Emergency Capital Investment Program-Restrictions on Executive Compensation, Share Buybacks, and Dividends (rule, 86 FR 13449, March 9, 2021)
Summary
An interim final rule and request for public comment from the Department of the Treasury on restrictions on executive compensation, share buybacks and dividends under the Emergency Capital Investment Program (ECIP). It was published in the Federal Register on March 9, 2021 (Vol. 86, No. 44). It states that Section 104A of the Community Development Banking and Financial Institutions Act of 1994, added by the Consolidated Appropriations Act, 2021 (Pub. L. 116–260), establishes the ECIP to support capital investments in low- and moderate-income community financial institutions. Treasury states that the statute called for these restrictions for ECIP recipients within 30 days after enactment and that it has good cause to issue the rule without advance notice and comment. The rule is effective March 9, 2021, with comments due on or before April 8, 2021.
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Cite this document
“Emergency Capital Investment Program-Restrictions on Executive Compensation, Share Buybacks, and Dividends (rule, 86 FR 13449, March 9, 2021).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/emergency-capital-investment-program-restrictions-on-executive-compens-dcbe33d3fd/
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations 13449
delay effective dates when the agency, Comment date: Comments must be support the efforts of low- and
for good cause, finds that the received on or before April 8, 2021. moderate-income community financial
requirement is impracticable, ADDRESSES: You may submit comments institutions to, among other things,
unnecessary, or contrary to the public identified by number TREAS–DO– provide loans, grants, and forbearance
interest (5 U.S.C. 553(b)(B) and (d)(3)). 2021–0004 through the Federal for small businesses, minority-owned
There is good cause to waive both of eRulemaking Portal: http:// businesses, and consumers, especially
these requirements here as they are www.regulations.gov. Follow the in low-income and underserved
impracticable. A delay in the effective instructions for submitting comments. communities, including persistent
date of the final rule, titled Treasury will post all comments on poverty counties, which may be
‘‘Streamlined Launch and Reentry www.regulations.gov. If you wish to disproportionately impacted by the
License Requirements,’’ is necessary for submit confidential business economic effects of the COVID–19
the President’s appointees and information (CBI) as defined in the User pandemic.
designees to have adequate time to Notice at www.regulations.gov, please Under Section 104A(h) of the Act, the
review the rule before it takes effect, and send an email to ECIPInquiries@ Department of the Treasury (Treasury)
neither the notice and comment process Treasury.gov. Highlight the information must issue rules setting restrictions on
nor the delayed effective date could be that you consider to be CBI and explain executive compensation, share
implemented in time to allow for this why you believe Treasury should hold buybacks, and dividend payments for
review. this information as confidential. recipients of capital investments under
Issued in Washington, DC, under the Treasury will review the information ECIP. This rulemaking establishes those
authority in 49 U.S.C. 106(f) and 51 U.S.C. and make the final determination restrictions, which are described in
Chapter 509, on February 22, 2021. whether it will publish the information. section III below.
Steve Dickson, FOR FURTHER INFORMATION CONTACT: For II. Comments and Immediate Effective
Administrator. further information regarding this Date
[FR Doc. 2021–04068 Filed 3–8–21; 8:45 am] interim final rule contact Brian
Donovan, Emergency Capital Investment ECIP is intended to be used to make
BILLING CODE 4910–13–P
Program, Treasury, at (202) 653–0371 or investments in low- and moderate-
Brian.Donovan2@treasury.gov, or Eric income community financial
Froman, Assistant General Counsel institutions expeditiously.1 Section
DEPARTMENT OF THE TREASURY 104A(h) of the Act requires Treasury to
(Banking and Finance), Treasury, at
31 CFR Part 35 (202) 622–1942 or Eric.Froman@ issue rules no later than 30 days after
treasury.gov. the statute’s effective date that set
[Docket No. TREAS–DO–2021–0004] restrictions on executive compensation,
SUPPLEMENTARY INFORMATION:
RIN 1505–AC76 share buybacks, and dividend payments
Table of Contents for recipients of capital investments
Emergency Capital Investment I. Background Information
under ECIP. This legislative mandate,
Program—Restrictions on Executive II. Comments and Immediate Effective Date along with the dramatic and ongoing
Compensation, Share Buybacks, and III. Interim Final Rule effects of the COVID–19 pandemic—the
Dividends A. Background on the ECIP public health crisis, continuing closures
B. Overview of the Interim Final Rule of small businesses and minority-owned
AGENCY: Department of the Treasury. 1. Restrictions on Compensation businesses, and heightened consumer
ACTION: Interim final rule and request 2. Restrictions on Dividends, Share unemployment, especially in low-
for public comment. Buybacks, and Other Capital
income and underserved communities—
Distributions
SUMMARY: Section 104A of the IV. Regulatory Analyses provides good cause for Treasury to
Community Development Banking and A. Administrative Procedure Act issue this interim final rule without
Financial Institutions Act of 1994, B. National Environmental Policy Act advance notice and public comment and
which was added by the Consolidated C. Paperwork Reduction Act to dispense with the 30-day delayed
Appropriations Act, 2021, establishes D. Regulatory Flexibility Act effective date provided in the
E. Regulatory Planning and Review Administrative Procedure Act (5 U.S.C.
the Emergency Capital Investment F. Executive Order 13132
Program to support capital investments 553). The immediate effective date of
G. Congressional Review Act
in low- and moderate-income this interim final rule will benefit low-
community financial institutions. The I. Background Information and moderate-income community
program is available to eligible minority On December 27, 2020, the financial institutions, as well as the
depository institutions and community Consolidated Appropriations Act, 2021 communities served by such
development financial institutions that (Pub. L. 116–260), was signed into law. institutions, by allowing low- and
are insured depository institutions, bank It added Section 104A of the moderate-income community financial
holding companies, savings and loan Community Development Banking and institutions to expeditiously apply for
holding companies, or federally insured Financial Institutions Act of 1994 (the capital investments with a full
credit unions. Under Section 104A, the Act) (12 U.S.C. 4701 et seq.), which was understanding of the executive
Secretary of the Treasury is required to enacted as part of the Riegle Community compensation, share buyback, and
issue rules setting restrictions on Development and Regulatory dividend payment restrictions that will
executive compensation, share Improvement Act of 1994 (Pub. L. 103–
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1 For example, section 104A(d)(1) of the Act
buybacks, and dividend payments for 325). Section 104A authorizes the requires Treasury to begin accepting applications
recipients of capital investments under Secretary of the Treasury to establish for capital investments under ECIP within 30 days
the program. This interim final rule the Emergency Capital Investment after enactment of the statute, and section
establishes these restrictions. Program (ECIP or Program) to make 104A(h)(1) requires Treasury to issue rules setting
restrictions on executive compensation, share
DATES: investments in low- and moderate- buybacks, and dividend payments for ECIP
Effective date: This interim final rule income community financial recipients within 30 days after enactment of the
is effective March 9, 2021. institutions. These investments are to statute.
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13450 Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations
apply to participants in the Program. Consistent with statutory requirements, under ECIP is no longer held, in full or
Otherwise, potential recipients of the investment by Treasury will take the in part, by Treasury or a Treasury
capital investments under ECIP could form of preferred stock, except in cases affiliate, or a custodian, trustee, or agent
decide not to participate in the Program where Treasury determines that an acting on behalf of Treasury or a
or to delay their applications for a institution cannot feasibly issue Treasury affiliate, and (iii) the date that
material period of time pending the preferred stock, Treasury may purchase is ten years after the ECIP investment
establishment of these requirements, subordinated debt instruments.6 The date. The restrictions apply to the ECIP
which would reduce or delay the statute sets forth certain economic terms recipient on a consolidated basis.
provision of much-needed assistance to of the capital investments under ECIP 7 Treasury anticipates that the ECIP
communities that have suffered and limitations on the amount of capital period will provide sufficient time to
economic impairment due to the investments Treasury may purchase ensure that ECIP investments are
COVID–19 pandemic. Although this from individual institutions.8 In deployed in a manner that supports the
interim final rule is effective addition, the statute prohibits statutory objectives. Accordingly, the
immediately, comments are solicited institutions with certain types of requirements of the interim final rule
from the public on all aspects of the conflicts of interest from participating in will cease to apply when the ECIP
interim final rule. Comments must be ECIP.9 Treasury’s authority to make new investment is no longer held by
submitted on or before April 8, 2021. capital investments in ECIP will end six Treasury or an entity established by
Treasury will consider these comments months after the date on which the Treasury (Treasury affiliate).
and the need for making any revisions national emergency concerning the 1. Restrictions on Compensation
as a result of these comments. COVID–19 outbreak declared by the
President on March 13, 2020 under the The restrictions on executive
III. Interim Final Rule compensation under the interim final
National Emergencies Act (50 U.S.C.
