3. Outside retail lending area. i. For each outside retail 
lending area, the [Agency] develops a Retail Lending Test conclusion 
based on the bank's geographic distribution metrics, borrower 
distribution metrics, and performance ranges provided in Sec.  __.22 
and calculated in accordance with sections III, IV, and V of 
appendix A of this part.
    ii. For the bank's performance in each outside retail lending 
area, the [Agency] assigns one of the following Retail Lending Test 
conclusions and corresponding performance score: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory,'' (6 
points); ``Needs to Improve'' (3 points); or ``Substantial 
Noncompliance'' (0 points).
    4. State or multistate MSA. i. For each state or multistate MSA, 
the [Agency] develops a Retail Lending Test conclusion for a bank's 
performance based on a bank's Retail Lending Test conclusions for 
its facility-based assessment areas and, as applicable, retail 
lending assessment areas in each respective state or multistate MSA. 
The

[[Page 34056]]

[Agency] calculates a weighted average of the performance scores 
associated with the conclusions in accordance with section VI of 
appendix A of this part. The resulting raw number is the performance 
score for the bank's Retail Lending Test performance in a state or 
multistate MSA.
    ii. For the bank's performance in each state or multistate MSA, 
the [Agency] assigns a conclusion corresponding with the conclusion 
category that is nearest to the performance score, as follows: 
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory'' (6 points); ``Needs to Improve'' (3 points); 
``Substantial Noncompliance'' (0 points). For performance scores at 
the exact mid-point between two conclusion categories, the [Agency] 
rounds up to assign the conclusion (i.e., a performance score of 8.5 
is ``Outstanding'').
    5. Institution. i. For an institution overall, the [Agency] 
develops a Retail Lending Test conclusion for a bank's performance 
based on all of a bank's Retail Lending Test conclusions for its 
facility-based assessment areas and, as applicable, retail lending 
assessment areas. For large banks and certain intermediate banks as 
provided in Sec.  __.22(a)(3), the [Agency] also bases the 
institution-level conclusion on the bank's Retail Lending Test 
conclusion in its outside retail lending area. The [Agency] 
calculates a weighted average of the performance test conclusions 
for the assessment areas and outside retail lending area in 
accordance with section VI of appendix A of this part. The resulting 
raw number is the performance score for the bank's Retail Lending 
Test performance at the institution level.
    ii. For the bank's performance at the institution level, the 
[Agency] assigns a conclusion corresponding with the conclusion 
category that is nearest to the performance score, as follows: 
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory'' (6 points); ``Needs to Improve'' (3 points); 
``Substantial Noncompliance'' (0 points). For performance scores at 
the exact mid-point between two conclusion categories, the [Agency] 
rounds up to assign the conclusion (i.e., a performance score of 8.5 
is ``Outstanding'').
    c. Retail Services and Products Test conclusions. The [Agency] 
assigns Retail Services and Products Test conclusions in a bank's 
facility-based assessment areas and, as applicable, at the state, 
multistate MSA, and institution levels. Conclusions assigned for a 
bank's performance in a bank's facility-based assessment areas are 
the basis for conclusions at the state, multistate MSA, and 
institution levels. As applicable, a bank's performance conclusion 
at the institution level is also informed by bank's performance 
regarding digital and other delivery systems under Sec.  __.23(b)(3) 
and retail credit and deposit products under Sec.  __.23(c).
    1. Facility-based assessment area. i. Retail Services and 
Products Test conclusions for a bank's performance in a facility-
based assessment area are based on an evaluation of the bank's 
delivery systems, as described in Sec.  __.23(b)(1) and (b)(2).
    ii. For each facility-based assessment area, the [Agency] 
assigns one of the following Retail Services and Products Test 
conclusions and corresponding performance score: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory,'' (6 
points); ``Needs to Improve'' (3 points); or ``Substantial 
Noncompliance'' (0 points).
    2. State or multistate MSA. For each state and multistate MSA, 
as applicable, the [Agency] develops a Retail Services and Products 
Test conclusion for a bank's performance based on a bank's Retail 
Services and Products Test conclusions for its facility-based 
assessment areas in each respective state or multistate MSA. The 
[Agency] calculates a weighted average of the performance test 
conclusions for facility-based assessment areas in accordance with 
section VII of appendix A of this part. The resulting raw number is 
the performance score for the bank's Retail Services and Products 
Test performance in a state or multistate MSA. The [Agency] assigns 
a conclusion corresponding with the conclusion category that is 
nearest to the performance score, as follows: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); ``Substantial 
Noncompliance'' (0 points). For performance scores at the exact mid-
point between two conclusion categories, the [Agency] rounds up to 
assign the conclusion (i.e., a performance score of 8.5 is 
``Outstanding'').
    3. Institution. i. For an institution overall, the [Agency] 
assigns a Retail Services and Products Test conclusion for a bank's 
performance based on a combined assessment of the bank's delivery 
systems performance and its credit and deposit products performance, 
as applicable, as follows:
    A. Delivery systems evaluation. 1. The weighted average of a 
bank's Retail Services and Products Test performances scores for its 
conclusions in all of its facility-based assessment areas, 
calculated in accordance with section VII of appendix A of this 
part; and
    2. The bank's performance regarding digital and other delivery 
systems under Sec.  __.23(b)(3).
    B. Credit and deposit products evaluation. The bank's 
performance regarding credit and deposit products under Sec.  
__.23(c), as applicable.
    ii. On the basis of paragraph c.3.i of this section, the 
[Agency] assigns a Retail Services and Products Test conclusion for 
the bank at the institution level. The institution-level conclusion 
is translated into a numerical performance score using the following 
mapping: ``Outstanding'' (10 points); ``High Satisfactory'' (7 
points); ``Low Satisfactory'' (6 points); ``Needs to Improve'' (3 
points); ``Substantial Noncompliance'' (0 points).
    d. Community Development Financing Test conclusions. The 
[Agency] assigns Community Development Financing Test conclusions in 
facility-based assessment areas and, as applicable, in states, 
multistate MSAs, and in nationwide areas. Conclusions assigned for a 
bank's performance in a bank's facility-based assessment areas are 
the basis for conclusions at the state, multistate MSA, and 
institution levels, combined with an evaluation of applicable 
metrics and benchmarks for the bank's community development 
financing activity at those levels, as well as a review of the 
impact and responsiveness of those activities.
    1. Facility-based assessment area. (i) For each facility-based 
assessment area, the [Agency] develops a Community Development 
Financing Test conclusion based on the metric and benchmarks in 
Sec.  __.24 and a review of the impact and responsiveness of a 
bank's activities under Sec.  __.15. The facility-based conclusion 
is translated into a numerical performance score, as follows: 
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory'' (6 points); ``Needs to Improve'' (3 points); 
``Substantial Noncompliance'' (0 points).
    2. State, multistate MSA, or nationwide area. Community 
Development Financing Test conclusions for a bank's performance in a 
state, multistate MSA, or nationwide area are derived as set forth 
in section 15 of appendix B of this part.
    e. Community Development Services Test conclusions. The [Agency] 
assigns Community Development Services Test conclusions in facility-
based assessment areas and, as applicable, in states, multistate 
MSAs, and in nationwide areas. Conclusions assigned for a bank's 
performance in a bank's facility-based assessment areas are the 
basis of conclusions for state, multistate MSA, and nationwide area 
performance, with a possible upward adjustment based on the 
[Agency]'s review of the impact and responsiveness of the bank's 
community development services activities in those areas, 
respectively.
    1. Facility-based assessment area. For each facility-based 
assessment area, the [Agency] develops a Community Development 
Services Test conclusion based on, as applicable, an assessment of 
the Bank Assessment Area Community Development Service Hours Metric 
and other data set forth in Sec.  __.25(b)(1) and a review of the 
impact and responsiveness of a bank's activities under Sec.  __.15. 
The facility-based assessment area conclusion is translated into a 
numerical performance score, as follows: ``Outstanding'' (10 
points); ``High Satisfactory'' (7 points); ``Low Satisfactory'' (6 
points); ``Needs to Improve'' (3 points); ``Substantial 
Noncompliance'' (0 points).
    2. State, multistate MSA, or nationwide area. For each state, 
multistate MSA, and for a nationwide area, as applicable, the 
[Agency] develops a Community Development Services Test for a bank's 
performance, as follows:
    i. For each such state, multistate MSA, and for a nationwide 
area, the [Agency] calculates a weighted average of the performance 
test conclusions in accordance with section 15 of appendix B of this 
part. The resulting raw number is the performance score for the 
bank's Community Development Services Test performance in a state, 
multistate MSA, or nationwide area. Subject to paragraph (e)(2)(ii) 
of this appendix, the [Agency] assigns a conclusion corresponding 
with the conclusion category that is nearest to the performance 
score, as follows: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); ``Needs 
to Improve'' (3 points); ``Substantial

[[Page 34057]]

