On March 22, 2021, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), and Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) published an interim final rule to support and facilitate the timely implementation of the congressionally authorized Emergency Capital Investment Program (ECIP). Under ECIP, the U.S. Department of the Treasury (Treasury) can make capital investments in certain low- and moderate-income community financial institutions. This interim final rule provides that preferred stock issued under ECIP qualifies as additional tier 1 capital and that subordinated debt issued under ECIP qualifies as tier 2 capital under the agencies’ capital rule. Although this interim final rule is effective immediately upon publication in the Federal Register, the agencies are accepting comments and may make revisions as appropriate. The deadline for comments on the interim final rule is May 21, 2021.
Note for Community Banks
The interim final rule applies to community banks that are designated as minority depository institutions or community development financial institutions.
- Under ECIP, a financial institution is generally eligible to receive capital investments from Treasury if it is a low- and moderate-income community financial institution, which is defined by the Consolidated Appropriations Act, 2021 to include any financial institution that is (1) a community development financial institution or minority depository institution, and (2) an insured depository institution, bank holding company, savings and loan holding company, or federally insured credit union (collectively, eligible banking organizations).
- Under ECIP, Treasury can acquire senior preferred stock from eligible banking organizations (senior preferred stock).
- If Treasury determines that an eligible banking organization cannot feasibly issue preferred stock, such as a bank organized as an S corporation or a mutual banking organization, Treasury can acquire subordinated debt instruments (subordinated debt) from such an eligible banking organization.
- To facilitate implementation of ECIP, the agencies are revising the capital rule to clarify that senior preferred stock will qualify as additional tier 1 capital and subordinated debt will qualify as tier 2 capital.
- Information about ECIP, including the terms of the investments and application process, can be found on Treasury’s website.
On December 27, 2020, the Consolidated Appropriations Act, 2021 (Act) was signed into law and added a new section 104A to the Community Development Banking and Financial Institutions Act of 1994. Section 104A authorizes Treasury to establish ECIP, through which Treasury can make capital investments in certain low- and moderate-income community financial institutions. The Act states that the purpose of these capital investments is to support the efforts of low- and moderate-income community financial institutions to, among other things, provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers in low-income and underserved communities, including persistent poverty counties, which may be disproportionately impacted by the economic effects of the Coronavirus 2019 (COVID–19) event.
Treasury’s authority to make capital investments under ECIP is time limited. ECIP will end six months after the date on which the national emergency concerning the COVID–19 outbreak terminates.
Please contact Margot Schwadron, Director, Capital Policy, or Andrew Tschirhart, Risk Expert, Capital Policy, (202) 649-6370, or Carl Kaminski, Special Counsel, Chief Counsel’s Office, (202) 649-5490. Persons who are hearing impaired, contact TTY, (202) 649-5597.