A. Background on the ECIP 1601 et seq.) terminates. rule include (i) a requirement to ensure
that the total compensation paid to
The purpose of ECIP is to support the B. Overview of the Interim Final Rule senior executive officers is appropriate
efforts of low- and moderate-income
This interim final rule establishes and not excessive; (ii) a restriction on
community financial institutions to,
restrictions on executive compensation, severance pay for an ECIP recipient’s
among other things, provide loans,
share buybacks, and dividend senior executive officers if the ECIP
grants, and forbearance for small
payments, as required by the Act. In recipient is in troubled condition; and
businesses, minority-owned businesses,
developing these restrictions, Treasury (iii) a requirement to adopt policies and
and consumers, especially in low-
has considered two primary objectives. procedures prohibiting excessive or
income and underserved communities,
First, these restrictions should seek to luxury expenditures (as defined below).
including persistent poverty counties,
which may be disproportionately promote the integrity of ECIP by Each of these compensation-related
impacted by the economic effects of the ensuring that the funds provided under restrictions is intended to help ensure
COVID–19 pandemic.2 To support these the Program are used to provide loans, that the proceeds of ECIP investments
objectives, the Act makes up to $9 grants, and forbearance for small have the effect intended by Section
billion available to Treasury to make businesses, minority-owned businesses, 104A of the Act and are not to fund
capital investments in minority and consumers, especially in low- excessive compensation for ECIP
depository institutions and community income and underserved communities. recipients’ executives.
Second, the restrictions generally The restrictions on excess
development financial institutions that
are (1) insured depository institutions should seek to encourage a large number compensation apply to total
that are not controlled by eligible bank of minority depository institutions and compensation, which is defined as all
holding companies or eligible savings community development financial compensation, other than any severance
and loan holding companies, (2) bank institutions to participate in ECIP, payment, provided by an ECIP recipient
holding companies, (3) savings and loan because the Program will have the most to an officer or employee, including
holding companies, or (4) federally beneficial impact on the intended salary, wages, bonuses, awards of stock,
insured credit unions. Certain communities if a broad range of deferred compensation, and other
additional eligibility criteria apply, institutions participate in the Program. financial benefits.
A ‘‘senior executive officer’’ means an
including a requirement for applicants The restrictions under this interim
ECIP recipient’s president, any vice
to provide Treasury with an investment final rule generally apply to an ECIP
president in charge of a principal
and lending plan that provides certain recipient during the ‘‘ECIP period,’’
business unit division or function (such
specified information concerning the defined as the period from the date the
as sales, administration, or finance), any
applicant’s lending history and plans.3 ECIP makes its investment until the
A community development financial other officer who performs a policy
earliest of (i) the date on which the ECIP
institution or minority depository making function, or any other person
recipient has fully redeemed or repaid
institution that submits an application who performs similar policy making
the capital investment received under
and is selected to participate in the functions.
ECIP; (ii) the date on which the capital
Program (ECIP recipient) will receive a investment the ECIP recipient received i. Policies and Procedures Prohibiting
capital investment from Treasury.4 5 Excessive Compensation
National Credit Union Administration (NCUA) are
2 Section 104A(b)(2) of the Act. those with a designation of low-income status. See
Under the interim final rule, an ECIP
12 CFR 701.34(b). Credit unions that do not meet recipient is required to ensure that the
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3 Sections 104A(d)(3)–(4), 104A(i) of the Act.
4 An ECIP capital investment may be treated as the low-income credit union designation may total compensation paid to its senior
equity or subordinated debt for accounting participate through the issuance of subordinated executive officers is appropriate and not
debt, but the subordinated debt would not be
purposes depending on the type of instrument
secondary capital.
excessive. Unless informed otherwise by
issued and the corporate form and regulatory Treasury, an ECIP recipient is
6 Section 104(d)(5)(B) of the Act.
classification of the ECIP participant.
5 Currently, the only Federal credit unions that 7 Sections 104A(d)(5)–(8) of the Act. considered to have satisfied the
may accept these types of investments as secondary 8 Sections 104A(e), (f) of the Act. requirements regarding excessive
capital under the secondary capital rules of the 9 Section 104A(h) of the Act. executive compensation under the
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations 13451
interim final rule if it maintains prohibitions on the ability of insured customers and community are not
compliance with the guidelines or depository institutions and their excessive or luxury expenditures.
standards established by its primary affiliated holding companies to enter The interim final rule requires an
Federal regulator that address excessive into contracts to pay and to make golden ECIP recipient to adopt and maintain an
compensation, corporate practices, and parachute and indemnification ‘‘excessive or luxury expenditures
operations. Specifically, ECIP recipients payments to institution-affiliated policy’’ that sets forth written standards
that are insured depository institutions parties, as issued by the FDIC.14 The applicable to the ECIP recipient and its
are subject to the Interagency Guidelines FDIC rules place restrictions on employees that address the five
Establishing Standards for Safety and payments to institution-affiliated parties categories of expenses set forth in the
Soundness as issued by the appropriate whenever an insured depository definition of ‘‘excessive or luxury
Federal banking agency for the institution or depository institution expenditures’’ and that are reasonably
particular ECIP recipient.10 Bank holding company is in ‘‘troubled designed to eliminate excessive or
holding companies and savings and condition,’’ as determined by the luxury expenditures. The standards
loan holding companies are required to appropriate Federal banking agency. An must (1) identify the types or categories
maintain compliance with corporate ECIP recipient that is not designated in of expenditures which are prohibited;
practice 11 and operations troubled condition by the appropriate (2) identify the types or categories of
requirements 12 issued by the Board of Federal banking agency during the ECIP expenditures for which prior approval is
Governors of the Federal Reserve period generally would not be subject to required (which may include a
System (Federal Reserve Board), and, restrictions on severance payments threshold expenditure amount per item,
under the interim final rule, to ensure under the interim final rule. Similarly, activity, or event or a threshold
their subsidiary insured depository a federally insured credit union is expenditure amount per employee
institutions adopt and maintain policies considered to have satisfied the receiving the item or participating in the
and procedures that are consistent with requirements regarding severance activity or event); (3) provide reasonable
the applicable guidelines or standards payments if it maintains compliance approval procedures for expenditures
established by their primary Federal with the limits and prohibitions on the requiring prior approval; (4) require the
regulators that address excessive ability of federally insured credit unions ECIP recipient to deliver a certification,
compensation. In addition, federally to enter into contracts to pay and to executed by two senior executive
insured credit unions must maintain make golden parachute and officers (one of which must be either the
compliance with the requirements on indemnification payments to ECIP recipient’s chief executive officer
compensation and benefits for federally institution-affiliated parties as issued by (or individual performing a similar
insured credit unions as issued by the the NCUA.15 This restriction is designed function) (defined as the ‘‘principal
National Credit Union Administration to align the requirements of the ECIP executive officer’’) or its chief financial
(NCUA).13 Treasury reserves the with existing standards applicable to officer (or individual performing a
authority to take action as necessary to ECIP recipients under regulations issued similar function) (defined as the
address potential anti-evasion concerns by Federal regulators. ‘‘principal financial officer’’) that the
relating to the interim final rule’s approval of any expenditure requiring
iii. Limit on Excessive or Luxury the prior approval of any senior
requirements for ECIP participants. Expenditures executive officer, any executive officer
ii. Limit on Severance Pay Under the interim final rule, ECIP of a substantially similar level of
Under the interim final rule, an ECIP recipients are required to establish and responsibility, or the ECIP recipient’s
recipient is prohibited from making maintain policies designed to eliminate board of directors (or a committee of
excessive severance payments to a excessive or luxury expenditures. The such board of directors) was properly
senior executive officer. Severance pay term ‘‘excessive or luxury expenditures’’ obtained with respect to each such
is defined to include all types of cash is defined as excessive expenditures on expenditure; (5) require the prompt
payments, benefits, and other amounts any of the following to the extent such internal reporting of violations to an
paid or provided in connection with an expenditures are not reasonable appropriate person or persons identified
individual’s termination of expenditures for staff development, in this policy; and (6) mandate
employment, except for payment for reasonable performance incentives, or accountability for adherence to the
services performed or benefits that were other similar reasonable measures policy. The requirement to establish a
accrued prior to termination of conducted in the normal course of the policy regarding excessive or luxury
employment or otherwise accrued with ECIP recipient’s business operations: (1) expenditures is intended to promote the
respect to services performed. Entertainment or events; (2) office and integrity of ECIP by ensuring that the
Unless informed otherwise by facility renovations; (3) aviation or other funds provided under the Program are
Treasury, an ECIP recipient that is an transportation services; (4) tax gross-ups used to provide loans, grants, and
insured depository institution, bank (i.e., reimbursement of taxes owed with forbearance, without restricting ECIP
holding company, or savings and loan respect to any compensation); and (5) participants’ discretion to establish
holding company is considered to have other similar items, activities, or events policies and procedures that are tailored
satisfied the requirements regarding for which the ECIP recipient may to meet the needs and business
severance payments if it maintains reasonably anticipate incurring objectives of their respective
compliance with the limits and expenses, or reimbursing an employee organizations.