Noncompliance'' (0 points). For performance scores at the exact mid-
point between two conclusion categories, the [Agency] rounds up to 
assign the conclusion (i.e., a performance score of 8.5 is 
``Outstanding'').
    ii. The [Agency] may adjust upward the performance score derived 
under paragraph (e)(2)(i) of this appendix, based on the [Agency]'s 
review of the impact and responsiveness of the bank's Community 
Development Services Test activities outside of facility-based 
assessment areas in each state, multistate MSA, or nationwide area 
under Sec.  __.15 to a performance score associated with one of the 
following conclusions: ``Outstanding'' (10 points); ``High 
Satisfactory'' (7 points); ``Low Satisfactory'' (6 points); or 
``Needs to Improve'' (3 points).
    f. Community Development Financing Test for Wholesale or Limited 
Purpose Banks conclusions. The [Agency] assigns conclusions for a 
wholesale or limited purpose bank under the Community Development 
Financing Test for Wholesale or Limited Purpose Banks in facility-
based assessment areas and, as applicable, in states, multistate 
MSAs, and in a nationwide area. Conclusions assigned for a bank's 
performance in a bank's facility-based assessment areas inform 
conclusions for state, multistate MSA, and nationwide area 
performance, along with the [Agency's] review of the volume, impact, 
and responsiveness of the bank's activities in those areas, 
respectively.
    1. Facility-based assessment area. For each facility-based 
assessment area, the [Agency] assigns one of the following Community 
Development Financing Test conclusions based on consideration of the 
dollar value of a bank's community development loans and community 
development investments that serve the facility-based assessment 
area during the evaluation period, and a review of the impact and 
responsiveness of the bank's activities in the facility-based 
assessment area under Sec.  __.15: ``Outstanding;'' ``High 
Satisfactory;'' ``Low Satisfactory;'' ``Needs to Improve;'' 
``Substantial Noncompliance.''
    2. State or multistate MSA. For each state or multistate MSA, 
the [Agency] assigns a Community Development Financing Test 
conclusion of ``Outstanding,'' ``High Satisfactory,'' ``Low 
Satisfactory,'' ``Needs to Improve,'' or ``Substantial 
Noncompliance'' based on the following:
    i. The bank's facility-based assessment area performance test 
conclusions in each state or multistate MSA, respectively; and
    ii. The dollar value of a bank's community development loans and 
community development investments that serve the state or multistate 
MSA during the evaluation period, and a review of the impact and 
responsiveness of the bank's activities in the state or multistate 
MSA under Sec.  __.15.
    3. Nationwide area. For a nationwide area, the [Agency] assigns 
a Community Development Financing Test conclusion of 
``Outstanding,'' ``High Satisfactory,'' ``Low Satisfactory,'' 
``Needs to Improve,'' or ``Substantial Noncompliance'' based on the 
following:
    i. The bank's community development financing performance in all 
of its facility-based assessment areas; and
    ii. The bank's Wholesale or Limited Purpose Bank Community 
Development Financing Metric and a review of the impact and 
responsiveness of the bank's activities in a nationwide area under 
Sec.  __.15.

Appendix D to Part__--Ratings

    a. Ratings in general. In assigning a rating, the [Agency] 
evaluates a bank's performance under the applicable performance 
criteria in this part, in accordance with Sec. Sec.  __.21 and 
__.28, including consideration of evidence of discriminatory or 
other illegal practices. The [Agency] assigns a rating of 
``Outstanding,'' ``Satisfactory,'' ``Needs to Improve,'' or 
``Substantial Noncompliance'' for the bank's performance at the 
state, multistate MSA, and institution levels.
    b. Large bank ratings at the state, multistate MSA, and 
institution levels. 1. State and multistate MSA. Subject to 
paragraph (g) of this appendix, the [Agency] combines a large bank's 
raw performance scores for its state or multistate MSA performance 
under the Retail Lending Test, Retail Services and Products Test, 
Community Development Financing Test, and Community Development 
Services Test to determine the bank's rating at the state or 
multistate MSA level.
    i. The [Agency] weights the performance scores as follows: 
Retail Lending Test (45 percent); Retail Services and Products Test 
(15 percent); Community Development Financing Test (30 percent); and 
Community Development Services Test (10 percent). The [Agency] 
multiplies each of these weights by the bank's performance score on 
the respective performance test, and then adds the resulting values 
together to develop a state or multistate MSA performance score.
    ii. The [Agency] assigns a rating corresponding with the rating 
category that is nearest to the state or multistate MSA performance 
score, as follows:
    A. A state or multistate MSA performance score of less than 1.5 
results in a state or multistate MSA rating of ``Substantial 
Noncompliance;''
    B. A state or multistate MSA performance score of 1.5 or more 
but less than 4.5 results in a state or multistate MSA rating of 
``Needs to Improve;''
    C. A state or multistate MSA performance score of 4.5 or more 
but less than 8.5 results in a state or multistate MSA rating of 
``Satisfactory;''
    D. A state or multistate MSA performance score of 8.5 or more 
results in a state or multistate MSA rating of ``Outstanding.''
    Example: Assume that a large bank received the following 
performance scores and conclusions in a state:
    1. On the Retail Lending Test, the bank received a 7.3 
performance score and a corresponding conclusion of ``High 
Satisfactory;''
    2. On the Retail Services and Products Test, the bank received a 
6.0 performance score and a corresponding conclusion of ``Low 
Satisfactory;''
    3. On the Community Development Financing Test, the bank 
received a 5.7 performance score and a corresponding conclusion of 
``Low Satisfactory;'' and
    4. On the Community Development Services Test, the bank received 
a 3.0 performance score and a corresponding conclusion of ``Needs to 
Improve.''
    Calculating weights:
    1. For the Retail Lending Test, the weight is 45 percent (or 
0.45);
    2. For the Retail Services and Products Test, the weight is 15 
percent (or 0.15);
    3. For the Community Development Financing Test, the weight is 
30 percent (or 0.3); and
    4. For the Community Development Services Test, the weight is 10 
percent (or 0.1).
    State Performance Score and Rating: Based on the illustration 
above, the bank's state performance score is 6.2.
    (0.45 weight x 7.3 performance score on the Retail Lending Test 
= 3.29) + (0.15 weight x 6.0 performance score on the Retail 
Services and Products Test = 0.9) + (0.3 weight x 5.7 performance 
score on the Community Development Financing Test = 1.7) + (0.1 
weight x 3.0 performance score on the Community Development Services 
Test = 0.3).
    A state performance score of 6.2 is greater than or equal to 4.5 
but less than 8.5, resulting in a rating of ``Satisfactory.''
    2. Institution. Subject to paragraph g. of this appendix, the 
[Agency] combines a large bank's raw performance scores for its 
institution-level performance under the Retail Lending Test, Retail 
Services and Products Test, Community Development Financing Test, 
and Community Development Services Test to determine the bank's 
rating at the institution level.
    i. The [Agency] weights the performance scores as follows: 
Retail Lending Test (45 percent); Retail Services and Products Test 
(15 percent); Community Development Financing Test (30 percent); and 
Community Development Services Test (10 percent). The [Agency] 
multiplies each of these weights by the bank's performance score on 
the respective performance test, and then adds the resulting values 
together to develop an institution performance score.
    ii. The [Agency] assigns a rating corresponding with the rating 
category that is nearest to the institution performance score, as 
follows:
    A. An institution performance score of less than 1.5 results in 
an institution rating of ``Substantial Noncompliance;''
    B. An institution performance score of 1.5 or more but less than 
4.5 results in an institution rating of ``Needs to Improve;''
    C. An institution performance score of 4.5 or more but less than 
8.5 results in an institution rating of ``Satisfactory;''
    D. An institution performance score of 8.5 or more results in an 
institution rating of ``Outstanding.''
    Example: Assume that a large bank received the following 
performance scores and conclusions at the institution level:
    A. On the Retail Lending Test, the bank received a 6.2 
performance score and a corresponding conclusion of ``Low 
Satisfactory;''
    B. On the Retail Services and Products Test, the bank received a 
7 performance score and a corresponding conclusion of ``High 
Satisfactory;''
    C. On the Community Development Financing Test, the bank 
received a 6.4

