Q: § __.12(n) – 2: What factors will the Agencies consider to determine whether an institution that, if limited purpose, makes loans outside a narrow product line, or, if wholesale, engages in retail lending, will lose its limited purpose or wholesale designation because of too much other lending?
A: Wholesale institutions may engage in some retail lending without losing their designation if this activity is incidental and done on an accommodation basis. Similarly, limited purpose institutions continue to meet the narrow product line requirement if they provide other types of loans on an infrequent basis. In reviewing other lending activities by these institutions, the Agencies will consider the following factors:
• Is the retail lending provided as an incident to the institution’s wholesale lending?
• Are the retail loans provided as an accommodation to the institution’s wholesale customers?
• Are the other types of loans made only infrequently to the limited purpose institution’s customers?
• Does only an insignificant portion of the institution’s total assets and income result from the other lending?
• How significant a role does the institution play in providing that type(s) of loan(s) in the institution’s assessment area(s)?
• Does the institution hold itself out as offering that type(s) of loan(s)?
• Does the lending test or the community development test present a more accurate picture of the institution’s CRA performance?
This Interagency Q&A, and others, was released in July 2016.
The 2016 Q&As consolidates and supersedes all previously published “Interagency Questions and Answers Regarding Community Reinvestment,” and were noted as being effective immediately. They may be found here: http://www.ffiec.gov/cra/qnadoc.htm