(a) Bank request for designation as a limited purpose bank. To receive
a designation as a limited purpose bank, a bank must file a written
request with the Board at least 90 days prior to the proposed effective
date of the designation. If the Board approves the designation, it
remains in effect until the bank requests revocation of the designation
or until one year after the Board notifies a limited purpose bank
that the Board has revoked the designation on the Board’s own
initiative.
(b) Performance
evaluation.
(1) In general. To evaluate a limited
purpose bank, the Board applies the Community Development Financing
Test for Limited Purpose Banks as described in paragraphs (c) through
(f) of this section.
(2) Additional consideration.
(i) Community
development services. The Board may adjust a limited purpose bank’s
institution rating from “Satisfactory” to “Outstanding”
where a bank requests and receives additional consideration for services
that would qualify under the Community Development Services Test in
section 228.25.
(ii) Additional consideration for low-cost education loans. A limited
purpose bank may request and receive additional consideration at the
institution level for providing low-cost education loans to low-income
borrowers pursuant to 12 U.S.C. 2903(d), regardless of the limited
purpose bank’s overall institution rating.
(c) Community Development
Financing Test for Limited Purpose Banks.
(1) In general. Pursuant to section 228.21, the Community Development
Financing Test for Limited Purpose Banks evaluates a limited purpose
bank’s record of helping to meet the credit needs of its entire
community through community development loans and community development
investments (i.e., the bank’s community development financing
performance).
(2) Allocation. The Board considers community
development loans and community development investments allocated
pursuant to paragraph I.b of appendix B to this part.
(d) Facility-based assessment
area evaluation. The Board evaluates a limited purpose bank’s
community development financing performance in a facility-based assessment
area and assigns a conclusion in the facility-based assessment area
based on the Board’s:
(1) Consideration of the dollar volume
of the limited purpose bank’s community development loans and
community development investments that benefit or serve the facility-based
assessment area; and
(2) A review of the impact and responsiveness of the limited purpose
bank’s community development loans and community development
investments that benefit or serve a facility-based assessment area,
as provided in section 228.15.
(e) State or multistate MSA evaluation. The
Board evaluates a limited purpose bank’s community development
financing performance in each state or multistate MSA, as applicable
pursuant to sections 228.19 and 228.28(c), and assigns a conclusion
for the bank’s performance in the state or multistate MSA based
on the Board’s consideration of the following two components:
(1) Component one—Facility-based assessment
area performance conclusions in a state or multistate MSA. A
limited purpose bank’s community development financing performance
in its facility-based assessment areas in the state or multistate
MSA; and
(2) Component two—State or multistate MSA
performance. The dollar volume of the limited purpose bank’s
community development loans and community development investments
that benefit or serve the state or multistate MSA and a review of
the impact and responsiveness of those loans and investments, as provided
in section 228.15.
(f) Nationwide area evaluation. The Board evaluates
a limited purpose bank’s community development financing performance
in the nationwide area, pursuant to section 228.19, and assigns a
conclusion for the institution based on the Board’s consideration
of the following two components:
(1) Component
one—Facility-based assessment area performance. The limited
purpose bank’s community development financing performance in
all of its facility-based assessment areas; and
(2) Component
two—Nationwide area performance. The limited purpose bank’s
community development financing performance in the nationwide area
based on the following metrics and benchmarks in paragraphs (f)(2)(i)
through (iv) of this section and a review of the impact and responsiveness
of the bank’s community development loans and community development
investments in paragraph (f)(2)(v) of this section.
(i) Limited
Purpose Bank Community Development Financing Metric. The Limited
Purpose Bank Community Development Financing Metric measures the dollar
volume of a bank’s community development loans and community
development investments that benefit or serve all or part of the nationwide
area compared to the bank’s assets calculated pursuant to paragraph
III.a of appendix B to this part.
(ii) Community Development Financing
Benchmarks. The Board compares the Limited Purpose Bank Community
Development Financing Metric to the following benchmarks:
(A) Nationwide
Limited Purpose Bank Community Development Financing Benchmark. The Nationwide Limited Purpose Bank Community Development Financing
Benchmark measures the dollar volume of community development loans
and community development investments of depository institutions designated
as limited purpose banks or savings associations pursuant to 12 CFR
25.26(a) or designated as limited purpose banks pursuant to paragraph
(a) of this section or 12 CFR 345.26(a) reported pursuant to section
228.42(b) or 12 CFR 25.42(b) or 345.42(b) that benefit and serve all
or part of the nationwide area compared to assets for those depository
institutions, calculated pursuant to paragraph III.b of appendix B
to this part; and
(B) Nationwide Asset-Based Community Development
Financing Benchmark. The Nationwide Asset-Based Community Development
Financing Benchmark measures the dollar volume of community development
loans and community development investments that benefit or serve
all or part of the nationwide area of all depository institutions
that reported pursuant to section 228.42(b) or 12 CFR 25.42(b) or
345.42(b) compared to assets for those depository institutions, calculated
pursuant to paragraph III.c of appendix B to this part.
(iii) Limited Purpose
Bank Community Development Investment Metric. For a limited purpose
bank that had assets greater than $10 billion as of December 31 in
both of the prior two calendar years, the Limited Purpose Bank Community
Development Investment Metric measures the dollar volume of the bank’s
community development investments that benefit or serve all or part
of the nationwide area, excluding mortgage-backed securities, compared
to the bank’s assets, calculated pursuant to paragraph III.d
of appendix B to this part.
(iv) Nationwide Asset-Based Community
Development Investment Benchmark.
(A) For a limited purpose
bank that had assets greater than $10 billion as of December 31 in
both of the prior two calendar years, the Board compares the Limited
Purpose Bank Community Development Investment Metric to the Nationwide
Asset-Based Community Development Investment Benchmark. This comparison
may only contribute positively to the bank’s Community Development
Financing Test for Limited Purpose Banks conclusion for the institution.
(B) The Nationwide Asset-Based
Community Development Investment Benchmark measures the dollar volume
of community development investments that benefit or serve all or
part of the nationwide area, excluding mortgage-backed securities,
of all depository institutions that had assets greater than $10 billion
as of December 31 in both of the prior two calendar years, compared
to assets for those depository institutions, calculated pursuant to
paragraph III.e of appendix B to this part.
(v) Impact and responsiveness
review. The Board reviews the impact and responsiveness of the
bank’s community development loans and community development
investments that benefit or serve the nationwide area, as provided
in section 228.15.
(g) Community Development Financing Test for Limited
Purpose Banks performance conclusions and ratings.
(1) Conclusions. Pursuant to section 228.28
and appendix C to this part, the Board assigns conclusions for a limited
purpose bank’s Community Development Financing Test for Limited
Purpose Banks performance in each facility-based assessment area,
each state or multistate MSA, as applicable, and for the institution.
In assigning conclusions under this performance test, the Board may
consider performance context information as provided in section 228.21(d).
(2) Ratings. Pursuant to section 228.28 and
appendix D to this part, the Board incorporates a limited purpose
bank’s Community Development Financing Test for Limited Purpose
Banks conclusions into its state or multistate MSA ratings, as applicable,
and its institution rating.