[[Page 34058]]

performance score and a corresponding conclusion of ``Low 
Satisfactory;'' and
    D. On the Community Development Services Test, the bank received 
a 2.5 performance score and a corresponding conclusion of ``Needs to 
Improve.''
    Calculating weights:
    A. For the Retail Lending Test, the weight is 45 percent (or 
0.45);
    B. For the Retail Services and Products Test, the weight is 15 
percent (or 0.15);
    C. For the Community Development Financing Test, the weight is 
30 percent (or 0.3); and
    D. For the Community Development Services Test, the weight is 10 
percent (or 0.1).
    Institution Performance Score and Rating: Based on the 
illustration above, the bank's institution performance score is 
6.01.
    (0.45 weight x 6.2 performance score on the Retail Lending Test 
= 2.79) + (0.15 weight x 7.0 performance score on the Retail 
Services and Products Test = 1.05) + (0.3 weight x 6.4 performance 
score on the Community Development Financing Test = 1.92) + (0.1 
weight x 2.5 performance score on the Community Development Services 
Test = 0.25).
    An institution performance score of 6.012 is greater than or 
equal to 4.5 but less than 8.5, resulting in an overall institution 
rating of ``Satisfactory.''
    c. Intermediate bank ratings. 1. Intermediate banks evaluated 
under the Retail Lending Test and the Community Development 
Financing Test. i. State or multistate MSA. Subject to paragraph (g) 
of this appendix, the [Agency] combines an intermediate bank's raw 
performance scores for its state or multistate MSA performance under 
Retail Lending Test and Community Development Financing Test to 
determine the bank's rating at the state or multistate MSA level.
    A. The [Agency] weights the performance scores as follows: 
Retail Lending Test (50 percent) and Community Development Financing 
Test (50 percent). The [Agency] multiplies each of these weights by 
the bank's corresponding performance score on the respective 
performance test, and then adds the resulting values together to 
develop a state or multistate MSA performance score.
    B. The [Agency] assigns a rating corresponding with the rating 
category that is nearest to the state or multistate MSA performance 
score, as follows:
    1. A state or multistate MSA performance score of less than 1.5 
results in a state or multistate MSA rating of ``Substantial 
Noncompliance;''
    2. A state or multistate MSA performance score of 1.5 or more 
but less than 4.5 results in a state or multistate MSA rating of 
``Needs to Improve;''
    3. A state or multistate MSA performance score of 4.5 or more 
but less than 8.5 results in a state or multistate MSA rating of 
``Satisfactory;''
    4. A state or multistate MSA performance score of 8.5 or more 
results in a state or multistate MSA rating of ``Outstanding.''
    ii. Institution. Subject to paragraph g. of this appendix, the 
[Agency] combines an intermediate bank's raw performance scores for 
its institution-level performance under Retail Lending Test and 
Community Development Financing Test to determine the bank's rating 
at the institution level.
    A. The [Agency] weights the performance test conclusions as 
follows: Retail Lending Test (50 percent) and Community Development 
Financing Test (50 percent). The [Agency] multiplies each of these 
weights by the bank's corresponding performance score on the 
respective performance test, and then adds the resulting values 
together to develop an institution performance score.
    B. The [Agency] assigns a rating corresponding with the rating 
category that is nearest to the institution performance score, as 
follows:
    1. An institution performance score of less than 1.5 results in 
an institution rating of ``Substantial Noncompliance;''
    2. An institution performance score of 1.5 or more but less than 
4.5 results in an institution rating of ``Needs to Improve;''
    3. An institution performance score of 4.5 or more but less than 
8.5 results in an institution rating of ``Satisfactory;''
    4. An institution performance score of 8.5 or more results in an 
institution rating of ``Outstanding.''
    C. The [Agency] may adjust an intermediate bank's institution 
rating from ``Satisfactory'' to ``Outstanding'' where the bank has 
requested and received sufficient additional consideration for 
activities that qualify under the Retail Services and Products Test, 
the Community Development Services Test, or both.
    2. Intermediate banks evaluated under the Retail Lending Test 
and the intermediate bank community development evaluation in Sec.  
__.29(b). (i) State or multistate MSA. The [Agency] combines an 
intermediate bank's raw performance scores for its state or 
multistate MSA conclusions under Retail Lending Test and the 
intermediate bank community development evaluation in Sec.  __.29(b) 
to determine the bank's rating at the state or multistate MSA level.
    A. The [Agency] weights the performance scores as follows: 
Retail Lending Test (50 percent) and intermediate bank community 
development evaluation (50 percent). The [Agency] multiplies each of 
these weights by the bank's corresponding performance score on the 
respective performance test and performance evaluation, and then 
adds the resulting values together to develop a state or multistate 
MSA performance score. For purposes of this paragraph, the 
performance score for the intermediate bank community development 
evaluation corresponds to the conclusion assigned, as follows: 
``Outstanding'' (10 points); ``High Satisfactory'' (7 points); ``Low 
Satisfactory'' (6 points); ``Needs to Improve'' (3 points); 
``Substantial Noncompliance'' (0 points).
    B. The [Agency] assigns a rating corresponding with the rating 
category that is nearest to the state or multistate MSA performance 
score, as follows:
    1. A state or multistate MSA performance score of less than 1.5 
results in a state or multistate MSA rating of ``Substantial 
Noncompliance;''
    2. A state or multistate MSA performance score of 1.5 or more 
but less than 4.5 results in a state or multistate MSA rating of 
``Needs to Improve;''
    3. A state or multistate MSA performance score of 4.5 or more 
but less than 8.5 results in a state or multistate MSA rating of 
``Satisfactory;''
    4. A state or multistate MSA performance score of 8.5 or more 
results in a state or multistate MSA rating of ``Outstanding.''
    iii. Institution. The [Agency] combines an intermediate bank's 
raw performance scores for its institution-level conclusions under 
Retail Lending Test and intermediate bank community development 
evaluation to determine the bank's rating at the institution level.
    A. The [Agency] weights the performance test conclusions as 
follows: Retail Lending Test (50 percent) and intermediate bank 
community development evaluation (50 percent). The [Agency] 
multiplies each of these weights by the bank's corresponding 
performance score on the respective performance test and performance 
evaluation, and then adds the resulting values together to develop 
an institution performance score.
    B. The [Agency] assigns a rating corresponding with the rating 
category that is nearest to the institution performance score, as 
follows:
    1. An institution performance score of less than 1.5 results in 
an institution rating of ``Substantial Noncompliance;''
    2. An institution performance score of 1.5 or more but less than 
4.5 results in an institution rating of ``Needs to Improve;''
    3. An institution performance score of 4.5 or more but less than 
8.5 results in an institution rating of ``Satisfactory;''
    4. An institution performance score of 8.5 or more results in an 
institution rating of ``Outstanding.''
    d. Ratings for small banks evaluated under the Retail Lending 
Test. The [Agency] determines a small bank's state, multistate MSA, 
or institution rating based on the raw performance score for its 
Retail Lending Test conclusions at the state, multistate MSA, or 
institution level, respectively.
    1. The [Agency] assigns a rating corresponding with the rating 
category that is nearest to the state, multistate MSA, or 
institution performance score, as follows:
    i. A state, multistate MSA, or institution performance score of 
less than 1.5 results in a state, multistate MSA, or institution 
rating of ``Substantial Noncompliance;''
    ii. A state, multistate MSA, or institution performance score of 
1.5 or more but less than 4.5 results in a state, multistate MSA, or 
institution rating of ``Needs to Improve;''
    iii. A state, multistate MSA, or institution performance score 
of 4.5 or more but less than 8.5 results in a state, multistate MSA, 
or institution rating of ``Satisfactory;''
    iv. A state, multistate MSA, or institution performance score of 
8.5 or more results in a state, multistate MSA, or institution 
rating of ``Outstanding.''
    2. The [Agency] may adjust a small bank's institution rating 
from ``Satisfactory'' to ``Outstanding'' where the bank has 
requested and received sufficient additional consideration for 
activities that qualify for its performance in making community

[[Page 34059]]

development investments and services and its performance in 
providing branches and other services and delivery systems that 
enhance credit availability in its facility-based assessment areas.
    e. Wholesale or limited purpose banks. 1. The [Agency] 
determines a wholesale or limited purpose bank's state, multistate 
MSA, or institution level rating based on its Community Development 
Financing Test for Wholesale or Limited Purpose Banks conclusion at 
the state, multistate MSA, or nationwide area, respectively.
    2. The [Agency] assigns a rating according to the category of 
the conclusion assigned: ``Outstanding;'' ``High Satisfactory;'' 
``Low Satisfactory;'' or ``Needs to Improve;'' or ``Substantial 
Noncompliance.'' A conclusion of either ``Low Satisfactory'' or 
``High Satisfactory'' corresponds to a rating of ``Satisfactory.''
    3. The [Agency] may adjust a wholesale or limited purpose bank's 
institution-level rating from ``Satisfactory'' to ``Outstanding'' 
where the bank has requested and received sufficient additional 
consideration for activities that qualify for consideration under 
the Community Development Services Test.
    f. Ratings for banks operating under an approved strategic plan. 
1. Satisfactory goals. The [Agency] approves as ``Satisfactory'' 
measurable goals that adequately help to meet the credit needs of 
the bank's assessment areas.
    2. ``Outstanding'' goals. If the plan identifies a separate 
group of measurable goals that substantially exceed the levels 
approved as ``Satisfactory,'' the [Agency] will approve those goals 
as ``Outstanding.''
    3. Rating. The [Agency] assesses the performance of a bank 
operating under an approved plan, to determine if the bank has met 
its plan goals:
    i. If the bank substantially achieves its plan goals for a 
``Satisfactory'' rating, the [Agency] will rate the bank's 
performance under the plan as ``Satisfactory.''
    ii. If the bank exceeds its plan goals for a ``Satisfactory'' 
rating and substantially achieves its plan goals for an 
``Outstanding'' rating, the Board will rate the bank's performance 
under the plan as ``Outstanding.''
    iii. If the bank fails to meet substantially its plan goals for 
a ``Satisfactory'' rating, the [Agency] will rate the bank as either 
``Needs to Improve'' or ``Substantial Noncompliance,'' depending on 
the extent to which it falls short of its plan goals, unless the 
bank elected in its plan to be rated otherwise, as provided in Sec.  
__.27(f)(6).
    g. Minimum performance test conclusion requirements. 1. Retail 
lending test minimum conclusion. An intermediate or large bank must 
receive at least a ``Low Satisfactory'' Retail Lending Test 
conclusion at, respectively, the state, multistate MSA, or 
institution level to receive an overall state, multistate MSA, or 
institution rating of ``Satisfactory'' or ``Outstanding.''
    2. Minimum of ``low satisfactory'' overall assessment area 
conclusion for 60 percent of assessment areas. i. A large bank with 
a total of 10 or more facility-based and retail lending assessment 
areas in any state or multistate MSA, or nationwide, as applicable, 
may not receive a rating of ``Satisfactory'' or ``Outstanding'' in 
that state or multistate MSA, or for the institution unless the bank 
received an overall assessment area conclusion of at least ``Low 
Satisfactory'' in 60 percent or more of the total number of its 
assessment areas in that state or multistate MSA, or nationwide, as 
applicable.
    ii. Overall assessment area conclusion. For purposes of the 
requirement in paragraph (g)(2)(i) of this appendix:
    A. An overall assessment area conclusion in a retail lending 
assessment area is the retail lending assessment area conclusion 
derived under the Retail Lending Test in accordance with appendix C 
of this part.
    B. An overall assessment area conclusion in a facility-based 
assessment area is calculated by combining a large bank's raw 
performance scores for its conclusions in the facility-based 
assessment area under the Retail Lending Test, Retail Services and 
Products Test, Community Development Financing Test, and Community 
Development Services Test.
    C. The [Agency] weights the performance scores as follows: 
Retail Lending Test (45 percent); Retail Services and Products Test 
(15 percent); Community Development Financing Test (30 percent); and 
Community Development Services Test (10 percent). The [Agency] 
multiplies each of these weights by the bank's performance score on 
the respective performance test, and then adds the resulting values 
together to develop a facility-based assessment area performance 
score.
    D. The [Agency] assigns a conclusion corresponding with the 
conclusion category that is nearest to the performance score, as 
follows: ``Outstanding'' (10 points); ``High Satisfactory'' (7 
points); ``Low Satisfactory'' (6 points); ``Needs to Improve'' (3 
points); ``Substantial Noncompliance'' (0 points). For performance 
scores at the midpoint between two conclusion categories, the 
[Agency] rounds up to assign the conclusion (i.e., a performance 
score of 8.5 is ``Outstanding'').

