Interagency Q&A .23(a) – 2: What information may an institution provide to demonstrate that an investment in a nationwide fund (w/a community dev. purpose) will benefit the institution’s assessment area(s)?

Compliance > Regulation BB - CRA
Q:  § __.23(a) – 2: In order to receive CRA consideration, what information may an institution provide that would demonstrate that an investment in a nationwide fund with a primary purpose of community development will directly or indirectly benefit one or more of the institution’s assessment area(s) or a broader statewide or regional area that includes the institution’s assessment area(s)?
 
A:  There may be several ways to demonstrate that the institution’s investment in a nationwide fund meets the geographic requirements, and the Agencies will employ appropriate flexibility in this regard in reviewing information the institution provides that reasonably supports this determination.
 
In making this determination, the Agencies will consider any information provided by a financial institution that reasonably demonstrates that the purpose, mandate, or function of the fund includes serving geographies or individuals located within the institution’s assessment area(s) or a broader statewide or regional area that includes the institution’s assessment area(s).  Typically, information about where a fund’s investments are expected to be made or targeted will be found in the fund’s prospectus, or other documents provided by the fund prior to or at the time of the institution’s investment, and the institution, at its option, may provide such documentation in connection with its CRA evaluation.
 
Nationwide funds are important sources of investments in low- and moderate-income and underserved communities throughout the country and can be an efficient vehicle for institutions in making qualified investments that help meet community development needs.  Nationwide funds may be suitable investment opportunities, particularly for large financial institutions with a nationwide branch footprint.  Other financial institutions, including those with a nationwide business focus, may find such funds to be efficient investment vehicles to help meet community development needs in their assessment area(s) or the broader statewide or regional area that includes their assessment area(s).  Prior to investing in such a fund, an institution should consider reviewing the fund’s investment record to see if it is generally consistent with the institution’s investment goals and the geographic considerations in the regulations.  Examiners will consider investments in nationwide funds that benefit the institution’s assessment area(s).  Examiners will also consider investments in nationwide funds that benefit the broader statewide or regional area that includes the institution’s assessment area(s) consistent with the treatment detailed in Q&A § __.12(h) – 6.
 
 
 
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
 

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