for incurring expenses. Capital To facilitate compliance with this
investments, including investments in requirement, Treasury is making
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10 For national banks and Federal savings
associations, 12 CFR part 30, Appendix A; state technology, equipment, and similar available to ECIP recipients a form of
member banks, 12 CFR part 208, Appendix D–1; items that expand the long-term excessive or luxury expenditures policy
and insured state nonmember banks and state in Appendix A to the interim final rule.
savings associations, 12 CFR part 364, Appendix A. capability of an ECIP recipient to
11 12 CFR 225.4. provide products and services to its An ECIP recipient may use this form to
12 12 CFR 238.8. satisfy the requirement in the interim
13 12 CFR 701.19(a); 12 CFR 701.21(c)(8); 12 CFR 14 12 CFR part 359. final rule to adopt and maintain an
702.203(b)(10); 12 CFR 702.204(b)(10). 15 12 CFR part 750. excessive or luxury expenditures policy.
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13452 Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations
Alternatively, an ECIP recipient may use excessive or luxury expenditures policy permitted under the interim final rule
other forms or existing policies relating requirement that would be as effective must also comply with any applicable
to excessive or luxury expenditures, but in ensuring that funds provided under limitations or determinations
such other forms or policies must satisfy the Program are used to provide loans, established by an ECIP recipient’s
all the requirements of the interim final grants, and forbearance, without Federal regulators.
rule. restricting ECIP participant discretion to Similar to the restrictions on
establish policies and procedures that executive compensation described
iv. Material Changes to Policies or
are tailored to meet the needs and above, these limitations on capital
Procedures
business objectives of their respective distributions are intended to ensure that
An ECIP recipient must obtain prior organizations? the funds provided under ECIP have the
approval from Treasury before making Question #3: What additional effect intended by Section 104A of the
any material change to the policies or guidance or clarification regarding the Act, and are not to provide undue
procedures that it maintains for compensation and expenditure compensation to an ECIP recipient’s
purposes of compliance with the restrictions would help facilitate shareholders or owners. In addition,
compensation, severance pay and compliance with these restrictions and these restrictions serve to protect the
excessive or luxury expenditures ensure that the restrictions are working taxpayer’s financial interest in
requirements described in the preceding as intended? connection with the instruments issued
discussion.16 A change to such policies by an ECIP recipient to Treasury in
or procedures will be considered 2. Restrictions on Dividends, Share
Buybacks, and Other Capital connection with the Program.
material if the change is likely to have
a negative effect on the financial Distributions i. Restriction on Dividends, Share
condition of the ECIP recipient, limit The restrictions on dividends, share Buybacks and Other Capital
the ability of the ECIP recipient to make buybacks, and other capital Distributions
payments under the terms of an ECIP distributions under the interim final The interim final rule defines ‘‘non-
instrument, or otherwise impair the rule include two components. The first senior securities’’ as any equity interests
ECIP recipient’s ability to meet its is a prohibition on discretionary in or other instruments issued by an
obligations to Treasury under the dividends, share buybacks and other ECIP recipient that are pari passu with
Program. An ECIP recipient would bear capital distributions on non-senior or junior to Treasury’s investment, or
the initial responsibility for determining securities if an ECIP recipient has not (i) equity interests in or other instruments
whether a change in policy or for preferred stock issued to Treasury, issued by a depository institution
procedures is material; however, paid in full the dividends for the last holding company of which the ECIP
Treasury would retain the authority to completed dividend period, or (ii) for recipient is a subsidiary. Under the
take enforcement as appropriate (i.e., an instruments issued to Treasury other interim final rule, an ECIP recipient will
ECIP recipient should not revise its than in the form of preferred stock, such be prohibited from making capital
compensation policy to permit or pay as subordinated debt, paid all amounts distributions, such as declaring or
excessive compensation if its cash is due and payable and all amounts paying any dividend on, or purchasing
insufficient to pay dividends on ECIP previously deferred under the terms of or redeeming, any non-senior securities
instruments). A request by an ECIP the instruments. The second is a limit unless (i) if Treasury holds shares of
recipient to make a material change to on dividends, share buybacks, and other preferred stock, the company has paid
its compensation, severance pay, or capital distributions based on separate in full dividends on the preferred stock
excessive or luxury expenditures earnings-based tests for (i) insured with respect to the last completed
policies or procedures must be depository institutions, bank holding dividend period (prior to the current
submitted to Treasury in writing at least companies and savings and loan dividend period); or (ii) if Treasury
30 days prior to the effective date of the holding companies, on the one hand, holds an instrument other than
policy change. The notice will be and (ii) federally insured credit unions, preferred stock (e.g., subordinated debt),
deemed approved 30 days after the ECIP on the other. all amounts due and payable on the
submits the notice to Treasury unless However, the interim final rule instrument have been paid in full, and
prior to the expiration of the 30-day provides an exception from these no deferred amounts are unpaid. These
period Treasury (i) objects to the restrictions for ECIP recipients that are restrictions reflect customary
proposed change or (ii) notifies the ECIP S corporations or other pass-through contractual protections to prevent an
recipient that additional time is entities for purposes of the Internal ECIP recipient from making
required in order to better evaluate the Revenue Code of 1986. The interim final discretionary distributions on non-
impact of the proposed change to policy rule will permit S corporations and senior securities if payments are not
or procedures. other pass-through entities to make being made to Treasury on its
Treasury specifically solicits capital distributions to the extent investment. These restrictions would
comments from members of the public reasonably required to cover its owners’ not prevent an ECIP recipient from
concerning the following issues: tax obligations in respect of the entity’s
Question #1: Are the restrictions on making required, non-discretionary
earnings. Such distributions shall be payments on non-senior securities, such
compensation sufficiently tailored to subject to an annual reconciliation, with
facilitate the ECIP Program objectives as payments required at stated maturity
any surplus or deficiency to be in accordance with an instrument’s
without discouraging participation in deducted or added to distributions, as
the program? terms, or payments of interest that may
applicable, in the following year.
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Question #2: Are there other not be deferred.17
The exemption for tax-related
reasonable alternatives to the Program’s For these purposes, a ‘‘capital
distributions in the interim final rule
distributions’’ are defined as (i)
does not supersede otherwise applicable
16 Disclosures by ECIP recipients of any proposed dividends, including discretionary
limitations or determinations with
material changes to any such policies or procedures
will be subject to their Federal regulators’
respect to distributions established by 17 Such payments may be subject to limitations
applicable restrictions in respect of the disclosure an ECIP recipient’s Federal regulators. established by an ECIP recipient’s primary Federal
of confidential supervisory information. Accordingly, tax-related distributions regulator.
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations 13453
dividends, on non-senior securities and and helping to ensure that the proceeds meaningful support for the objectives of
any other payments on a share of stock of the ECIP investment are used to the Program.
or other equity or equivalent interest, expand lending to low- and moderate- B. Earnings Test for Federally Insured
(ii) payments, including interest income and other targeted populations. Credit Unions
payments, on non-senior securities that
the issuer has full discretion to A. Earnings Test for Insured Depository Consistent with existing distribution
permanently or temporarily suspend Institutions, Bank Holding Companies, limitations applicable to federally
without triggering a default, (iii) and Savings and Loan Holding insured credit unions,19 the interim
redemptions or repurchases of non- Companies final rule provides that, without prior
senior securities or (iv) any similar approval by Treasury, an ECIP recipient
The interim final rule provides that, that is a federally insured credit union
transaction that Treasury determines to
without prior approval from Treasury, may not make a capital distribution on
be in substance a capital distribution.
