Arizona MultiBank CDC A group of national banks made investments in the Arizona MultiBank Community Development Corporation using public welfare investment authority.

Barry Wides, Deputy Comptroller, Community Affairs, OCC

Today, as the U.S. economy regains strength, banks are helping to revitalize and stabilize their local neighborhoods with investments that are mutually beneficial to banks and the communities they serve.

Banks are providing affordable housing and supporting small businesses and job growth. They are taking advantage of federal tax credits that support real estate development in low-income and other targeted communities. They are investing in community development financial institutions and funds. Even as they make these investments that help bring new life to troubled communities, banks are helping themselves by meeting their own Community Reinvestment Act (CRA) goals.

This issue of Community Developments Investments serves as a guide—or perhaps a refresher—to banks interested in making public welfare investments that support community development and help reduce the economic distress in the neighborhoods where they do business.

Evolution of Public Welfare Investing

Nearly a half century ago, an Office of the Comptroller of the Currency (OCC) ruling ushered in a wave of local investing by national banks that, working in collaboration with their community partners, helped renew and rebuild struggling communities across the nation.

The change began in 1963, when the OCC issued a legal interpretation of the National Bank Act allowing national banks to make community development investments that promote the public welfare. OCC Interpretive Rule 7.7480 allowed national banks to "make reasonable contributions to local community agencies and groups to further the physical, economic, and social development of their communities."

In a way, the ruling was revolutionary because it gave banks the regulatory green light to invest in community revitalization. It also paved the way for banks to use a new tool—community development corporations—to collaborate with community groups for the good of their communities.

The ruling helped lay a foundation for the 1977 enactment of the CRA and stimulated the increase in national bank investments in public welfare and community development over the next several decades. In 1992, the public welfare investment authority was codified in statute. Originally national banks were authorized to make public welfare investments in an amount up to 10 percent of a bank's capital and surplus. This amount was raised to 15 percent in 2006.

Using the public welfare investment authority, banks have helped their communities—while boosting their own bottom lines—by;

• Creating affordable multifamily housing and supporting other residential and commercial real estate development,
• Providing equity for small business start-ups and expansion,
• Revitalizing or stabilizing government-designated development areas, and
• Strengthening communities’ capacity to undertake and sustain key community development infrastructure and related projects.

Today, community development investing under the public welfare investment authority remains a flexible tool that enables banks to minimize risk by structuring investments that make the most of the public- and private-sector resources and expertise available within their service areas and at the state, regional, and national levels.

The articles in this issue of Community Developments Investments highlight community development investing by banks, and, specifically, the common types of public welfare investments; compare the public welfare investment authority provisions with CRA; and explain the public welfare investment submission process, as well as documentation requirements for public welfare investments. For a summary of the requirements, see the Public Welfare Investments Quick Reference Guide and the Public Welfare Investments fact sheet.

We know you will find this issue of Community Development Investments helpful. For information on opportunities, investment structures, and the application process, visit the OCC’s Web site. To find information on public welfare investments authority, go to the left side navigation of the OCC's Community Affairs home page and select Public Welfare Investments (12 CFR 24). We also encourage you to contact the District Community Affairs Officer in your area.

For current information on public welfare investments, we suggest you join the OCC Community Affairs News List Service. After registering, you will receive regular e-mail alerts on new welfare investments precedents; the latest quarterly investment compilations; and announcements on new interpretations, regulations, and policy changes. In addition, we will inform you about the release of new Community Affairs publications as they become available.