Dear [ ]:
This letter responds to your correspondence dated September 27, 1996 concerning the definition of community development services in the agencies’ Community Reinvestment Act (CRA) regulations. As you know, the four bank and thrift regulatory agencies have promulgated substantially identical regulations. Therefore, staff from all of the agencies have considered the issue you raised and concur in the opinions expressed in this letter.
Question: What do examiners look for, and require when examining for "community development services" evaluations?
A community development service is defined in the regulation as a service, having as its primary purpose community development; which is related to the provision of financial services; and which has not been considered in the evaluation of the bank’s retail banking services. See 12 C.F.R. § 25.12(j), 228.12(j), 345.12(j), and 563e.12(i). Community development is defined in the regulation as: affordable housing (including multifamily rental housing) for low- or moderate-income individuals; community services targeted to low-or moderate-income individuals; activities that promote economic development by financing of businesses or farms that meet the size eligibility standards of of the Small Business Administration’s Development Companies or Small Business Investment Companies programs (13 CFR 121.301) or have gross annual revenues of $1 million or less; or activities that revitalize or stabilize low- or moderate-income geographies. See 12 C.F.R.§ 25.12(h), 228.12(h), 345.12(h), and 563e.12(g).
In addition to meeting the definition of "community development", community development services must also be related to the provision of financial services. Question 1 under .12(j) & 563e.(i) Community Development service in the newly released Interagency Questions and Answers Regarding Community Reinvestment (61 Fed. Reg. 54,647, 54,650 (Oct. 21, 1996)) provides further guidance on what is meant by the provision of financial services.
It is also important to note that personal charitable activities provided by an institution’s employees or directors outside the ordinary course of their employment are not considered community development services. In order to be considered for purposes of CRA, these services must be provided by the employees or director as a representative of the institution. For an example see Question 2 under .12(j) & 563e.(i) Community Development Service in the Inter-agency Questions and Answers.
For other examples of community development services and technical assistance activities that might be provided to community development organizations please see the Inter-agency Questions 3 under .12(j) & 563e.(i) Community Development Services. I trust this letter is responsive to your inquiry. We have included a copy of the recently released interagency staff commentary containing guidance regarding the new regulation in the form of questions and answers which we hope you find useful. If you have any further questions, please feel free to contact me at (202) 452-3585.
Glenn E. Loney
Division of Consumer and Community Affairs
Board of Governors of the Federal Reserve System