Appendix E to Part __--Small Bank Conclusions and Ratings and 
Intermediate Bank Community Development Evaluation Conclusions

    a. Small banks evaluated under the small bank performance 
standards--1. Lending evaluation conclusions. Unless a small bank 
has opted to be evaluated pursuant to the Retail Lending Test, the 
[Agency] assigns conclusions for a small bank's lending test 
performance under Sec.  __.29 of ``Outstanding,'' ``Satisfactory,'' 
``Needs to Improve,'' or ``Substantial Noncompliance.''
    i. Eligibility for a ``Satisfactory'' lending evaluation 
conclusion. The [Agency] assigns a small bank's lending performance 
a conclusion of ``Satisfactory'' if, in general, the bank 
demonstrates:
    A. A reasonable loan-to-deposit ratio (considering seasonal 
variations) given the bank's size, financial condition, the credit 
needs of its facility-based assessment areas, and taking into 
account, as appropriate, other lending-related activities such as 
loan originations for sale to the secondary markets and community 
development loans and community development investments;
    B. A majority of its loans and, as appropriate, other lending-
related activities, are in its facility-based assessment areas;
    C. A distribution of retail lending to and, as appropriate, 
other lending-related activities for individuals of different income 
levels (including low- and moderate-income individuals) and 
businesses and farms of different sizes that is reasonable given the 
demographics of the bank's facility-based assessment areas;
    D. A record of taking appropriate action, when warranted, in 
response to written complaints, if any, about the bank's performance 
in helping to meet the credit needs of its facility-based assessment 
areas; and
    E. A reasonable geographic distribution of loans given the 
bank's facility-based assessment areas.
    ii. Eligibility for an ``Outstanding'' lending evaluation 
conclusion. A small bank that meets each of the standards for a 
``Satisfactory'' conclusion under this paragraph and exceeds some or 
all of those standards may warrant consideration for a lending 
evaluation conclusion of ``Outstanding.''
    iii. ``Needs to Improve'' or ``Substantial Noncompliance'' 
lending evaluation conclusions. A small bank may also receive a 
lending evaluation conclusion of ``Needs to Improve'' or 
``Substantial Noncompliance'' depending on the degree to which its 
performance has failed to meet the standard for a ``Satisfactory'' 
conclusion.
    2. Small bank ratings. Unless a small bank has opted to be 
evaluated pursuant to the Retail Lending Test, the [Agency] assigns 
a small bank rating of ``Outstanding,'' ``Satisfactory,'' ``Needs to 
Improve,'' or ``Substantial Noncompliance'' based on Sec.  __.29 and 
consideration of evidence of discriminatory or other illegal 
practices as described in Sec.  __.28.
    i. ``Outstanding'' overall small bank rating. A small bank that 
meets each of the standards for a ``Satisfactory'' rating under the 
lending evaluation and exceeds some or all of those standards may 
warrant consideration for an overall bank rating of ``Outstanding.'' 
In assessing whether a bank's performance is ``Outstanding,'' the 
[Agency] considers the extent to which the bank exceeds each of the 
performance standards for a ``Satisfactory'' rating and its 
performance in making community development investments and services 
and its performance in providing branches and other services and 
delivery systems that enhance credit availability in its facility-
based assessment areas.
    ii. ``Needs to Improve'' or ``Substantial Noncompliance'' 
overall bank ratings. A small bank may also receive an overall bank 
rating of ``Needs to Improve'' or ``Substantial Noncompliance'' 
depending on the degree to which its performance has failed to meet 
the standards for a ``Satisfactory'' rating.
    b. Intermediate banks evaluated under the community development 
performance standards in Sec.  __.29. Unless an intermediate bank 
has opted to be evaluated pursuant to the Community Development 
Financing Test, the [Agency] assigns conclusions for an intermediate 
bank's community development

[[Page 34060]]

performance under Sec.  __.29 of ``Outstanding,'' ``High 
Satisfactory,'' ``Low Satisfactory,'' ``Needs to Improve,'' or 
``Substantial Noncompliance.''
    1. Community development evaluation conclusions. i. A. 
Eligibility for a ``Satisfactory'' community development evaluation 
conclusion. The [Agency] assigns an intermediate bank's community 
development performance a ``Low Satisfactory'' conclusion if the 
bank demonstrates adequate responsiveness, and a ``High 
Satisfactory'' conclusion if the bank demonstrates good 
responsiveness, to the community development needs of its facility-
based assessment areas through community development loans, 
community development investments, and community development 
services. The adequacy of the bank's response will depend on its 
capacity for such community development activities, its facility-
based assessment areas' need for such community development 
activities, and the availability of such opportunities for community 
development in the bank's facility-based assessment areas.
    B. The [Agency] considers an intermediate bank's retail banking 
services and products activities as community development services 
if they provide benefit to low- and moderate-income individuals.
    ii. Eligibility for an ``Outstanding'' community development 
evaluation conclusion. The [Agency] assigns an intermediate bank's 
community development performance an ``Outstanding'' conclusion if 
the bank demonstrates excellent responsiveness to community 
development needs in its facility-based assessment areas through 
community development loans, community development investments, and 
community development services, as appropriate, considering the 
bank's capacity and the need and availability of such opportunities 
for community development in the bank's facility-based assessment 
areas.
    iii. ``Needs to Improve'' or ``Substantial Noncompliance'' 
community development evaluation conclusions. The [Agency] assigns 
an intermediate bank's community development performance a ``Needs 
to Improve'' or ``Substantial Noncompliance'' conclusion depending 
on the degree to which its performance has failed to meet the 
standards for a ``Satisfactory'' conclusion.
    2. Intermediate bank ratings. The [Agency] rates an intermediate 
bank's performance as described in appendix D of this part.

Appendix F to Part __[RESERVED]

End of Common Proposed Rule Text

List of Subjects

12 CFR Part 25

    Community development, Credit, Investments, National banks, 
Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 228

    Banks, banking, Community development, Credit, Investments, 
Reporting and recordkeeping requirements.

12 CFR Part 345

    Banks, Banking, Community development, Credit, Investments, 
Reporting and recordkeeping requirements.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set forth in the common preamble and under the 
authority of 12 U.S.C. 93a and 2905, the Office of the Comptroller of 
the Currency proposes to amend part 25 of chapter I of title 12, Code 
of Federal Regulations as follows:

PART 25--COMMUNITY REINVESTMENT ACT AND INTERSTATE DEPOSIT 
PRODUCTION REGULATIONS

0
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, 1462a, 1463, 1464, 1814, 1816, 1828(c), 1835a, 2901 
through 2908, 3101 through 3111, and 5412(b)(2)(B).

