[Code of Federal Regulations] [Title 12, Volume 2, Parts 200 to 219] [Revised as of January 1, 2001] From the U.S. Government Printing Office via GPO Access [CITE: 12CFR208.22] [Page 171-172] TITLE 12--BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL RESERVE SYSTEM (REGULATION H)--Table of Contents Subpart B--Investments and Loans Sec. 208.22 Community development and public welfare investments. (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). (b) Investments not requiring prior Board approval. Notwithstanding the provisions of section 5136 of the Revised Statutes (12 U.S.C. 24, para. 7th) 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 [[Page 172]] (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 five percent of its capital stock and surplus; (5) The member bank is well capitalized or adequately capitalized under Secs. 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. (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 Board approval under this paragraph (d) shall 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. (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.