Excluded from this definition, however, an ECIP recipient that is an insured any non-senior securities if the
are (a) redemptions or repurchases of depository institution, bank holding distribution would (i) in the case of a
shares that are part of an employee stock company, or savings and loan holding dividend, be payable from retained
ownership plan for an ECIP recipient company may not make a capital earnings (as defined in 12 CFR 702.2(f))
that is not publicly traded, provided distribution if the total capital other than undivided earnings; or (ii)
that the repurchase is required solely by distributions made during the calendar cause the credit union’s net worth
virtue of the Employee Retirement year, including the proposed capital classification to fall below ‘‘adequately
Income Security Act of 1974, as distribution, exceeds its ‘‘eligible capitalized’’ (as defined in 12 CFR
amended; (b) in the case of federally distributable income,’’ which is 702.102(a)(2)).
insured credit unions, payments of calculated as the sum of the ECIP
3. Exemptive Relief
dividends and interest (as defined by 12 recipient’s (a) year-to-date net income as
CFR 707.2(h) and (o)) on accounts held of the end of the most recent calendar Under the interim final rule, Treasury
by their members and redemptions of quarter, plus net income for the two retains authority to grant waivers or
membership share interests upon preceding calendar years, less (b) any exemptions from the restrictions under
voluntary or involuntary terminations of dividends or capital distributions for the the interim final rule on dividends,
membership by a credit union or its year to date as of the end of the most share buybacks, and other capital
members, as applicable; and (c) solely in recent calendar quarter, and for the two distributions. Such relief may be
the case of the earnings test described preceding calendar years, where each granted broadly to all ECIP recipients or
below, redemptions or repurchases of amount is calculated in accordance with to particular entities. In considering
non-senior securities if the issuer of the the instructions to the Call Report or whether to grant exemptive relief,
non-senior securities being repurchased applicable reporting form. While Treasury will consider whether the
or redeemed funds the redemption or approval may be awarded by Treasury relief is necessary or appropriate to
repurchase by issuing at least a to make capital distributions, the achieve the goals of the ECIP or to
corresponding amount of new non- interim final rule confirms that such protect the public interest. Such relief
senior securities that rank equally in may be granted based on terms and
approval does not supersede any
liquidation with, receive the same conditions as determined by Treasury,
applicable regulatory requirements of
capital treatment as and, if applicable, and in making determinations regarding
the ECIP recipient’s appropriate Federal
have a stated maturity date no earlier requests for exemptive relief, Treasury
banking agency, or other actions taken
than the non-senior securities being may consult with the primary Federal
by such agency.
redeemed or repurchased. An regulator when deemed appropriate.
extraordinary or special dividend The ‘‘eligible distributable income’’
limit is similar to other existing earnings 4. Annual Certification and Enforcement
(which excludes an ordinary dividend
on a special share account) by a limitations on payments of dividends Each ECIP recipient will be required
federally insured credit union is a that apply to certain insured depository to submit to Treasury on an annual basis
capital distribution and is not subject to institutions.18 In light of this similarity, a certification executed by two senior
the exclusion for payments of dividends an ECIP recipient could calculate executive officers (one of which must be
and interest by credit unions on eligible distributable income with either the ECIP recipient’s principal
accounts held by their members. respect to capital distributions, by executive officer or principal financial
applying the methodology set forth in officer) that the ECIP recipient is in
ii. Limit on the Amount of Capital 12 CFR 5.64 or 12 CFR 208.5, as compliance with each of the excessive
Distributions applicable, with respect to dividends, compensation, severance payments,
Under the interim final rule, an ECIP by substituting ‘‘capital distributions’’ excessive or luxury expenditures
recipient will be required to obtain prior for ‘‘dividends.’’ In addition, in the case requirements and restrictions on capital
approval from Treasury in order to make of 12 CFR 208.5, an ECIP recipient that distributions set forth in the interim
capital distributions in excess of the is not an insured depository institution final rule. If an ECIP recipient certifies
following earnings-based tests. would use net income, as reported in that it satisfies the severance payments
Treasury determined that the limits the ECIP recipient’s FR Y–9C or FR Y– requirements, Treasury expects that the
on capital distributions are appropriate 9SP, instead of net income as reported certification will address only
based on a review of publicly available in the Reports of Condition and Income. compliance with the requirements and
data regarding average dividend rates Treasury anticipates that the operational will neither address whether the ECIP
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among banking organizations with $10 impact the capital distribution approval recipient is in troubled condition for
billion or less in total assets, in the requirement will be nominal and that purposes of 12 CFR parts 359 and 750,
period before the Covid-19 pandemic. the approval requirement will provide as applicable, nor contain any
Thus, the limitation on capital confidential supervisory information
distributions strikes an appropriate 18 See, e.g., 12 U.S.C. 60 (national banks), 12 CFR subject to applicable disclosure
balance between allowing ECIP 5.64 (national banks), and 12 CFR 208.5 (state
recipients to make capital distributions member banks). 19 See 12 CFR 702.403.
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13454 Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations
restrictions promulgated by the ECIP environmental quality regulations Treasury has determined for good cause
recipients’ Federal regulators. published pursuant to the National that general notice and opportunity for
The interim final rule is promulgated Environmental Protection Act of 1969 public comment is unnecessary, and
under Section 104A of the Act, and (NEPA). It is the determination of therefore is not issuing a notice of
agreements between ECIP recipients and Treasury that the interim final rule does proposed rulemaking. Because no notice
Treasury in connection with the not constitute a major Federal action of proposed rulemaking is required for
Program will be entered into under the significantly affecting the quality of the this interim final rule, the provisions of
Act. Treasury may take action or human environment and, in accordance the RFA do not apply. Nevertheless,
directly address noncompliance with with NEPA and the CDFI Fund’s Treasury seeks comment on whether,
the requirements of this interim final environmental quality regulations at 12 and the extent to which, the interim
rule or Program agreements. In addition, CFR part 1815, neither an final rule would affect a significant
Treasury may, in its discretion, inform Environmental Assessment nor an number of small entities.
the appropriate Federal banking Environmental Impact Statement is
agencies of any apparent violations by required. E. Regulatory Planning and Review
ECIP recipients of the interim final rule C. Paperwork Reduction Act This interim final rule is
or Program agreements between ECIP economically significant for the
recipients and Treasury.20 The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3521) (PRA) states that purposes of Executive Orders 12866 and
Treasury specifically solicits 13563. Treasury, however, is proceeding
comments from members of the public no agency may conduct or sponsor, nor
is the respondent required to respond under the emergency provision at
concerning the following issues: Executive Order 12866 section 6(a)(3)(D)
Question #4: Are the restrictions on to, an information collection unless it
displays a currently valid OMB control based on the need to move
dividends, share buybacks, and other expeditiously to mitigate the current
capital distributions sufficiently tailored number.
The interim final rule will add current economic conditions arising from the
to facilitate the ECIP Program objectives COVID–19 emergency, as discussed in
information collections for excessive or
without discouraging participation in Section II of this Supplementary
luxury expenditure policy and
the program? Information.
exemptive relief requests to the ECIP
Question #5: What would be the
application process. The ‘‘excessive or F. Executive Order 13132
advantages and disadvantages of
luxury policy’’ collection requirements
aligning limitations on capital
include the adoption and maintenance This interim final rule does not have
distributions under the interim final rule
of the policy (detailed in section 1(iii)); federalism implications as defined in
with limitations applicable to each
written notices of change (detailed in Executive Order 13132. It will not have
entity pursuant to the requirements of
section 1(iv)); and annual certifications substantial direct effects on the States,
its appropriate Federal banking
(detailed in section 4). The exemptive on the relationship between the
regulator? What are the advantages and
relief requests are detailed in section 3. National Government and the States, or
disadvantages of calculating eligible
The addition of these collections will on the distribution of power and
distributable income based on (i)
increase total annual burden by 44,014 responsibilities among the various
income as of the end of the most recent
hours: The policy requirements are levels of government, as specified in the
calendar quarter and (ii) year to date
expected to take 1,100 respondents 40 executive order. As such it does not
reported net income? What are the
hours to complete for an annual burden warrant the preparation of a federalism
advantages and disadvantages of
of 44,000 hours, and it is estimated that assessment.
calculating the capital distribution
55 (or 5%) of respondents will submit
limitation using (i) year-to-date G. Congressional Review Act
an exemptive relief request that will
dividends or capital distributions; (ii)
take 15 minutes to complete, for an The Administrator of the Office of
reported dividends or capital
annual burden of 14 hours. The OMB Management and Budget’s Office of
distributions; and (iii) year-to-date
Control Number for the Emergency Information and Regulatory Affairs
dividends or capital distributions as of
Capital Investment Program information (OIRA) has determined that this is a
the end of the most recent calendar
collection is 1505–0267. major rule for purposes the
quarter? Comments concerning suggestions for
Congressional Review Act (CRA) (5
IV. Regulatory Analyses reducing the burden of collections of
U.S.C. 804(2) et seq.). Under the CRA,
information should be directed to the
A. Administrative Procedure Act a major rule takes effect 60 days after
Deputy Director for Policy and
the rule is published in the Federal
Pursuant to authority at 5 U.S.C. Programs, Community Development
Register. 5 U.S.C. 801(a)(3).