Subpart E--[Redesignated]

0
2. Redesignate subpart E as subpart F.
0
3. Amend part 25 by revising subparts A though D, adding a new subpart 
E, revising appendices A and B and adding appendices C through F to 
read as set forth at the end of the common preamble.
0
4. In part 25 amend subparts A through E and appendices A through E by:
0
a. Removing ``[Agency]'' wherever it appears and adding ``appropriate 
Federal banking agency'' in its place;
0
b. Removing ``bank'', ``bank'', ``banks'', ``banks'', ``bank's'', and 
``bank's'', wherever they appear and adding ``bank or savings 
association'', ``bank or savings association'', ``banks or savings 
associations'', ``banks or savings associations'', bank's or savings 
association's'', or ``bank's or savings association's'' in their 
places, respectively;
0
c. Removing ``Bank'', ``Bank'', ``Banks'', and ``Banks'' wherever they 
appear and adding ``Bank and savings association'', ``Bank and savings 
association'', ``Banks and savings associations'', or ``Banks and 
savings associations'' in their places, respectively;
0
d. Removing ``[operations subsidiary or operating subsidiary]'' 
wherever it appears and adding ``operating subsidiary'' in its place;
0
e. Removing ``[operations subsidiaries or operating subsidiaries]'' 
wherever it appears and adding ``operating subsidiaries'' in its place; 
and
0
f. Removing ``[operations subsidiaries or operating subsidiaries]'' 
wherever it appears and adding ``operating subsidiaries'' in its place.
0
5. Amend Sec.  25.11 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  25.11  Authority, purposes, 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, 1462a, 1463, 1464, 1814, 1816, 
1828(c), 1835a, 2901 through 2908, 3101 through 3111, and 
5412(b)(2)(B).
* * * * *
    (c) Scope--(1) General. (i) Subparts A, B, C, D, and E and 
appendices A, B, C, D, E, and F apply to all banks and savings 
associations except as provided in paragraphs (c)(2) and (3) of this 
section. Subpart F only applies to banks.
    (ii) With respect to subparts A, B, C, D, and E and appendices A, 
B, C, D, E, and F:
    (A) The OCC has the authority to prescribe these regulations for 
national banks, Federal savings associations, and State savings 
associations and has the authority to enforce these regulations for 
national banks and Federal savings associations; and
    (B) The FDIC has the authority to enforce these regulations for 
State savings associations.
    (iii) With respect to subparts A (except in the definition of 
Minority depository institution in Sec.  25.12), B, C, D, and E and 
appendices A, B, C, D, E, and F, references to appropriate Federal 
banking agency will mean the OCC when the institution is a national 
bank or Federal savings association and the FDIC when the institution 
is a State savings association.
    (2) Federal branches and agencies. (i) This part applies to all 
insured Federal branches and to any Federal branch that is uninsured 
that results from an acquisition described in section 5(a)(8) of the 
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)).
    (ii) Except as provided in paragraph (c)(2)(i) of this section, 
this part does not apply to Federal branches that are uninsured, 
limited Federal branches, or Federal agencies, as those terms are 
defined in part 28 of this chapter.
    (3) Certain special purpose banks and savings associations. This 
part does not apply to special purpose banks or special purpose savings 
associations that do not perform commercial or retail banking services 
by granting credit to the public in the ordinary course of business, 
other than as incident to their

[[Page 34061]]

specialized operations. These banks or savings associations include 
banker's banks, as defined in 12 U.S.C. 24 (Seventh), and banks or 
savings associations that engage only in one or more of the following 
activities: Providing cash management controlled disbursement services 
or serving as correspondent banks or savings associations, trust 
companies, or clearing agents.
0
6. In Sec.  25.12:
0
a. Add the definition of ``Bank'';
0
b. Remove the definitions of ``Bank and savings association'' and 
``[Operations subsidiary or operating subsidiary]''; and
0
c. Add the definitions of ``Operating subsidiary'', and ``Savings 
association''.
    The additions read as follows:


Sec.  25.12  Definitions.

* * * * *
    Bank means a national bank (including a Federal branch as defined 
in part 28 of this chapter) with Federally insured deposits, except as 
provided in Sec.  25.11(c).
* * * * *
    Operating subsidiary means an operating subsidiary as described in 
12 CFR 5.34 in the case of an operating subsidiary of a national bank 
or an operating subsidiary as described in 12 CFR 5.38 in the case of a 
savings association.
* * * * *
    Savings association means a Federal savings association or a State 
savings association.
* * * * *
0
7. Add Sec.  25.31 to read as follows:


Sec.  25.31  Effect of CRA performance on applications.

    (a) CRA performance. Among other factors, the appropriate Federal 
banking agency takes into account the record of performance under the 
CRA of each applicant bank or savings association, and for applications 
under 10(e) of the Home Owners' Loan Act (12 U.S.C. 1467a(e)), of each 
proposed subsidiary savings association, in considering an application 
for:
    (1) The establishment of:
    (i) A domestic branch for insured national banks; or
    (ii) A domestic branch or other facility that would be authorized 
to take deposits for savings associations;
    (2) The relocation of the main office or a branch;
    (3) The merger or consolidation with or the acquisition of assets 
or assumption of liabilities of an insured depository institution 
requiring approval under the Bank Merger Act (12 U.S.C. 1828(c));
    (4) The conversion of an insured depository institution to a 
national bank or Federal savings association charter; and
    (5) Acquisitions subject to section 10(e) of the Home Owners' Loan 
Act (12 U.S.C. 1467a(e)).
    (b) Charter application. (1) An applicant (other than an insured 
depository institution) for a national bank charter shall submit with 
its application a description of how it will meet its CRA objectives. 
The OCC takes the description into account in considering the 
application and may deny or condition approval on that basis.
    (2) An applicant for a Federal savings association charter shall 
submit with its application a description of how it will meet its CRA 
objectives. The appropriate Federal banking agency takes the 
description into account in considering the application and may deny or 
condition approval on that basis.
    (c) Interested parties. The appropriate Federal banking agency 
takes into account any views expressed by interested parties that are 
submitted in accordance with the applicable comment procedures in 
considering CRA performance in an application listed in paragraphs (a) 
and (b) of this section.
    (d) Denial or conditional approval of application. A bank's or 
savings association's record of performance may be the basis for 
denying or conditioning approval of an application listed in paragraph 
(a) of this section.
    (e) Insured depository institution. For purposes of this section, 
the term ``insured depository institution'' has the meaning given to 
that term in 12 U.S.C. 1813.


Sec.  25.42  [Amended]

0
8. In Sec.  25.42 amend paragraph (i) by removing ``[other Agencies]'' 
and adding in its place the phrase ``Board of Governors of the Federal 
Reserve System and FDIC or OCC, as appropriate''.


Sec.  25.43  [Amended]

0
9. In Sec.  25.43 amend paragraph (b)(2) by removing ``[operations 
subsidiaries' or operating subsidiaries']'' and adding ``operating 
subsidiaries''' in its place.


Sec.  25.46  [Amended]

0
10. In Sec.  25.46 amend paragraph (b) by removing ``[Agency contact 
information]'' and adding in its place ``<a href="/cdn-cgi/l/email-protection#efacbdaeac8082828a819b9caf808c8cc19b9d8a8e9cc1888099"><span class="__cf_email__" data-cfemail="34776675775b5959515a4047745b57571a40465155471a535b42">[email protected]</span></a> for 
banks and Federal savings associations or <a href="/cdn-cgi/l/email-protection#20637261634f4d4d454e54634f4c4c4543544f5260464449430e474f56"><span class="__cf_email__" data-cfemail="5e1d0c1f1d3133333b302a1d3132323b3d2a312c1e383a373d70393128">[email protected]</span></a> 
for State savings associations''.
0
11. Revise paragraph (c)(2) of Sec.  25.51 to read as follows:


Sec.  25.51  Applicability dates, and transition provisions.

* * * * *
    (c) * * *
    (2) Existing plans. A strategic plan in effect as of [DATE OF 
PUBLICATION IN THE FEDERAL REGISTER] remains in effect until the 
expiration date of the plan except for provisions that were not 
permissible under this part as of January 1, 2022.
0
12. Revise the heading of Appendix A to read as follows:

Appendix A to Part 25--Calculations for the Retail Tests

0
13. Revise the heading of Appendix B to read as follows:

Appendix B to Part 25--Calculations for the Community Development Tests

0
14. Revise the heading of Appendix C to read as follows:

Appendix C to Part 25--Performance Test Conclusions

0
15. Revise the heading of Appendix D to read as follows:

Appendix D to Part 25--Ratings

0
16. Revise the heading of Appendix E to read as follows:

Appendix E to Part 25-- Small Bank Conclusions and Ratings and 
Intermediate Bank Community Development Evaluation Conclusions

0
17. Add Appendix F to read as follows:

Appendix F to Part 25--CRA Notice

    (a) Notice for main offices and, if an interstate bank, one 
branch office in each state.

Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the [Office 
of the Comptroller of the Currency (OCC) or Federal Deposit 
Insurance Corporation (FDIC), as appropriate] evaluates our record 
of helping to meet the credit needs of this community consistent 
with safe and sound operations. The [OCC or FDIC, as appropriate] 
also takes this record into account when deciding on certain 
applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and 
our performance under the CRA, including, for example, information 
about our branches, such as their location and services provided at 
them; the public section of our most recent CRA Performance 
Evaluation, prepared by the [OCC or FDIC, as appropriate]; and 
comments received from the public relating to our performance in 
helping to meet community credit needs, as well as our responses to 
those comments. You may review this information today.

