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Inactive Financial Institution Letters
|March 8, 1996|
EXECUTIVE OFFICER and COMPLIANCE OFFICER
Examination Procedures and Public Evaluation Formats
| The joint examination
procedures for monitoring compliance with the revised Community
Reinvestment Act (CRA) regulations, adopted by the four Federal
bank and thrift regulatory agencies, are attached for your information.
Separate examination procedures have been established for small institutions, large retail institutions, limited purpose or wholesale institutions, and institutions with approved strategic plans. The differences in the four assessment methods are based on variations in institutions size, structure, and operations.
Evaluations of small institutions under the new examination procedures began on January 1, 1996. Under the new CRA regulations, a small institution is an institution that (1) had total assets of less than $250 million as of December 31 of either of the two prior calendar years; and (2) was independent or an affiliate of a holding company that had total banking and thrift assets of less than $1 billion as of December 31 of either of the two prior calendar years.
Evaluations of large retail institutions under the new examination procedures will begin on July 1, 1997, to enable the agencies to use newly reported loan data. Large retail institutions are retail institutions that do not meet the definition of a small institution. An institution of any size may elect evaluation under these examination procedures for large institutions before July 1, 1997, if the institution can provide to examiners data on small business and small farm loans, and community development loans for the 12-month period preceding the examination.
Wholesale and limited purpose institutions may be evaluated under a community development test. Wholesale institutions are those that are not in the business of extending home mortgage, small business or farm, or consumer loans to retail customers. Limited purpose institutions offer only a narrow product line (such as credit card or motor vehicle loans) to a regional or broader market. In order for an FDIC-supervised institution to be evaluated as a wholesale or limited purpose institution, the institution must request designation as such by the FDIC. Procedures for requesting designation as a wholesale or limited purpose institution were distributed by the FDIC on January 11, 1996, in FIL-3-96.
As an alternative to the other assessment methods, beginning January 1, 1996, any institution may submit to the FDIC a strategic plan for approval and be evaluated using the strategic plan examination procedures once the approved plan has been in effect for one year. Procedures for submitting a strategic plan for approval were included in FIL-3-96.
Each set of examination procedures contains steps for constructing a performance context in which to evaluate an institution, reviewing its assessment area(s), and analyzing the performance criteria prescribed in the regulation. A public file checklist is included at the end of each set of procedures.
Also attached are newly adopted public evaluation formats that reflect each examination method. These formats also address new CRA requirements, as amended by The Interstate Banking and Branching Efficiency Act of 1994 (IBBEA) concerning the contents of public evaluations. The four Federal regulatory agencies must not only assign a rating to each institutions overall performance in meeting the credit needs of its community, but also assign a rating to each institutions performance in each state in which it operates branches, and to each multistate metropolitan statistical area (MSA) in which it operates branches in two or more states within the multistate MSA. The IBBEA also requires that the agencies state their conclusions separately for each MSA in which an institution operates branches and for the non-metropolitan portions of each state in which an institution operates branches.
The new examination procedures will be incorporated into the next edition of the FDICs Compliance Examination Manual, which we expect to issue in loose-leaf form in the summer of 1996. All FDIC-supervised institutions will be offered a subscription to the new manual.
If you have questions concerning the examination procedures or public evaluation formats, please contact the Regional Office of the FDICs Division of Compliance and Consumer Affairs shown on the attached address list.
The attachment to this Financial Institution Letter is not currently available in electronic format. Until it is in a form that will allow us to post it to the internet, you may obtain hard copy or fax from:
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