553(b)(B), the interim final rule is Financial Institutions Fund, 601 13th
exempt from the rulemaking Street, NW, Suite 200 South, Notwithstanding this requirement, the
requirements of the Administrative Washington, DC 20005. CRA allows agencies to dispense with
Procedure Act (APA) (5 U.S.C. 551 et the requirements of section 801 when
D. Regulatory Flexibility Act the agency for good cause finds that
seq.), including the requirement to
provide prior notice and an opportunity The Regulatory Flexibility Act (RFA) such procedure would be impracticable,
for public comment for the good cause (5 U.S.C. 601 et seq.) requires an agency unnecessary, or contrary to the public
shown in Sections I and II of this to consider whether the rules it interest and the rule shall take effect at
SUPPLEMENTARY INFORMATION. proposes will have a significant such time as the agency promulgating
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economic impact on a substantial the rule determines. 5 U.S.C. 808(2).
B. National Environmental Policy Act number of small entities. The RFA Pursuant to § 808(2), Treasury, for the
The interim final rule has been applies only to rules for which an good cause shown in sections I and II of
reviewed in accordance with 12 CFR agency publishes a general notice of this SUPPLEMENTARY INFORMATION, finds
part 1815, the CDFI Fund’s proposed rulemaking pursuant to 5 that a 60-day delay to provide public
U.S.C. 553(b). As discussed above, notice is impracticable and contrary to
20 See, e.g., 12 U.S.C. 4717(b). consistent with 5 U.S.C. 553(b)(B), the public interest.
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations 13455
List of Subjects in 31 CFR Part 35 (c) Limitation of authority. Nothing in distributions), redemptions or
Executive compensation. this subpart shall be interpreted to limit repurchases of non-senior securities if
the authority of the appropriate Federal the issuer of the non-senior securities
■ For the reasons set forth in the banking agency to take action under being repurchased or redeemed fully
preamble, 31 CFR subtitle A is amended other provisions of law, including funds the redemption or repurchase by
by adding part 35 to read as follows: action to address unsafe or unsound issuing at least a corresponding amount
practices or conditions, deficient capital of new non-senior securities that rank
PART 35—EMERGENCY CAPITAL
levels, or violations of law or regulation, equally in liquidation with, receive the
INVESTMENT PROGRAM
under section 8 of the Federal Deposit same capital treatment as and, if
Subpart A—[Reserved] Insurance Act, section 8 of the Bank applicable, have a stated maturity date
Holding Company Act, or section 10 of no earlier than the non-senior securities
Subpart B—Compensation and Capital
Distributions
the Home Owners’ Loan Act, or the being redeemed or repurchased.
Federal Credit Union Act, as may be ECIP means the Emergency Capital
Sec. applicable. Investment Program established under
35.20 Purpose, applicability, and general Section 104A of the Community
provisions. § 35.21 Definitions.
35.21 Definitions. Development Banking and Financial
Except as modified in this regulation Institutions Act of 1994, as amended.
35.22 Restrictions on compensation.
35.23 Restrictions on dividends, share or unless the context otherwise requires, ECIP investment means any preferred
buybacks, and other capital the terms used in this regulation have stock, subordinated debt, or other
distributions. the same meaning as set forth in the instrument (including any successor to
35.24 Annual certification. relevant statutes. For purposes of this any such instrument) issued by an ECIP
35.25 Exemptive relief. subpart: recipient to the Department of the
Appendix A to 31 CFR Part 35—Emergency Act means the Community Treasury under the ECIP.
Capital Investment Program Model Development Banking and Financial ECIP investment agreement means the
Excessive or Luxury Expenditures Policy Institutions Act of 1994, as amended (12 agreement between an ECIP recipient
Authority: Consolidated Appropriations U.S.C. 4701 et seq.). and the Department of the Treasury
Act, 2021 (Pub. L. 116–260), Division N, Title Appropriate Federal banking agency with respect to the ECIP investment in
V, Subtitle B; Community Development has the same meaning as in 12 U.S.C. that ECIP recipient.
Banking and Financial Institutions Act of 1813 and also includes the NCUA with ECIP investment date means the date
1994 (enacted as part of the Riegle respect to a federally insured credit on which an ECIP recipient first issued
Community and Regulatory Improvement Act union. an ECIP investment.
of 1994 (Pub. L. 103–325)), as amended (12 Capital distributions means: ECIP period means the period from
U.S.C. 4701 et seq.), Section 104A. (1) Dividends, including discretionary the ECIP investment date until the
dividends, on non-senior securities and earliest of:
Subpart A [Reserved] any other payments on a share of stock (1) The date on which the ECIP
or other equity or equivalent interest; recipient has fully redeemed or repaid
Subpart B—Compensation and Capital (2) Payments, including interest
Distributions the ECIP investment received under
payments, on non-senior securities, that ECIP;
§ 35.20 Purpose, applicability and general the issuer has full discretion to (2) The date on which the investment
provisions. permanently or temporarily suspend the ECIP recipient received under the
(a) Purpose. Pursuant Section 104A of without triggering a default; ECIP is no longer held, in full or in part,
the Community Development Banking (3) Redemptions or repurchases of by the Department of the Treasury or
and Financial Institutions Act of 1994 non-senior securities; or any affiliate thereof; and
(4) Any similar transaction that the (3) Ten years after the ECIP
(Act), as added by the Consolidated
Department of the Treasury determines investment date.
Appropriations Act, 2021 (Pub. L. 116–
to be in substance a capital distribution; ECIP recipient means any entity that
260), this subpart establishes (5) Provided, that a ‘‘capital
restrictions on executive compensation, has received a capital investment under
distribution’’ does not include: the ECIP.
