[Federal Register Volume 78, Number 209 (Tuesday, October 29, 2013)]
[Notices]
[Pages 64598-64600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25622]
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DEPARTMENT OF THE TREASURY
Community Development Financial Institutions Fund
Bank Enterprise Award (BEA) Program; Programmatic and
Administrative Aspects; Public Comment Request
AGENCY: Community Development Financial Institutions Fund, Department
of the Treasury.
ACTION: Request for public comment.
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SUMMARY: This notice invites comments from the public on certain
programmatic and administrative aspects of the Community Development
Financial Institutions Fund's (CDFI Fund) Bank Enterprise Award (BEA)
Program, pursuant to the BEA Program regulations set forth at 12 CFR
part 1806 (the Interim Rule). All materials submitted will be available
for public inspection and copying.
DATES: All comments and submissions must be received by December 30,
2013.
ADDRESSES: Comments should be sent by mail to: CDFI Fund, BEA Program
Office, U.S. Department of the Treasury, 1500 Pennsylvania Ave., NW.,
Washington, DC 20220; by email to [email protected]; or by facsimile
at (202) 508-0089. This is not a toll free number.
FOR FURTHER INFORMATION CONTACT: Information regarding the CDFI Fund
and its programs may be downloaded from the CDFI Fund's Web site at
http://www.cdfifund.gov.
SUPPLEMENTARY INFORMATION: Through the BEA Program, the CDFI Fund
encourages Insured Depository Institutions to increase their activities
in the form of loans, investments, services, and technical assistance
provided within Distressed Communities, as well as investments in
Community Development Financial Institutions (CDFIs) through grants,
stock purchases, loans, deposits, and other forms of financial and
technical assistance. The increase in these activities is measured from
a Baseline Period to an Assessment Period. Each capitalized term used
in this Request for Public Comments is more fully defined either in the
Interim Rule or the Notice of Funds Availability for the FY 2013 BEA
Program award round (Federal Register/Vol. 78, No.109) (the NOFA).
Through this notice, the CDFI Fund is seeking comments from the public
regarding certain programmatic and administrative aspects of the CDFI
Fund's BEA Program. Commentators are encouraged to consider, at a
minimum, the following topics:
I. Eligibility
A. CRA Rating: The Community Reinvestment Act (CRA) encourages and
examines efforts to service the banking needs of low- and moderate-
income communities. The CDFI Fund considers a financial institution's
CRA rating a key indicator of its efforts to serve the communities that
it does business in and the effectiveness of those efforts in providing
access to financial products and services to businesses and residents
of those communities, including low-and-moderate income communities.
As stated in Section VII ``Application Review Information'' of the
NOFA, the CDFI Fund may choose not to approve a BEA Program award at
the time of application if the Applicant and/or its affiliates' most
recent overall CRA assessment rating is below ``Satisfactory.'' This
determination is made during the review of the application.
The CDFI Fund is considering making this an ``Eligibility''
requirement (Section III of the NOFA). If implemented, Section III of
the NOFA would inform prospective Applicants that a CRA rating of below
``Satisfactory'' during the Baseline Period or the Assessment Period of
the applicable BEA Program award round will result in ineligibility.
1. Should the CDFI Fund consider an Applicant ineligible if the
Applicant's CRA rating is below ``Satisfactory'' and the CRA
examination date was within the applicable Baseline or Assessment
Period? If so, please indicate why. If not, please provide a specific
reason why not.
2. Should the CDFI Fund consider an Applicant ineligible if the
Applicant's most recent CRA rating is below ``Satisfactory'' but the
CRA examination date was prior to the applicable Baseline or Assessment
Period? If so, please indicate why. If not, please provide a specific
reason why not.
3. Should the CDFI Fund perform additional due diligence to obtain
an update on the status or progress made by the Applicant to improve
its CRA rating prior to making an eligibility determination? If so, in
which of the two scenarios above should additional due diligence be
performed? Should that information be self-reported by the
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Applicant, or provided directly by its Appropriate Federal Banking
Regulatory Agency?
B. Financial Health: The BEA Program requires award recipients to
deploy an amount equivalent to the award received in additional
Qualified Activities in the calendar year following the receipt of the
award. This requirement ensures that all BEA Program award proceeds are
directly invested in distressed communities. Award recipients must
remain in operation in order for their BEA Program award proceeds to be
successfully deployed in Distressed Communities. Therefore, the
financial health of an Applicant is an important factor in making an
award determination. The CDFI Fund considers an audit opinion a key
indicator of the financial health of an Applicant.
As stated in Section VII ``Application Review Information'' of the
NOFA, the CDFI Fund may choose not to approve a BEA Program Award at
the time of application if the Applicant received a going concern
opinion on its most recent audit. This determination is made during the
review of the application.
The CDFI Fund is considering making this an ``Eligibility''
requirement (Section III of the NOFA). If implemented, Section III of
the NOFA would inform prospective Applicants that a going concern audit
opinion during the Baseline Period or the Assessment Period of the
applicable BEA Program award round will result in ineligibility.