[[Page 34062]]

    At least 60 days before the beginning of each calendar quarter, 
the [OCC or FDIC, as appropriate] publishes a list of the banks that 
are scheduled for CRA examination by the [OCC or FDIC, as 
appropriate] for the next two quarters. This list is available 
through the [OCC's or FDIC's, as appropriate] website at [OCC.gov or 
FDIC.gov, as appropriate].
    You may send written comments about our performance in helping 
to meet community credit needs to (name and address of official at 
bank), (title of responsible official), to the [OCC or FDIC Regional 
Director, as appropriate, (address)]. You may also submit comments 
electronically to the [OCC at <a href="/cdn-cgi/l/email-protection#ca89988b89a5a7a7afa4beb98aa5a9a9e4beb8afabb9e4ada5bc"><span class="__cf_email__" data-cfemail="baf9e8fbf9d5d7d7dfd4cec9fad5d9d994cec8dfdbc994ddd5cc">[email protected]</span></a> or FDIC 
through the FDIC's website at FDIC.gov/regulations/cra, as 
appropriate]. Your written comments, together with any response by 
us, will be considered by the [OCC or FDIC, as appropriate] in 
evaluating our CRA performance and may be made public.
    You may ask to look at any comments received by the [OCC or FDIC 
Regional Director, as appropriate]. You may also request from the 
[OCC or FDIC Regional Director, as appropriate] an announcement of 
our applications covered by the CRA filed with the [OCC or FDIC, as 
appropriate]. [We are an affiliate of (name of holding company), a 
bank holding company. You may request from (title of responsible 
official), Federal Reserve Bank of (address) an announcement of 
applications covered by the CRA filed by bank holding companies.]
    (b) Notice for branch offices.

Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the [Office 
of the Comptroller of the Currency (OCC) or Federal Deposit 
Insurance Corporation (FDIC), as appropriate] evaluates our record 
of helping to meet the credit needs of this community consistent 
with safe and sound operations. The [OCC or FDIC, as appropriate] 
also takes this record into account when deciding on certain 
applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and 
our performance under the CRA. You may review today the public 
section of our most recent CRA Performance Evaluation, prepared by 
the [OCC or FDIC, as appropriate], and a list of services provided 
at this branch. You may also have access to the following additional 
information, which we will make available to you at this branch 
within five calendar days after you make a request to us:
    (1) A map showing the facility-based assessment area containing 
this branch, which is the area in which the [OCC or FDIC, as 
appropriate] evaluates our CRA performance in this community;
    (2) Information about our branches in this facility-based 
assessment area;
    (3) A list of services we provide at those locations;
    (4) Data on our lending performance in this facility-based 
assessment area; and
    (5) Copies of all written comments received by us that 
specifically relate to our CRA performance in this facility-based 
assessment area, and any responses we have made to those comments. 
If we are operating under an approved strategic plan, you may also 
have access to a copy of the plan.
    [If you would like to review information about our CRA 
performance in other communities served by us, the public file for 
our entire bank is available on our website (website address) and at 
(name of office located in state), located at (address).]
    At least 60 days before the beginning of each calendar quarter, 
the [OCC or FDIC, as appropriate] publishes a list of the banks that 
are scheduled for CRA examination by the [OCC or FDIC, as 
appropriate] for the next two quarters. This list is available 
through the [OCC's or FDIC's, as appropriate] website at [OCC.gov or 
FDIC.gov, as appropriate].
    You may send written comments about our performance in helping 
to meet community credit needs to (name and address of official at 
bank), (title of responsible official), to the [OCC or FDIC Regional 
Director, as appropriate (address)]. You may also submit comments 
electronically to the [OCC at <a href="/cdn-cgi/l/email-protection#2764756664484a4a424953546748444409535542465409404851"><span class="__cf_email__" data-cfemail="86c5d4c7c5e9ebebe3e8f2f5c6e9e5e5a8f2f4e3e7f5a8e1e9f0">[email protected]</span></a> or FDIC 
through the FDIC's website at FDIC.gov/regulations/cra, as 
appropriate]. Your written comment, together with any response by 
us, will be considered by the [OCC or FDIC, as appropriate] in 
evaluating our CRA performance and may be made public.
    You may ask to look at any comments received by the [OCC or FDIC 
Regional Director, as appropriate]. You may also request from the 
[OCC or FDIC Regional Director, as appropriate] an announcement of 
our applications covered by the CRA filed with the [OCC or FDIC, as 
appropriate]. [We are an affiliate of (name of holding company), a 
bank holding company. You may request from (title of responsible 
official), Federal Reserve Bank of (address) an announcement of 
applications covered by the CRA filed by bank holding companies.]

FEDERAL RESERVE SYSTEM

12 CFR Chapter II

Authority and Issuance

    For the reasons discussed in the common preamble section, the Board 
of Governors of the Federal Reserve System proposes to amend part 228 
of chapter II of title 12 of the Code of Federal Regulations as 
follows:

PART 228--COMMUNITY REINVESTMENT (REGULATION BB)

0
18. The authority citation for part 228 continues to read as follows:

    Authority:  12 U.S.C. 321, 325, 1828(c), 1842, 1843, 1844, and 
2901 et seq.

0
19. Revise part 228 as set forth at the end of the common preamble.
0
20. Amend newly revised part 228 by:
0
a. Removing ``[Agency]'' wherever it appears and adding ``Board'' in 
its place;
0
b. Removing the words ``[operations subsidiary or operating 
subsidiary]'' wherever they appear and adding, in their place, the 
words ``operations subsidiary'';
    c. Removing the words ``[operations subsidiaries or operating 
subsidiaries]'', ``[operations subsidiaries or operating 
subsidiaries]'' wherever they appear and adding in their place, 
``operations subsidiaries'' ``operations subsidiaries'', respectively.
0
21. Amend Sec.  228.11 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  228.11  Authority, purposes and scope.

    (a) Authority. The Board of Governors of the Federal Reserve System 
(the Board) issues this part to implement the Community Reinvestment 
Act (12 U.S.C. 2901 et seq.) (CRA). The regulations comprising this 
part are issued under the authority of the CRA and under the provisions 
of the United States Code authorizing the Federal Reserve:
    (1) To conduct examinations of state-chartered banks that are 
members of the Federal Reserve System (12 U.S.C. 325);
    (2) To conduct examinations of bank holding companies and their 
subsidiaries (12 U.S.C. 1844) and savings and loan holding companies 
and their subsidiaries (12 U.S.C. 1467a); and
    (3) To consider applications for:
    (i) Domestic branches by state member banks (12 U.S.C. 321);
    (ii) Mergers in which the resulting bank would be a state member 
bank (12 U.S.C. 1828(c));
    (iii) Formations of, acquisitions of banks by, and mergers of, bank 
holding companies (12 U.S.C. 1842);
    (iv) The acquisition of savings associations by bank holding 
companies (12 U.S.C. 1843); and
    (v) Formations of, acquisitions of savings associations by, 
conversions of, and mergers of, savings and loan holding companies (12 
U.S.C. 1467a).
* * * * *
    (c) Scope. (1) General. This part applies to all banks except as 
provided in paragraph (c)(3) of this section.
    (2) Foreign bank acquisitions. This part also applies to an 
uninsured state branch (other than a limited branch) of a foreign bank 
that results from an acquisition described in section 5(a)(8) of the 
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)). The terms 
``state branch'' and ``foreign bank'' have the same meanings as given 
to those terms in section 1(b) of the International Banking Act of 1978 
(12 U.S.C. 3101 et seq.); the term ``uninsured state branch'' means a 
state branch the deposits of which are not insured by the Federal 
Deposit Insurance Corporation; the term ``limited branch'' means a 
state branch that accepts only deposits that are permissible for a 
corporation organized

[[Page 34063]]

under section 25A of the Federal Reserve Act (12 U.S.C. 611 et seq.).
    (3) Certain exempt banks. This part does not apply to banks that do 
not perform commercial or retail banking services by granting credit to 
the public in the ordinary course of business, other than as incident 
to their specialized operations and done on an accommodation basis. 
These banks include bankers' banks, as defined in 12 U.S.C. 24 
(Seventh), and banks that engage only in one or more of the following 
activities: providing cash management controlled disbursement services 
or serving as correspondent banks, trust companies, or clearing agents.


Sec.  228.11  [Amended]

0
22. In Sec.  228.11 amend paragraph (b) by removing the words 
``Community Reinvestment Act (12 U.S.C. 2901 et seq.) (CRA)'' and 
adding, in their place, ``CRA''.
0
23. In Sec.  228.12:
0
a. Revise the definition of ``Affiliate''.
0
b. Remove the definition of ``[Operations subsidiary or operating 
subsidiary]'' and add, in its place, the definition of ``Operations 
subsidiary''.
    The revision and addition read as follows:


Sec.  228.12  Definitions.

* * * * *
    Affiliate means any company that controls, is controlled by, or is 
under common control with another company. The term ``control'' has the 
meaning given to that term in 12 U.S.C. 1841(a)(2), as implemented by 
the Board in 12 CFR part 225, and a company is under common control 
with another company if both companies are directly or indirectly 
controlled by the same company.
* * * * *
    Operations subsidiary means an organization designed to serve, in 
effect, as a separately incorporated department of the bank, 
performing, at locations at which the bank is authorized to engage in 
business, functions that the bank is empowered to perform directly.
0
24. Add Sec.  228.31 to read as follows:


Sec.  228.31  Effect of CRA performance on applications.

