Considerations Of Qualified Activities Of A Bank's Affiliates In a CRA Examination
The FDIC may exempt an institution from federal CRA compliance by designating it as "special purpose," but the Division does not provide such an exemption. Wholesale institutions are subject to the Massachusetts CRA, Mass. Gen. Laws chapter 167, section 14 and its implementing regulations 209 CMR 46.00 et seq. Pursuant to 209 CMR 46.25(2), a wholesale institution does not extend home mortgage, small business, small farm or consumer loans to retail customers; its CRA performance is evaluated based on community development lending and services, and/or qualified investments.
The CRA performance of an affiliate designated a large institution is evaluated based on three performance tests: Lending Test; Service Test; and Investment Test. Under the Lending Test, the Division evaluates an institution's lending performance pursuant to several criteria. In addition, at an institution's option, the Division will consider loans by an affiliate of the institution, if the institution provides data on the affiliate's loans. Pursuant to 209 CMR 46.23(3) and 46.24(3), an institution also may ask the Division to consider a qualified investment and/or community development service, provided by an affiliate of the institution, if said investment or service is not claimed by any other institution.
Wholly-owned subsidiary institutions of the same bank holding company are subject separately to compliance with the Massachusetts CRA. In addition, what the institutions do in conjunction with the FDIC examination process will not impact the Division's examinations. Where both entities are subject to Massachusetts CRA compliance, "shifting" activities, while enhancing the CRA performance of one institution, could negatively impact the CRA performance of the other institution.