WASHINGTON -- The Federal Reserve Board made it easier this week for healthy banks to invest in low- and moderate-income housing and other community development projects.
Banks must notify the Fed of the transaction but no longer need wait for a reserve bank to approve the deal or explain to the Fed how the investment complies with Regulation H.
Housing, commercial enterprises, and training programs in low- and moderate-income areas qualify for the expedited process. Also, the Comptroller of the Currency's prior approval suffices.
A number of institutions with capital or regulatory compliance problems, such as those scoring below satisfactory on consumer compliance exams or with Camel ratings below 2, cannot use the stream-lined approach.
"This rule is much better than the existing rule," said Karen Thomas, regulatory counsel to the Independent Bankers Association of America. "But it could have gone further."
The Fed should have expanded the types of investments banks can make without prior approval, she said. Some rural banks will have trouble finding low- and moderate-income areas to invest in because people do not live near each other, she added.