    (a) CRA performance. Among other factors, the Board takes into 
account the record of performance under the CRA of:
    (1) Each applicant bank for the:
    (i) Establishment of a domestic branch by a State member bank; and
    (ii) Merger, consolidation, acquisition of assets, or assumption of 
liabilities requiring approval under the Bank Merger Act (12 U.S.C. 
1828(c)) if the acquiring, assuming, or resulting bank is to be a State 
member bank; and
    (2) Each insured depository institution (as defined in 12 U.S.C. 
1813) controlled by an applicant and subsidiary bank or savings 
association proposed to be controlled by an applicant:
    (i) To become a bank holding company in a transaction that requires 
approval under section 3 of the Bank Holding Company Act (12 U.S.C. 
1842);
    (ii) To acquire ownership or control of shares or all or 
substantially all of the assets of a bank, to cause a bank to become a 
subsidiary of a bank holding company, or to merge or consolidate a bank 
holding company with any other bank holding company in a transaction 
that requires approval under section 3 of the Bank Holding Company Act 
(12 U.S.C. 1842);
    (iii) To own, control or operate a savings association in a 
transaction that requires approval under section 4 of the Bank Holding 
Company Act (12 U.S.C. 1843);
    (iv) To become a savings and loan holding company in a transaction 
that requires approval under section 10 of the Home Owners' Loan Act 
(12 U.S.C. 1467a); and
    (v) To acquire ownership or control of shares or all or 
substantially all of the assets of a savings association, to cause a 
savings association to become a subsidiary of a savings and loan 
holding company, or to merge or consolidate a savings and loan holding 
company with any other savings and loan holding company in a 
transaction that requires approval under section 10 of the Home Owners' 
Loan Act (12 U.S.C. 1467a).
    (b) Interested parties. In considering CRA performance in an 
application described in paragraph (a) of this section, the Board takes 
into account any views expressed by interested parties that are 
submitted in accordance with the Board's Rules of Procedure set forth 
in part 262 of this chapter.
    (c) Denial or conditional approval of application. A bank or 
savings association's record of performance may be the basis for 
denying or conditioning approval of an application listed in paragraph 
(a) of this section.
    (d) Definitions. For purposes of paragraphs (a)(2)(i)-(iii) of this 
section, ``bank,'' ``bank holding company,'' ``subsidiary,'' and 
``savings association'' have the same meanings given to those terms in 
section 2 of the Bank Holding Company Act (12 U.S.C. 1841). For 
purposes of paragraphs (a)(2)(iv) and (v) of this section, ``savings 
and loan holding company'' and ``subsidiary'' have the same meaning 
given to those terms in section 10 of the Home Owners' Loan Act (12 
U.S.C. 1467a).


Sec.  228.42  [Amended]

0
25. In Sec.  228.42 amend paragraph (i) by removing the words ``[other 
Agencies]'' and adding in their place, the words ``FDIC and OCC''.


Sec.  228.43  [Amended]

0
26. In Sec.  228.43 amend paragraph (b)(2) by removing the words 
``[operations subsidiaries' or operating subsidiaries']'' and add in 
their place, the words ``operations subsidiaries' ''.


Sec.  228.46  [Amended]

0
27. In Sec.  228.46 amend paragraph (b) by removing the words ``[Agency 
contact information]'' and adding in their place, the words ``at Staff 
Group: Community Reinvestment Act at https://federalreserve.gov/apps/contactus/feedback.aspx?Submit=Submit, by mail to Secretary of the 
Board, Board of Governors of the Federal Reserve System, 20th Street 
and Constitution Avenue NW, Washington, DC 20551, or by facsimile at 
(202) 452-3819''.
0
28. Revise the heading of Appendix A to read as follows:

Appendix A to Part 228--Calculations for the Retail Tests

0
29. Revise the heading of Appendix B to read as follows:

Appendix B to Part 228--Calculations for the Community Development 
Tests

0
30. Revise the heading of Appendix C to read as follows:

Appendix C to Part 228--Performance Test Conclusions

0
31. Revise the heading of Appendix D to read as follows:

Appendix D to Part 228--Ratings

0
32. Revise the heading of Appendix E to read as follows:

Appendix E to Part 228--Small Bank Conclusions and Ratings and 
Intermediate Bank Community Development Evaluation Conclusions

0
33. Add Appendix F to read as follows:

Appendix F to Part 228--CRA Notice

    (a) Notice for main offices and, if an interstate bank, one 
branch office in each state.

Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the Federal 
Reserve Board (Board) evaluates our record of helping to meet the 
credit needs of this community consistent with safe and sound 
operations. The Board also takes this record into account when 
deciding on certain applications submitted by us.

[[Page 34064]]

    Your involvement is encouraged.
    You are entitled to certain information about our operations and 
our performance under the CRA, including, for example, information 
about our branches, such as their location and services provided at 
them; the public section of our most recent CRA Performance 
Evaluation, prepared by the Federal Reserve Bank of __(Reserve 
Bank); and comments received from the public relating to our 
performance in helping to meet community credit needs, as well as 
our responses to those comments. You may review this information 
today.
    At least 60 days before the beginning of each calendar quarter, 
the Federal Reserve System publishes a list of the banks that are 
scheduled for CRA examination by the Reserve Bank for the next two 
quarters. This list is available from (title of responsible 
official), Federal Reserve Bank of __(address), or through the 
Board's website at federalreserve.gov.
    You may send written comments about our performance in helping 
to meet community credit needs to (name and address of official at 
bank) and (title of responsible official), Federal Reserve Bank of 
__(address), or through the Board's website at federalreserve.gov. 
Your letter, together with any response by us, will be considered by 
the Federal Reserve System in evaluating our CRA performance and may 
be made public.
    You may ask to look at any comments received by the Reserve 
Bank. You may also request from the Reserve Bank an announcement of 
our applications covered by the CRA filed with the Reserve Bank. [We 
are an affiliate of (name of holding company), a bank holding 
company. You may request from (title of responsible official), 
Federal Reserve Bank of __(address) an announcement of applications 
covered by the CRA filed by bank holding companies.]

(b) Notice for branch offices.

Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the Federal 
Reserve Board (Board) evaluates our record of helping to meet the 
credit needs of this community consistent with safe and sound 
operations. The Board also takes this record into account when 
deciding on certain applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and 
our performance under the CRA. You may review today the public 
section of our most recent CRA evaluation, prepared by the Federal 
Reserve Bank of __(address), and a list of services provided at this 
branch. You may also have access to the following additional 
information, which we will make available to you at this branch 
within five calendar days after you make a request to us: (1) A map 
showing the assessment area containing this branch, which is the 
area in which the Board evaluates our CRA performance in this 
community; (2) information about our branches in this assessment 
area; (3) a list of services we provide at those locations; (4) data 
on our lending performance in this assessment area; and (5) copies 
of all written comments received by us that specifically relate to 
our CRA performance in this assessment area, and any responses we 
have made to those comments. If we are operating under an approved 
strategic plan, you may also have access to a copy of the plan.
    [If you would like to review information about our CRA 
performance in other communities served by us, the public file for 
our entire bank is available at (name of office located in state), 
located at (address).]
    At least 60 days before the beginning of each calendar quarter, 
the Federal Reserve System publishes a list of the banks that are 
scheduled for CRA examination by the Reserve Bank for the next two 
quarters. This list is available from (title of responsible 
official), Federal Reserve Bank of __(address), or through the 
Board's website at federalreserve.gov.
    You may send written comments about our performance in helping 
to meet community credit needs to (name and address of official at 
bank) and (title of responsible official), Federal Reserve Bank of 
__(address), or through the Board's website at federalreserve.gov. 
Your letter, together with any response by us, will be considered by 
the Federal Reserve System in evaluating our CRA performance and may 
be made public.
    You may ask to look at any comments received by the Reserve 
Bank. You may also request from the Reserve Bank an announcement of 
our applications covered by the CRA filed with the Reserve Bank. [We 
are an affiliate of (name of holding company), a bank holding 
company. You may request from (title of responsible official), 
Federal Reserve Bank of __(address) an announcement of applications 
covered by the CRA filed by bank holding companies.]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Chapter III

Authority and Issuance

    For the reasons discussed in the preamble, the Federal Deposit 
Insurance Corporation proposes to revise part 345 of chapter III of 
title 12 of the Code of Federal Regulations to read as follows:

PART 345--COMMUNITY REINVESTMENT

0
34. Revise the authority citation for part 345 to read as follows:

    Authority:  12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u, 2901-
2908, 3103-3104, and 3108(a).

