(a) Definitions. For purposes of this section:
(1) Low- or moderate-income area means—
(i) one or more census tracts in a metropolitan
statistical area where the median family income adjusted for family
size in each census tract is less than 80 percent of the median family
income adjusted for family size of the metropolitan statistical area;
or
(ii) if not in
a metropolitan statistical area, one or more census tracts or block-numbered
areas where the median family income adjusted for family size in each
census tract or block-numbered area is less than 80 percent of the
median family income adjusted for family size of the state.
(2) Low- and moderate-income persons has the
same meaning as low- and moderate-income persons as defined in 42
U.S.C. 5302(a)(20)(A).
(3) Small business means a business
that meets the size eligibility standards of 13 CFR 121.802(a)(2).
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(b) Investments not requiring
prior Board approval. Notwithstanding the provisions of section
5136 of the Revised Statutes (12 U.S.C. 24 (seventh)) made applicable
to member banks by paragraph 20 of section 9 of the Federal Reserve
Act (12 U.S.C. 335), a member bank may make an investment, without
prior Board approval, if the following conditions are met:
(1) the investment is in a corporation,
limited partnership, or other entity, and
(i) the Board has determined
that an investment in that entity or class of entities is a public-welfare
investment under paragraph 23 of section 9 of the Federal Reserve
Act (12 U.S.C. 338a), or a community development investment under
Regulation Y (12 CFR 225.25(b)(6)); or
(ii) the Comptroller of the Currency
has determined, by order or regulation, that an investment in that
entity by a national bank is a public-welfare investment under section
5136 of the Revised Statutes (12 U.S.C. 24, eleventh); or
(iii) the entity is a community
development financial institution as defined in section 103(5) of
the Community Development Banking and Financial Institutions Act of
1994 (12 U.S.C. 4702(5)); or
(iv) the entity, directly or indirectly,
engages
solely in or makes loans solely for the purposes of one or more of
the following community development activities:
(A) investing
in, developing, rehabilitating, managing, selling, or renting residential
property if a majority of the units will be occupied by low- and moderate-income
persons or if the property is a “qualified low-income building” as
defined in section 42(c)(2) of the Internal Revenue Code (26 U.S.C.
42(c)(2));
(B) investing
in, developing, rehabilitating, managing, selling, or renting nonresidential
real property or other assets located in a low- or moderate-income
area and targeted towards low- and moderate-income persons;
(C) investing in one or more
small businesses located in a low- or moderate-income area to stimulate
economic development;
(D) investing in, developing, or otherwise assisting job training
or placement facilities or programs that will be targeted towards
low- and moderate- income persons;
(E) investing in an entity located in a low-
or moderate-income area if the entity creates long-term employment
opportunities, a majority of which (based on full-time equivalent
positions) will be held by low- and moderate-income persons; and
(F) providing technical assistance,
credit counseling, research, and program-development assistance to
low- and moderate-income persons, small businesses, or nonprofit corporations
to help achieve community development;
(2) the investment is permitted by state
law;
(3) the investment
will not expose the member bank to liability beyond the amount of
the investment;
(4)
the aggregate of all such investments of the member bank does not
exceed the sum of 5 percent of its capital stock and surplus;
(5) the member bank is well
capitalized or adequately capitalized under section 208.43(b)(1) and
(2);
(6) the member
bank received a composite CAMELS rating of 1 or 2 under the Uniform
Financial Institutions Rating System as of its most recent examination
and an overall rating of 1 or 2 as of its most recent consumer compliance
examination; and
(7) the member bank is not subject to any written agreement, cease-and-desist
order, capital directive, prompt-corrective-action directive, or memorandum
of understanding issued by the Board or a Federal Reserve Bank.
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(c) Notice
to Federal Reserve Bank. Not more than 30 days after making an
investment under paragraph (b) of this section, the member bank shall
advise its Federal Reserve Bank of the investment, including the amount
of the investment and the identity of the entity in which the investment
is made.
(d) Investments
requiring Board approval.
(1) With prior Board approval, a member
bank may make public-welfare investments under paragraph 23 of section
9 of the Federal Reserve Act (12 U.S.C. 338a), other than those specified
in paragraph (b) of this section.
(2) Requests for approval under this paragraph
(d) should include, at a minimum—
(i) the amount of the proposed
investment;
(ii)
a description of the entity in which the investment is to be made;
(iii) an explanation
of why the investment is a public-welfare investment under paragraph
23 of section 9 of the Federal Reserve Act (12 U.S.C. 338a);
(iv) a description of the
member bank’s potential liability under the proposed investment;
(v) the amount of
the member bank’s aggregate outstanding public-welfare investments
under paragraph 23 of section 9 of the Federal Reserve Act;
(vi) the amount of the member
bank’s capital stock and surplus; and
(vii) if the bank investment is not
eligible under paragraph (b) of this section, explain the reason or
reasons why it is ineligible.
(3) The Board shall act on a request under
this paragraph (d) within 60 calendar days of receipt of a request
that meets the requirements of paragraph (d)(2) of this section, unless
the Board notifies the requesting member bank that a longer time period
will be required.
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(e) Divestiture of investments. A member bank
shall divest itself of an investment made under paragraph (b) or (d)
of this section to the extent that the investment exceeds the scope
of, or ceases to meet, the requirements of paragraphs (b)(1) through
(b)(4) or paragraph (d) of this section. The divestiture shall be
made in the manner specified in 12 CFR 225.140, Regulation Y, for
interests acquired by a lending subsidiary of a bank holding company
or the bank holding company itself in satisfaction of a debt previously
contracted.