dividend payments, and share buybacks (i) Redemptions or repurchases of Excessive or luxury expenditures
for recipients of capital investments shares that are part of an employee stock means:
under the Department of the Treasury’s ownership plan for an ECIP recipient (1) Excessive expenditures on any of
Emergency Capital Investment Program that is not publicly traded, provided the following to the extent such
(ECIP or Program), as well as additional that the repurchase is required solely by expenditures are not reasonable
criteria for participation in the Program virtue of the Employee Retirement expenditures for staff development,
that the Secretary has determined are Income Security Act of 1974, as reasonable performance incentives, or
appropriate in furtherance of the amended; other similar reasonable measures
Program goals. (ii) In the case of federally insured conducted in the normal course of the
(b) Applicability. This subpart applies credit unions: ECIP recipient’s business operations:
on a consolidated basis to any insured (A) Payments of dividends and (i) Entertainment or events;
depository institution, bank holding interest (as defined by 12 CFR 707.2(h) (ii) Office and facility renovations;
company, savings and loan holding and (o)) on accounts held by their (iii) Aviation or other transportation
company, or federally insured credit members; provided that this exclusion services;
union that issues preferred stock or a does not apply to any extraordinary or (iv) Tax gross-ups; and
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subordinated debt instrument to the special dividend by a credit union; or (v) Other similar items, activities, or
Department of the Treasury under the (B) Redemptions of membership share events for which the ECIP recipient may
Program (an ECIP recipient, as defined interests upon voluntary or involuntary reasonably anticipate incurring
in § 35.21 of this subpart). An ECIP terminations of membership by a credit expenses, or reimbursing an employee
recipient must comply with the union or its members, as applicable; and for incurring expenses;
requirements of this subpart during the (iii) Solely in the case of § 35.23(b) (2) Provided, that reasonable capital
ECIP period. (Limit on amount of capital investments in technology, equipment,
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13456 Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations
and similar items that expand the long- including but not limited to the (1) For an ECIP recipient or subsidiary
term capability of an ECIP recipient to common stock (or equivalent equity of an ECIP recipient that is an insured
provide products and services to its interest) of the ECIP recipient, or any depository institution, except for
customers and community are not equity interest or equivalent interest or federally insured credit unions, the
excessive or luxury expenditures. any other interest in or instrument Interagency Guidelines Establishing
Excessive or luxury expenditures issued by a depository institution Standards for Safety and Soundness as
policy means written standards holding company of which the ECIP issued by the appropriate Federal
applicable to the ECIP recipient and its recipient is a subsidiary. banking agency for the ECIP recipient or
employees that address the five OCC means the Office of the subsidiary (i.e., for national banks and
categories of expenses set forth in the Comptroller of the Currency. Federal savings associations, 12 CFR
definition of ‘‘excessive or luxury Principal executive officer means the part 30, appendix A; state member
expenditures,’’ and that are reasonably chief executive officer of an ECIP banks, 12 CFR part 208, appendix D–1;
designed to eliminate excessive and recipient (or individual performing a insured state nonmember banks and
luxury expenditures. Such written similar function). state savings associations, 12 CFR part
standards must: Principal financial officer means the 364, appendix A);
(1) Identify the types or categories of chief financial officer of an ECIP (2) For an ECIP recipient that is a
expenditures which are prohibited recipient (or individual performing a bank holding company, the
(which may include a threshold similar function). requirements for corporate practices of
expenditure amount per item, activity, bank holding companies as issued by
Senior executive officer means an
or event or a threshold expenditure the Federal Reserve Board at 12 CFR
ECIP recipient’s president, any vice
amount per employee receiving the item 225.4;
president in charge of a principal (3) For an ECIP recipient that is a
or participating in the activity or event); business unit, division or function, any
(2) Identify the types or categories of savings and loan holding company, the
other officer who performs a policy requirements regarding safe and sound
expenditures for which prior approval is
making function, or any other person operations of savings and loan holding
required (which may include a
who performs similar policy making companies as issued by the Federal
threshold expenditure amount per item,
functions. Reserve Board at 12 CFR 238.8; and
activity, or event or a threshold
Severance payment means any (4) For an ECIP recipient that is a
expenditure amount per employee
payment or benefit provided to an federally insured credit union, the
receiving the item or participating in the
officer or employee of an ECIP recipient requirements on compensation and
activity or event);
(3) Provide reasonable approval in connection with any termination of benefits for federally insured credit
procedures for expenditures requiring such officer or employee’s employment unions as issued by the NCUA at 12
prior approval; with the ECIP recipient (including CFR 701.19(a); 12 CFR 701.21(c)(8); 12
(4) Require the ECIP recipient to resignation, severance, retirement, or CFR 702.203(b)(10); and 12 CFR
deliver a certification, executed by two constructive termination), except for 702.204(b)(10).
senior executive officers (one of which payment for services performed or (b) Restriction on severance
must be its principal executive officer or benefits accrued. A severance payment payments. An ECIP recipient shall not
principal financial officer) certifying includes cash payments, health care make excessive severance payments to
that the approval of any expenditure benefits, perquisites, the enhancement any senior executive officer. Unless
requiring the prior approval of any or acceleration of any payment or informed otherwise by the Department
senior executive officer, any executive vesting of any payment or benefit, or of the Treasury, an ECIP is considered
officer of a substantially similar level of any other in-kind benefit payable or to have satisfied the requirements
responsibility, or the ECIP recipient’s provided in connection with any regarding severance payments in this
board of directors (or a committee of termination of an officer or employee of section if it maintains compliance with
such board of directors), was properly the ECIP recipient. the following (or any successor
obtained with respect to each such Total compensation means all requirement, as applicable):
expenditure; compensation, other than any severance (1) For an ECIP recipient that is an
(5) Require the prompt internal payment, provided by an ECIP recipient insured depository institution, a bank
reporting of violations to an appropriate to an officer or employee, including holding company or a savings and loan
person or persons identified in this salary, wages, bonuses, awards of stock, holding company, the limits and
policy; and deferred compensation, and other prohibitions to enter into contracts to
(6) Mandate accountability for financial benefits. pay and to make golden parachute and
adherence to the policy. indemnification payments to
§ 35.22 Restrictions on compensation.
FDIC means the Federal Deposit institution-affiliated parties to the extent
Insurance Corporation. (a) Restriction on executive applicable to the ECIP recipient, as
Federal Reserve Board means the compensation. An ECIP recipient must issued by the FDIC at 12 CFR part 359;
Board of Governors of the Federal ensure that the total compensation paid and
Reserve System. to its senior executive officers is (2) For an ECIP recipient that is a
NCUA means the National Credit appropriate and not excessive. Unless federally insured credit union, the
Union Administration. informed otherwise by the Department limits and prohibitions on the ability of
Non-senior security means any equity of the Treasury, an ECIP recipient is federally insured credit unions to enter
interest or equivalent interest (including considered to have satisfied the into contracts to pay and to make golden
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but not limited to membership share requirements regarding executive parachute and indemnification
interests in the case of a credit union) compensation in this section if it, and, payments to institution-affiliated parties
or any other interest in, or instrument if applicable, all insured depository as issued by the NCUA at 12 CFR 750.1.
issued by, an ECIP recipient that is pari institution subsidiaries of the ECIP (c) Excessive or luxury expenditures.
passu with, or junior to, the ECIP recipient, maintains compliance with (1) Ninety days after an ECIP investment
investment with respect to capital the following (or any successor date with respect to an ECIP recipient,
distributions or ranking in liquidation, requirement, as applicable): the board of directors of the ECIP
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations 13457
recipient must adopt an excessive or of the Treasury objects to the proposed (ii) Cause the ECIP recipient’s net
luxury expenditures policy, provide change or notifies the ECIP recipient worth classification to fall below
such policy to the Department of the that additional time is required in order ‘‘adequately capitalized’’ (as defined in
Treasury and the ECIP recipient’s to complete review of the proposed 12 CFR 702.102(a)(2)).
appropriate Federal banking agency, change to policy or procedures (c) Exception for Subchapter S
and post the text of such policy on its Corporations and other pass-through
internet website, if the ECIP recipient § 35.23 Restrictions on dividends, share entities. Notwithstanding anything to
buybacks, and other capital distributions. the contrary in paragraphs (a) and (b) of
maintains an internet website.
(2) If, after adopting an excessive or (a) Restriction on capital distributions this section, any ECIP recipient that is
luxury expenditures policy, the board of due to nonpayment. An ECIP recipient an S corporation, as defined in 26 U.S.C.
directors of the ECIP recipient makes shall not make any capital distribution 1361(a), or other pass-through entity
any material amendments to such on a non-senior security, unless: may make capital distributions, to the
policy, within ninety days of the (1) If the ECIP investment is in the extent reasonably required to cover its
adoption of the amended policy the form of preferred stock, the ECIP owners’ tax obligations in respect to the
board of directors must provide the recipient has paid in full the dividends entity’s earnings. Such distributions
amended policy to the Department of for the last completed dividend period shall be subject to an annual
the Treasury and the ECIP recipient’s on the preferred stock; or reconciliation, with any surplus or
appropriate Federal banking agency and (2) If the ECIP investment is in a form deficiency to be deducted or added to
post the amended policy on its internet other than preferred stock (including, distributions, as applicable, in the
website, if the ECIP recipient maintains subordinated debt), the ECIP recipient following year. Any tax-related
an internet website. has paid in full the principal, interest, distributions permitted under this
(3) The ECIP recipient must maintain, and other amounts due and payable paragraph (c) must also comply with
and continue the disclosure of any under the terms of the ECIP investment, any applicable limitations or
material amendments to, the excessive and no amount that has been deferred determinations established by an ECIP
or luxury expenditures policy during remains unpaid. recipient’s Federal regulators.
