Wholesale/Limited Purpose Institution Procedures Flashcards
What are wholesale and limited purpose banks evaluated on? (3)
Wholesale or limited purpose institutions are evaluated on the basis of their:
- Community development lending, qualified investments, or community development services;
- Use of innovative or complex qualified investments, community development loans, or community development services and the extent to which investments are not routinely provided by private investors; and
- Responsiveness to community credit and development needs.
What must an institution do to be considered a wholesale/Limited purpose bank and be evaluated under the Community Development test?
To be evaluated under the CD test, a bank must be designated as a Wholesale or limited purpose bank.
To become designated, the bank must submit a written request to and receive approval from the regulator. Once designated, the bank need not reapply.
Upon approval of a wholesale limited purpose bank designation, how long does that designation last?
Are there ways this designation can be revoked?
The designation remains in effect until the bank requests it be revokes or until one year after the agency determines the bank no longer satisfies the criteria for designation and notifies the bank of the determination.
During a PE evaluation, examiners should analyze a bank’s operations to determine if any significant changes result in the bank no longer satisfying the criteria for designation.
True or false:
Banks need to engage in all three categories of CD activities to be considered satisfactory under the CD test.
False. Banks do not need to engage in all three CD categories to receive a satisfactory rating.
Examiners should recognize the wholesale/limited purpose banks may tailor their CD activities based on their own circumstances and the CD opportunities available in the AA or broader statewide or regional areas.
Can CD activities that are directed at a broader statewide or regional market still be qualified under the CD test?
Yes if they include the institution’s AA and meet CD qualifications they can be included as benefitting the AA.
Moreover, if the bank has a satisfactory CD record in its AA all CD activities regardless of location should be considered.
What factors should be considered when determining which AA should receive a full scope or limited scope review? (8)
(at a bank with more than one AA)
a. The lending, investment, and service activity in the
different assessment areas, particularly community
development activities;
b. The lending, investment, and service opportunities
available in the different assessment areas,
particularly community development opportunities;
c. The length of time since the assessment area(s)
received a full scope review;
d. The institution’s prior CRA performance in different
assessment areas;
e. The number of other institutions in the assessment areas and the importance of the institution under examination in addressing community development needs in the different assessment areas, particularly in areas with a limited number of financial service providers;
f. The existence of apparent anomalies in the reported
HMDA data for any particular assessment area;
g. Examiners’ knowledge of the same or similar
assessment areas; and
h. Comments from the public regarding the institution’s
CRA performance.
For interstate institutions, how many ratings should be assigned?
For interstate institutions, a rating must be assigned for
each state where the institution has a branch and for each multi-state metropolitan statistical areas/metropolitan divisions (MSA/MD) where the institution has branches in
two or more of the states that comprise the multi-state
MSA/MD. Select one or more assessment areas in each
state for examination using the full scope procedures.
What information should be reviewed to determine performance context? (5)
- demographic, economic, and loan data for each AA under review.
- information the bank provides on local community, economy, and CD activity capacity.
- community contact data
- ability and capacity of the bank to participate in local CD activities. (Call reports, financial info, annual reports, CRA PEs, similarly situated banks)
- comments in the bank’s public file since the LX
When reviewing a bank’s AA examiners should ensure it meets what standards? (5)
a. Consists of one or more MSAs/MDs or contiguous
political subdivisions (i.e., counties, cities, or towns)
where the institution has its main office, branches, and
deposit-taking ATMs;
b. Consists only of whole census tracts;
c. Consists of separate delineations for areas that extend substantially across MSA/MD or state boundaries
unless the assessment area is located in a multistate
MSA/MD;
d. Does not reflect illegal discrimination; and
e. Does not arbitrarily exclude any low- or moderate income area(s) taking into account the institution’s size and financial condition.
If an AA does not coincide with the boundaries of an MSA/MD or political subdivision what should examiner’s assess?
whether the adjustments to the boundaries were
made because the assessment area would otherwise be too large for the institution to reasonably serve, have an unusual configuration, or include significant geographic
barriers.
What should examiners do if the bank’s AA does not comply with the required criteria?
If the assessment area(s) fails to comply with the applicable criteria described above, develop, based on
discussions with management, a revised assessment area(s) that complies with the criteria. Use this assessment area(s) to evaluate the institution’s performance, but do not otherwise consider the revision in determining the
institution’s rating.
According to the procedures, what 4 things should examiners do under the CD test?
- Identify the number and amount of the bank’s CD loans, qualified investments, and CD services.
- Verify the identified CD activities qualify as community development.
- if the bank claims CD activity from third parties, affiliates, or participations, review bank records to ensure CD loans only account for the bank’s share.
- consider the bank’s capacity and constraints and performance context when drawing conclusions about the bank’s performance
What documentation can examiners review to identify CD activities, and what types of CD activities can be included at the bank’s option? (2)
Examiners can review originated an purchased CD loans, and review HMDA data, investment portfolio, and other financial records. At the bank’s option include:
- CD activities provided by affiliates if they are not claimed by any other bank.
- CD lending by consortia (participations) or third parties.
What areas under the CD test must examiners form conclusions about? (5)
(areas evaluated to determine ratings)
Considering the institution’s capacity and constraints and
other information obtained through the performance
context review, form conclusions about:
a. The extent, by number and dollar amount of
community development loans, services, and qualified
investments;
b. The degree of innovation in community development
activities (e.g., serving low- or moderate-income
borrowers in new ways or serving groups of
creditworthy borrowers not previously served by the
institution);
c. The complexity of those community development
activities, such as the use of enhancements or other
features specifically designed to expand community development lending;
d. The responsiveness to the opportunities for community development lending, qualified investments, and community development
services; and
e. The degree to which the institution’s qualified
investments serve needs not routinely provided by
other private investors.
When determining ratings, what CD activities should be considered?
CD performance in each AA examined, only considering those CD activities that benefit the AAs broader statewide or regional areas that include the AAs.