0
35. Revise part 345 to read as set forth at the end of the common 
preamble.
0
36. Amend newly revised part 345 by:
0
a. Removing the word ``[Agency]'' wherever it appears and adding 
``FDIC'' in its place;
0
b. Removing the phrase ``[operations subsidiary or operating 
subsidiary]'' wherever it appears and adding ``operating subsidiary'' 
in its place;
0
c. Removing the phrase ``[operations subsidiaries or operating 
subsidiaries]'' wherever it appears and adding ``operating 
subsidiaries'' in its place;
0
d. Removing the phrase ``[operations subsidiaries or operating 
subsidiaries]'' wherever it appears and adding ``operating 
subsidiaries'' in its place.
0
37. Revise paragraphs (a) and (c) of Sec.  345.11 to read as follows:


Sec.  345.11  Authority, purposes, and scope.

    (a) Authority. The authority for this part is 12 U.S.C. 1814-1817, 
1819-1820, 1828, 1831u, 2901-2908, 3103-3104, and 3108(a).
* * * * *
    (c) Scope. (1) General. Except for certain special purpose banks 
described in paragraph (c)(3) of this section, this part applies to all 
insured State nonmember banks, including insured State branches as 
described in paragraph (c)(2) and any uninsured State branch that 
results from an acquisition described in section 5(a)(8) of the 
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)).
    (2) Insured State branches. Insured State branches are branches of 
a foreign bank established and operating under the laws of any State, 
the deposits of which are insured in accordance with the provisions of 
the Federal Deposit Insurance Act. In the case of insured State 
branches, references in this part to main office mean the principal 
branch within the United States and the term branch or branches refers 
to any insured State branch or branches located within the United 
States. The assessment area of an insured State branch is the community 
or communities located within the United States served by the branch as 
described in Sec.  345.41.
    (3) Certain special purpose banks. This part does not apply to 
special purpose banks that do not perform commercial or retail banking 
services by granting credit to the public in the ordinary course of 
business, other than as incident to their specialized operations. These 
banks include banker's banks, as defined in 12 U.S.C. 24 (Seventh), and 
banks that engage only in one or more of the following activities: 
Providing cash management controlled disbursement services or serving 
as correspondent banks, trust companies, or clearing agents.
0
38. Amend Sec.  345.12 as follows:
0
a. Revise the definition of ``Bank''.
0
b. Remove the definition of ``[Operations subsidiary or operating 
subsidiary]'' and add in its place the definition of ``Operating 
subsidiary''.
    The revision and addition read as follows:


Sec.  345.12  Definitions.

* * * * *
    Bank means a State nonmember bank, as that term is defined in 
section 3(e)(2)

[[Page 34065]]

of the Federal Deposit Insurance Act (FDIA) (12 U.S.C. 1813(e)(2)), 
with Federally insured deposits, except as defined in Sec.  345.11(c)). 
The term bank also includes an insured State branch as defined in Sec.  
345.11(c)).
* * * * *
    Operating subsidiary, for purposes of this part, means an operating 
subsidiary as described in 12 CFR 5.34.
0
39. Add Sec.  345.31 to read as follows:


Sec.  345.31  Effect of CRA performance on applications.

    (a) CRA performance. Among other factors, the FDIC takes into 
account the record of performance under the CRA of each applicant bank 
in considering an application for approval of:
    (1) The establishment of a domestic branch or other facility with 
the ability to accept deposits;
    (2) The relocation of the bank's main office or a branch;
    (3) The merger, consolidation, acquisition of assets, or assumption 
of liabilities; and
    (4) Deposit insurance for a newly chartered financial institution.
    (b) New financial institutions. A newly chartered financial 
institution shall submit with its application for deposit insurance a 
description of how it will meet its CRA objectives. The FDIC takes the 
description into account in considering the application and may deny or 
condition approval on that basis.
    (c) Interested parties. The FDIC takes into account any views 
expressed by interested parties that are submitted in accordance with 
the FDIC's procedures set forth in part 303 of this chapter in 
considering CRA performance in an application listed in paragraphs (a) 
and (b) of this section.
    (d) Denial or conditional approval of application. A bank's record 
of performance may be the basis for denying or conditioning approval of 
an application listed in paragraph (a) of this section.


Sec.  345.42  [Amended]

0
40. In Sec.  345.42 amend paragraph (i) by removing ``[other 
Agencies]'' and adding, in its place, the phrase ``Federal Reserve and 
OCC''.


Sec.  345.43  [Amended]

0
41. In Sec.  345.43 amend paragraph (b)(2) by removing ``[operations 
subsidiaries' or operating subsidiaries']'' and adding ``operating 
subsidiaries' '' in its place.


Sec.  345.46  [Amended]

0
42. In Sec.  345.46 amend paragraph (b) by removing ``[Agency contact 
information]'' and adding in its place ``at 
<a href="/cdn-cgi/l/email-protection#c182938082aeacaca4afb582aeadada4a2b5aeb381a7a5a8a2efa6aeb7"><span class="__cf_email__" data-cfemail="eeadbcafad8183838b809aad8182828b8d9a819cae888a878dc0898198">[email protected]</span></a>''.
0
43. Revise the heading of Appendix A to read as follows:

Appendix A to Part 345--Calculations for the Retail Lending Test

0
44. Revise the heading of Appendix B to read as follows:

Appendix B to Part 345--Calculations for the Community Development 
Tests

0
45. Revise the heading of Appendix C to read as follows:

Appendix C to Part 345--Performance Test Conclusions

0
46. Revise the heading of Appendix D to read as follows:

Appendix D to Part 345--Ratings

0
47. Revise the heading of Appendix E to read as follows:

Appendix E to Part 345--Small Bank Conclusions and Ratings and 
Intermediate Bank Conclusions

0
48. Add Appendix F to read as follows:

Appendix F to Part 345--CRA Notice

    (a) Notice for main offices and, if an interstate bank, one 
branch office in each state.

Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the Federal 
Deposit Insurance Corporation (FDIC) evaluates our record of helping 
to meet the credit needs of this community consistent with safe and 
sound operations. The FDIC also takes this record into account when 
deciding on certain applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and 
our performance under the CRA, including, for example, information 
about our branches, such as their location and services provided at 
them; the public section of our most recent CRA Performance 
Evaluation, prepared by the FDIC; and comments received from the 
public relating to our performance in helping to meet community 
credit needs, as well as our responses to those comments. You may 
review this information today.
    At least 60 days before the beginning of each calendar quarter, 
the FDIC publishes a nationwide list of the banks that are scheduled 
for CRA examination for the next two quarters. This list is 
available from the Regional Director, FDIC (address). You may send 
written comments about our performance in helping to meet community 
credit needs to (name and address of official at bank) and FDIC 
Regional Director. You may also submit comments electronically 
through the FDIC's website at www.fdic.gov/regulations/cra. Your 
letter, together with any response by us, will be considered by the 
FDIC in evaluating our CRA performance and may be made public.
    You may ask to look at any comments received by the FDIC 
Regional Director. You may also request from the FDIC Regional 
Director an announcement of our applications covered by the CRA 
filed with the FDIC. [We are an affiliate of (name of holding 
company), a bank holding company. You may request from the (title of 
responsible official), Federal Reserve Bank of __(address) an 
announcement of applications covered by the CRA filed by bank 
holding companies.]
    (b) Notice for branch offices.

Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the Federal 
Deposit Insurance Corporation (FDIC) evaluates our record of helping 
to meet the credit needs of this community consistent with safe and 
sound operations. The FDIC also takes this record into account when 
deciding on certain applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and 
our performance under the CRA. You may review today the public 
section of our most recent CRA evaluation, prepared by the FDIC, and 
a list of services provided at this branch. You may also have access 
to the following additional information, which we will make 
available to you at this branch within five calendar days after you 
make a request to us:
    (1) A map showing the assessment area containing this branch, 
which is the area in which the FDIC evaluates our CRA performance in 
this community;
    (2) Information about our branches in this assessment area;
    (3) A list of services we provide at those locations;
    (4) Data on our lending performance in this assessment area; and
    (5) Copies of all written comments received by us that 
specifically relate to our CRA performance in this assessment area, 
and any responses we have made to those comments. If we are 
operating under an approved strategic plan, you may also have access 
to a copy of the plan.
    [If you would like to review information about our CRA 
performance in other communities served by us, the public file for 
our entire bank is available at (name of office located in state), 
located at (address).]

[[Page 34066]]

    At least 60 days before the beginning of each calendar quarter, 
the FDIC publishes a nationwide list of the banks that are scheduled 
for CRA examination for the next two quarters. This list is 
available from the Regional Director, FDIC (address). You may send 
written comments about our performance in helping to meet community 
credit needs to (name and address of official at bank) and the FDIC 
Regional Director. You may also submit comments electronically 
through the FDIC's website at www.fdic.gov/regulations/cra. Your 
letter, together with any response by us, will be considered by the 
FDIC in evaluating our CRA performance and may be made public.
    You may ask to look at any comments received by the FDIC 
Regional Director. You may also request from the FDIC Regional 
Director an announcement of our applications covered by the CRA 
filed with the FDIC. [We are an affiliate of (name of holding 
company), a bank holding company. You may request from the (title of 
responsible official), Federal Reserve Bank of __(address) an 
announcement of applications covered by the CRA filed by bank 
holding companies.]

Michael J. Hsu,
Acting Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System.
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
    By order of the Board of Directors.

    Dated at Washington, DC, on May 5, 2022.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2022-10111 Filed 6-2-22; 8:45 am]
BILLING CODE 6210-01-P; 6714-01-P; 4810-33-P


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