the ECIP period, unless the Department (b) Limit on amount of capital
of the Treasury determines that § 35.24 Annual certification
distributions. (1) If an ECIP recipient is On an annual basis an ECIP recipient
discontinuation of the policy would not an insured depository institution, bank
be contrary to the public interest. shall, in accordance with the terms and
holding company, or savings and loan conditions of its ECIP investment
(d) Material changes in policies or
holding company, the ECIP recipient agreement, submit to the Department of
procedures. An ECIP recipient must
obtain prior approval from the shall obtain the approval of the the Treasury a certification executed by
Department of the Treasury before Department of the Treasury prior to two senior executive officers (one of
making any material change to the making any capital distribution if the which must be either its principal
policies or procedures that it maintains total of capital distributions made executive officer or principal financial
for purposes of compliance with during the calendar year, including the officer) that the ECIP recipient is in
paragraph (a), (b), or (c) of this section. proposed capital distribution, exceeds compliance with each of the excessive
A change to the compensation, its eligible distributable income; compensation, severance pay, and
severance pay, or excessive or luxury provided, however, that any prior excessive or luxury expenditures
expenditures policies or procedures will approval of a capital distribution by the requirements and restrictions on capital
be considered material for purposes of Department of the Treasury does not distributions set forth in §§ 35.22 and
this section if the change is likely to supersede any applicable regulatory 35.23.
have a negative effect on the financial requirements of the ECIP recipient’s
appropriate Federal banking agency, or § 35.25 Exemptive relief.
condition of the ECIP recipient, limit
the ability of the ECIP recipient to make other actions taken by such agency. For The Department of the Treasury may
payments under the terms of an ECIP purposes of this paragraph, ‘‘eligible grant exemptions or waivers from some
instrument, or otherwise impair the distributable income’’ means the sum of or all of the restrictions on share
ECIP recipient’s ability to meet its the ECIP recipient’s reported year-to- buybacks and dividend payments under
obligations to the Department of the date net income as of the end of the this part if such exemption or waiver is
Treasury under the ECIP. most recent calendar quarter, plus net necessary or appropriate to effectuate
(1) A request to make a material income for the two preceding calendar the goals of the ECIP or to protect the
change to compensation, severance pay years, less any dividends or public interest. Such exemptions or
or excessive luxury expenditures distributions for the year to date as of waivers may be subject to such terms
policies or procedures, must be the end of the most recent calendar and conditions as deemed necessary or
submitted by an ECIP recipient in quarter and the two preceding calendar appropriate by the Department of the
writing and received by the Department years, where each amount is calculated Treasury.
of the Treasury at least thirty days prior in accordance with the instructions to Appendix A to 31 CFR Part 35—
to the effective date of the policy the Call Report or applicable reporting Emergency Capital Investment Program
change. The request should describe the form. Model Excessive or Luxury
change, reason for the change, and (2) If the ECIP recipient is federally Expenditures Policy
anticipated financial or other impact of insured credit union, the ECIP recipient
shall obtain the Department of the I. Introduction
the change on the condition of the ECIP
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recipient. Treasury’s prior approval to make any A participant in the Emergency Capital
(2) The request will be deemed capital distributions if the distribution Investment Program (ECIP recipient, as
approved thirty days after the ECIP would: defined at 31 CFR 35.21) is required to
establish and maintain policies designed to
recipient has provided a complete (i) In the case of a dividend, be eliminate excessive or luxury expenditures.
request to the Department of the payable from retained earnings (as The term ‘‘excessive or luxury expenditures’’
Treasury, unless, prior to the expiration defined in 12 CFR 702.2(f)) other than means excessive expenditures on any of the
of the thirty-day period, the Department undivided earnings; or following to the extent such expenditures are
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13458 Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations
not reasonable expenditures for staff C. Responsibility for employees subject to tax from a non-U.S.
development, reasonable performance This policy is the responsibility of the jurisdiction.
incentives, or other similar reasonable Organization’s board of directors (board). The (5) Other similar items, activities, or events
measures conducted in the normal course of board has approved this policy and will for which the Organization may reasonably
the ECIP recipient’s business operations: (1) review compliance with this policy no less anticipate incurring expenses or reimbursing
Entertainment or events; (2) office and frequently than annually, and summary data an employee for incurring expenses. (i)
facility renovations; (3) aviation or other on excessive or luxury expenditures will be Expenditures related to other items not listed
transportation services; (4) tax gross-ups; and reported to the board as part of the in the preceding categories are exempt from
(5) other similar items, activities, or events compliance review. this policy in an amount less than $lll
for which the ECIP recipient may reasonably per instance, and together with all
anticipate incurring expenses, or reimbursing D. Scope expenditures permitted under this policy,
an employee for incurring expenses. This policy applies to all employees, may not exceed $lll on an annual
(1) To facilitate compliance with this officers, and directors of the Organization aggregate basis per individual.
requirement, the Department of the Treasury with regard to any expenditure of the (ii) For the avoidance of doubt, reasonable
is making available a model excessive or Organization. In making any expenditure on capital investments in technology,
luxury expenditures policy. An ECIP behalf of the Organization, employees, equipment, and similar items that expand the
recipient may refer to this model policy for officers, and directors should consider long-term capability of an ECIP recipient to
guidance in satisfying the requirement at 31 whether the expenditure is an excessive or provide products and services to its
CFR 35.22(c) to adopt and maintain an luxury expenditure that is prohibited under customers and community are not excessive
excessive or luxury expenditures policy. or luxury expenditures.
this policy.
Alternatively, ECIP recipients may use other (iii) The principal executive officer may
forms of, or existing policies relating to, E. Excessive or Luxury Expenditures establish or delegate to an appropriate
excessive or luxury expenditures, provided ‘‘Excessive or luxury expenditures’’ means executive officer the authority to establish
that such other forms or policies satisfy all excessive expenditures on any of the processes for the evaluation and approval of
the requirements of the regulation at 31 CFR following to the extent not reasonable or expenditures in the preceding categories that
35.22(c). appropriate expenditures for business are not luxury or excessive expenditures and
(2) An ECIP recipient’s luxury or excessive development, staff development, reasonable that are not otherwise exempt from this
expenditure policy should be posted on the performance incentives, or other similar policy. These processes must be reviewed by
ECIP recipient’s website. Any material reasonable measures conducted in the executive management no less frequently
amendments to an ECIP recipient’s excessive normal course of the Organization’s business than annually, as well as any additional
or luxury expenditures policy must made in threshold expenditure amounts per item,
operations:
accordance with the provisions set forth in activity, or event, or a threshold expenditure
(1) Entertainment or events. This category
31 CFR 35.22(d) (Material changes in policies amount per employee receiving the item or
includes fees, dues, tickets costs related to
or procedures). If the ECIP recipient makes participating in the activity or event under
social, athletic, artistic and dining clubs,
any material amendments to this policy, then this policy. Such approvals must be reported
activities, celebrations or other events, and
the ECIP recipient must submit a copy of the to the board of directors (which may be in
amended policy to the Department of the similar expenditures. Expenditures for
an appropriate summary form) no less
Treasury and post the amended policy on the charitable contributions and charitable
frequently than annually.
ECIP recipient’s website. ECIP recipients events are not prohibited under this policy.
should refer to 31 CFR part 35, subpart B for Entertainment or events expenditures in an F. Exceptions or Violations
additional information regarding definitions amount less than $lll per instance, and (1) Any exception or violation of this
of terms used in the model policy, disclosure, $lll on an annual aggregate basis per policy must be promptly reported to the
material changes, certification, and other individual, are exempt from this policy. Organization’s (i) principal executive officer,
compliance requirements. (2) Office and facility renovations. This (ii) officer with primary responsibility for the
category includes costs and allowances for Organization’s compliance function, or (iii)
II. Model Excessive or Luxury Expenditures office renovation, including expenditures officer designated with primary
Policy related to furniture, art, office responsibility for overseeing the
A. Purpose personalization, interior finishing, design administration, monitoring, and compliance
and decoration, and similar expenditures. with this policy. Exceptions and violations
The purpose of this policy is to establish Office and facility renovations expenditures
parameters and internal controls governing must be reported to the board of directors no
in an amount less than $lll per instance, less frequently than annually, or more
the expenditures of [NAME OF ECIP and $lll on an annual aggregate basis per
RECIPIENT] (together with its subsidiaries frequently as the nature and severity of
individual, are exempt from this policy. violation may warrant. All employees,
and controlled affiliates, referred to hereafter (3) Aviation or other transportation
as the Organization). Expenditures of the officers, and directors of the Organization
services. (i) This category includes charter must adhere to this policy and will be held
Organization should be customary, prudent,
fees, tickets, slip or docking fees, vehicle accountable for compliance. Any employee
consistent with applicable laws and
installment payments, reservation and travel or officer who violates this policy may be
regulations, and reasonably related to the
agent expenses, and similar expenditures subject to disciplinary action up to and
Organization’s business objectives and needs.