1. Should the CDFI Fund consider an Applicant ineligible to apply
for a BEA Program award if the Applicant received a going concern on
its most recent audit report? If not, please provide a specific reason
why not.
2. Is there additional financial health information that the CDFI
Fund should consider in making eligibility determinations? If so,
please describe.
II. Additional Program Considerations
A. Integrally Involved Certified-CDFIs: The Interim Rule defines
CDFI Support Activity as assistance provided by an Applicant or its
Subsidiary to a certified CDFI that meets criteria set forth by the
CDFI Fund in the applicable NOFA, that is Integrally Involved in a
Distressed Community. The NOFA defines Integrally Involved as having
provided: (i) At least 10 percent of financial transactions or dollars
transacted (e.g., loans or Equity Investments as defined in 12 CFR
1805.104(t)), or 10 percent of Development Service activities (as
defined in 12 CFR 1805.104(s)), in the Distressed Community identified
by the Applicant or the CDFI Partner, as applicable, in each of the
three calendar years preceding the date of the applicable NOFA, (ii)
having transacted at least 25 percent of financial transactions (e.g.,
loans or Equity Investments) in said Distressed Community in at least
one of the three calendar years preceding the date of the applicable
NOFA, or (iii) demonstrated that it has attained at least 10 percent of
market share for a particular product in said Distressed Community
(such as at least 10 percent of home mortgages originated in said
Distressed Community) in at least one of the three calendar years
preceding the date of the applicable NOFA.
1. Should the current definition of Integrally Involved be revised
or replaced? If so, how should the CDFI Fund define Integrally
Involved?
2. What other factors should the CDFI Fund consider when
determining an updated definition of Integrally Involved?
B. Updating the Types of BEA Qualified Activities: The CDFI Fund is
considering updating the types of activities eligible for BEA Program
awards. This includes the specific types of activities currently
considered eligible in the CDFI-Related, Distressed Community
Financing, and Service Activity categories. The following activities
are eligible CDFI-Related Activities: Equity-Like Loans (ELL), Grants
(CG), Loans (LNS), CDFI Deposits/Shares (DS), and Technical Assistance
(TA). The following activities are eligible Distressed Community
Financing Activities: Affordable Home Mortgage Loans (AHM), Affordable
Housing Development Loans and Project Investments (AHD), Home
Improvement Loans (HIL), Education Loans (EDU), and Commercial Real
Estate Loans and Project Investments (CRE). The following activities
are eligible Service Activities: Deposits (D), Community Services (CS),
Financial Services (FS), Targeted Financial Services (TFS), and
Targeted Retail Savings/Investment Products (TSP).
1. Should the CDFI Fund revise, replace, or add to the existing
types of CDFI-Related, Distressed Community Financing or Service
Activities to include financial products or services relevant to the
current economic environment? If so, please indicate the specific type
of activity that should be considered, the reasons why it should be
considered, and to the extent possible, the benefits of the activity to
residents of Distressed Communities. If the suggestion is that a
particular activity type be revised or replaced, please explain why.
C. Pay for Success: The CDFI Fund has received recent inquiries
about broadening BEA Qualified Activities to include ``Pay for
Success'' activities. The objective of the Pay for Success initiative
is to improve social outcomes while more effectively allocating public
resources, paying for services only when the desired results of social
outcomes are achieved. Examples of social outcomes include: academic
programs for disadvantaged youth that accelerate academic gains;
programs that reduce recidivism rates; and elderly care services that
reduce the number of elderly individuals placed in costly nursing home
facilities. Pay for Success has been part of the President's annual
budget since FY 2012. Pay for Success activities are typically
structured through contracts between state agencies and social service
providers. A financial institution can participate in Pay for Success
activities by providing the funding component. The financial
institution would be reimbursed by the federal government only if the
agreed-upon outcomes are achieved and verified by an external
evaluator. Since the anticipated social outcomes are achieved over a
number of years, Pay for Success contracts are typically multiple-year
commitments.
If a BEA applicant funds a certified CDFI that administers or
supports a Pay for Success activity, the activity could qualify as a
CDFI-related activity under the current Interim Rule. The CDFI Fund is
considering revising the Distressed Community Financing Activities
category to include the funding component of Pay for Success activities
by FDIC-insured financial institutions as a qualified activity. An
example of a Pay for Success activity which could qualify in the
Distressed Community Financing Activities category, is a loan or
investment made by an FDIC-insured financial institution to an
organization that funds a Pay for Success activity located in a BEA
Distressed Community. The Applicant would still need to be a FDIC-
insured financial institution, and the borrower would still need to be
located in a BEA Distressed Community in order for the transaction to
qualify. Disbursement of a Pay for Success award would be contingent
upon verification that the agreed upon social outcomes for which the
award determination was based have been achieved.
1. Should the CDFI Fund add Pay for Success activities as an
eligible Distressed Community Financing Activity? If so, please
indicate why. If not, please indicate why not.
[[Page 64600]]
2. If Pay for Success activities are added, should the CDFI Fund
cap the amount of BEA Program awards related to these activities? If
so, explain why and be specific regarding the amount in award dollars
and/or percentage.
3. Would the addition of Pay for Success activities as an eligible
Distressed Community Financing Activity incentivize financial
institutions to increase the funding of Pay for Success activities?
4. Do financial institutions currently fund Pay for Success
activities? If so, what are the attributes of the financial
institutions? For example, are they predominately certified-CDFIs,
community banks, minority depository institutions, small banks, large
banks, etc.?
D. Limitations on Loans or Investments to Certain Types of
Businesses: The CDFI Fund is considering prohibiting loans or
investments to certain types of businesses that otherwise meet other
eligibility criteria from qualifying for the BEA Program.
1. Should the CDFI Fund prohibit loans or investments to certain
types of businesses that otherwise meet other BEA Program eligibility
requirements from qualifying for the BEA Program? For example, should
the CDFI Fund consider a loan to a liquor store, gambling facility,
etc. that otherwise meets other BEA Program eligibility requirements,
an ineligible activity? If so, to which types of businesses should
loans or investments be considered ineligible? If not, please provide a
specific reason why not. Also, please discuss the positive or negative
impact that loans or investments to these types of businesses may have
on a Distressed Community.
E. Award Size: The CDFI Fund has received feedback regarding the
continued reduction in the maximum BEA Program award size. Over the
past three years, appropriated funds for the BEA Program have decreased
from $25 million in FY 2010 to approximately $17.1 million in FY 2013.
The CDFI Fund has continued to make an effort to award as many
Applicants as possible with available appropriations. In order to do
so, the CDFI Fund has lowered the award cap in the last three BEA
Program award rounds, reducing the maximum award amount an individual
Applicant can receive. For example, in FY 2010 the BEA Program was
appropriated $25 million and the award cap was $600,000. In FY 2011,
the BEA Program was appropriated $22 million and the award cap was
$500,000. In FY 2012, the BEA Program was appropriated $18 million and
the award cap was $415,000. The CDFI Fund is particularly interested in
knowing how impactful BEA Program awards are to: community banks,
certified CDFIs, minority depository institutions, and Small Banks
based on CRA Asset Size Classification (assets of less than $296
million as of 12/31/2012).
1. How impactful are BEA Program awards to the recipient financial
institutions?
2. Should the CDFI Fund consider making fewer, significantly larger
awards? For example, with an appropriation of $18 million, the CDFI
Fund could make 18 awards of $1 million each.
3. What other factors should the CDFI Fund consider regarding the
size of BEA Program awards?
III. Reporting and Supporting Documentation
A. Worksheet 2: BEA Report of Transactions: The CDFI Fund requires
BEA Applicants to complete and submit Worksheet 2: BEA Report of
Transactions as part of the BEA application. Worksheet 2: BEA Report of
Transactions captures the transaction data for the transactions an
Applicant included in its application. The data currently captured is:
(1) Name of Borrower/Investee/Service Provider; (2) Total Dollar Value
or Amount of Transactions; (3) Amount Disbursed to Date; (4) Street
Address; (5) City; (6) State; (7) Zip; (8) Census Tract; (9) Date of
Execution; (10) Date of Initial Disbursement; (11) Date of Final
Disbursement; (12) Type of Activity; and (13) Impact.
In addition to the information currently captured, the CDFI Fund is
considering adding two columns to Worksheet 2: BEA Report of
Transactions: (1) Description of Business Financed; and (2) NAICS Code
of the Business Financed. These two columns would only apply to loans
or investments provided to businesses.
1. Would the addition of these columns significantly increase the
burden on Applicants or result in any potential issues that the CDFI
Fund may not have considered?
2. Should the supporting documentation requirements apply to every
transaction, to only certain specific transaction types, or to
transactions of a certain amount?
B. Supporting Documentation Provided by Applicants: The CDFI Fund
currently requires Applicants to provide supporting documentation for
transactions greater than or equal to $250,000. The CDFI Fund is
considering changing the supporting documentation requirements.
1. Should the CDFI Fund require Applicants to provide supporting
documentation for loans or investments of less than $250,000? If so,
what type of supporting documentation should be required?
2. Would lowering the threshold amount for requiring supporting
documentation requirements significantly increase the burden on
Applicants or result in any potential issues that the CDFI Fund may not
have considered?
3. Should the supporting documentation requirements apply to every
transaction, to only certain specific transaction types, or to
transactions of a certain amount?
IV. Other
A. General Feedback: The CDFI Fund would also like to obtain
general feedback on the BEA Program and recognizes that there are other
topics that may not have been addressed in the questions above, but
that are important to consider. This information is especially
important given that the BEA Program statute is over 12 years old and
the Program regulations are over three years old. Please provide any
general feedback on any aspect of the BEA Program, including but not
limited to, program design, direction, impacts, performance measures,
etc.
Authority: 12 U.S.C. 1834a, 4703, 4703 note, 4713, 4717; 31
U.S.C. 321; 12 CFR part 1806.
Dated: October 23, 2013.
Donna J. Gambrell,
Director, Community Development Financial Institutions Fund.
[FR Doc. 2013-25622 Filed 10-28-13; 8:45 am]
BILLING CODE 4810-70-P