This policy identifies expenditures that are associated with transportation services (e.g., including termination of employment.
excessive or luxury expenditures, creates airline, train, rental cars, or vans). Mileage (2) Any employee or officer that is aware
processes that are reasonably designed to reimbursable according to current Internal of any circumstance that may indicate a
eliminate such expenditures, and establishes Revenue Service mileage rates is exempt violation of this policy is required to report
accountability for compliance. Routine from this policy. Transportation services in such circumstance to their supervisor or the
operating expenses, capital expenditures, and an amount less than $lll per instance, Organization’s principal compliance officer
other reasonable expenses are not prohibited and $lll on an annual aggregate basis per or compliance group. The Organization
by this policy. individual, are exempt from this policy. prohibits retaliation against any employee or
(ii) The principal executive officer may officer for making a good faith report of
B. Authority establish or delegate to an appropriate actual or suspected violations of the
The Organization has authority to provide executive officer the authority to establish Organization’s code of conduct, laws,
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compensation and benefits that are processes for reimbursement of reasonable regulations, or other Organization policies,
reasonable. This policy establishes a travel expenditures, which processes must be including this policy. A finding of retaliation
prohibition on expenditures that are reviewed by executive management no less against any such employee or officer may
excessive or luxury expenditures as required frequently than annually. result in disciplinary action up to and
by the Department of the Treasury’s (4) Tax gross-ups. This category includes including termination. Failure to promptly
Emergency Capital Investment Program any reimbursement of taxes owed with report known violations by others may also
regulations (31 CFR part 35), and as may be respect to any compensation. This category be deemed a violation of the Organization’s
required by other statutes and regulations. does not apply to tax equalization agreements code of conduct.
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations 13459
(3) Employees and officers may ask Mr. Willson can also be reached via Dated: March 3, 2021.
questions, raise concerns, or report instances electronic mail at Willson.Matthew@ Diana Esher,
of non-compliance with this policy and/or epa.gov. Acting Regional Administrator EPA Region
any of the existing underlying relevant
SUPPLEMENTARY INFORMATION: On III.
policies by contacting the following:
[COMPLIANCE HELP LINE OR E–MAIL]. February 9, 2021, (86 FR 8699), EPA [FR Doc. 2021–04827 Filed 3–8–21; 8:45 am]
published a final rule action BILLING CODE 6560–50–P
G. Certification
announcing our approval of Maryland’s
On an annual basis, the ECIP recipient will negative declaration regarding the
deliver to the Department of the Treasury a existence of SSI units in the state. In the ENVIRONMENTAL PROTECTION
certification, executed by two senior AGENCY
document, we inadvertently indicated
executive officers (one of which must be
either the ECIP recipient’s principal that a section should be added to the
Code of Federal Regulations (CFR) at 40 40 CFR Part 180
executive officer or principal financial
officer) certifying that (i) the Organization is CFR 62.4690 for air emissions from [EPA–HQ–OPP–2018–0551; FRL–10019–19]
in compliance with this policy and (ii) the existing SSI units. The intent of the rule
approval of any expenditure requiring the was to add a section for air emissions Fluindapyr; Pesticide Tolerances
prior approval of any senior executive officer, from existing SSI units at 40 CFR
any executive officer of a substantially AGENCY: Environmental Protection
62.5170. This document corrects the
similar level of responsibility, or the board of Agency (EPA).
erroneous language.
directors (or a committee of such board), was ACTION: Final rule.
properly obtained with respect to each such Need for Correction
expenditure. SUMMARY: This regulation establishes
As published, the final rule would
amend subpart T, which is for the tolerances for residues of fluindapyr in
David Lebryk,
approval of state plans for designated or on multiple commodities which are
Fiscal Assistant Secretary. identified and discussed later in this
[FR Doc. 2021–04900 Filed 3–5–21; 11:15 am]
facilities and pollutants for the state of
Louisiana. The intent of the final rule document. FMC Corporation requested
BILLING CODE 4810–AK–P
was to change the approval of state these tolerances under the Federal Food,
plans for designated facilities and Drug, and Cosmetic Act (FFDCA).
pollutants for the State of Maryland. DATES: This regulation is effective
ENVIRONMENTAL PROTECTION This correction will ensure that the March 9, 2021. Objections and requests
AGENCY correct section of the CFR, which for for hearings must be received on or
Maryland is subpart V, is amended. before May 10, 2021, and must be filed
40 CFR Part 62 in accordance with the instructions
Section 553 of the Administrative
[EPA–R03–OAR–2019–0527.; FRL–10020– Procedure Act, 5 U.S.C. 553(b)(3)(B), provided in 40 CFR part 178 (see also
90–Region 3] provides that, when an agency for good Unit I.C. of the SUPPLEMENTARY
cause finds that notice and public INFORMATION).
Approval and Promulgation of State procedure are impracticable, ADDRESSES: The docket for this action,
Air Quality Plans for Designated unnecessary or contrary to the public
Facilities and Pollutants; State of identified by docket identification (ID)
interest, the agency may issue a rule number EPA–HQ–OPP–2018–0551, is
Maryland; Control of Emissions From without providing notice and an
Existing Sewage Sludge Incineration available at http://www.regulations.gov
opportunity for public comment. We or at the Office of Pesticide Programs
Units; Correction have determined that there is good Regulatory Public Docket (OPP Docket)
AGENCY: Environmental Protection cause for making this rule final without in the Environmental Protection Agency
Agency (EPA). prior proposal and opportunity for Docket Center (EPA/DC), West William
ACTION: Final rule; correction. comment because we are merely Jefferson Clinton Bldg., Rm. 3334, 1301
correcting an incorrect citation in a Constitution Ave. NW, Washington, DC
SUMMARY: The Environmental Protection previous action. Thus, notice and public 20460–0001. The Public Reading Room
Agency (EPA) issued a final rule on procedure are unnecessary. We find that is open from 8:30 a.m. to 4:30 p.m.,
February 9, 2021 entitled ‘‘Approval this constitutes good cause under 5 Monday through Friday, excluding legal
and Promulgation of State Air Quality U.S.C. 553(b)(3)(B). holidays. The telephone number for the
Plans for Designated Facilities and In FR doc. 2021–02617 appearing on Public Reading Room is (202) 566–1744,
Pollutants; State of Maryland; Control of page 8699 in the Federal Register of and the telephone number for the OPP
Emissions from Existing Sewage Sludge Tuesday, February 9, 2021 the following Docket is (703) 305–5805.
Incineration Units.’’ This document corrections are made: Due to the public health concerns
corrects an error in the rule language of related to COVID–19, the EPA Docket
the final rule pertaining to EPA’s Subpart V—[Corrected]
Center (EPA/DC) and Reading Room is
approval of Maryland’s negative closed to visitors with limited
■ 1. On page 8700, in the third column,
declaration regarding the existence of exceptions. The staff continues to
in part 62, in amendment 2, the
Sewage Sludge Incineration (SSI) units provide remote customer service via
instruction ‘‘Add an undesignated
in the state submitted by the State of email, phone, and webform. For the
center heading and § 62.4690 to read as
Maryland. latest status information on EPA/DC
follows:’’ is corrected to read ‘‘Add an
DATES: Effective on March 11, 2021. undesignated center heading and services and docket access, visit https://
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FOR FURTHER INFORMATION CONTACT: § 62.5170 to read as follows:’’ www.epa.gov/dockets.
Matthew Willson, Permits Branch ■ 2. On page 8700, in the third column, FOR FURTHER INFORMATION CONTACT:
(3AD10), Air & Radiation Division, U.S. the section heading ‘‘§ 62.4690 Marietta Echeverria, Registration
Environmental Protection Agency, Identification of plan—negative Division (7505P), Office of Pesticide
Region III, 1650 Arch Street, declaration.’’ is corrected to read Programs, Environmental Protection
Philadelphia, Pennsylvania 19103. The ‘‘§ 62.5170 Identification of plan— Agency, 1200 Pennsylvania Ave. NW,
telephone number is (215) 814–5795. negative declaration.’’ Washington, DC 20460–0001; main
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