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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations
apply to participants in the Program.
Otherwise, potential recipients of capital investments under ECIP could decide not to participate in the Program or to delay their applications for a material period of time pending the establishment of these requirements, which would reduce or delay the provision of much-needed assistance to communities that have suffered economic impairment due to the COVID19 pandemic. Although this interim final rule is effective immediately, comments are solicited from the public on all aspects of the interim final rule. Comments must be submitted on or before April 8, 2021.
Treasury will consider these comments and the need for making any revisions as a result of these comments.
III. Interim Final Rule A. Background on the ECIP
The purpose of ECIP is to support the efforts of lowand moderate-income community financial institutions to, among other things, provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially in lowincome and underserved communities, including persistent poverty counties, which may be disproportionately impacted by the economic effects of the COVID19 pandemic.2 To support these objectives, the Act makes up to $9
billion available to Treasury to make capital investments in minority depository institutions and community development financial institutions that are 1 insured depository institutions that are not controlled by eligible bank holding companies or eligible savings and loan holding companies, 2 bank holding companies, 3 savings and loan holding companies, or 4 federally insured credit unions. Certain additional eligibility criteria apply, including a requirement for applicants to provide Treasury with an investment and lending plan that provides certain specified information concerning the applicants lending history and plans.3
A community development financial institution or minority depository institution that submits an application and is selected to participate in the Program ECIP recipient will receive a capital investment from Treasury.4 5
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2 Section
104Ab2 of the Act.
3 Sections 104Ad34, 104Ai of the Act.
4 An ECIP capital investment may be treated as equity or subordinated debt for accounting purposes depending on the type of instrument issued and the corporate form and regulatory classification of the ECIP participant.
5 Currently, the only Federal credit unions that may accept these types of investments as secondary capital under the secondary capital rules of the
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Consistent with statutory requirements, the investment by Treasury will take the form of preferred stock, except in cases where Treasury determines that an institution cannot feasibly issue preferred stock, Treasury may purchase subordinated debt instruments.6 The statute sets forth certain economic terms of the capital investments under ECIP 7
and limitations on the amount of capital investments Treasury may purchase from individual institutions.8 In addition, the statute prohibits institutions with certain types of conflicts of interest from participating in ECIP.9 Treasurys authority to make new capital investments in ECIP will end six months after the date on which the national emergency concerning the COVID19 outbreak declared by the President on March 13, 2020 under the National Emergencies Act 50 U.S.C.
1601 et seq. terminates.
B. Overview of the Interim Final Rule This interim final rule establishes restrictions on executive compensation, share buybacks, and dividend payments, as required by the Act. In developing these restrictions, Treasury has considered two primary objectives.
First, these restrictions should seek to promote the integrity of ECIP by ensuring that the funds provided under the Program are used to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially in lowincome and underserved communities.
Second, the restrictions generally should seek to encourage a large number of minority depository institutions and community development financial institutions to participate in ECIP, because the Program will have the most beneficial impact on the intended communities if a broad range of institutions participate in the Program.
The restrictions under this interim final rule generally apply to an ECIP
recipient during the ECIP period, defined as the period from the date the ECIP makes its investment until the earliest of i the date on which the ECIP
recipient has fully redeemed or repaid the capital investment received under ECIP; ii the date on which the capital investment the ECIP recipient received National Credit Union Administration NCUA are those with a designation of low-income status. See 12 CFR 701.34b. Credit unions that do not meet the low-income credit union designation may participate through the issuance of subordinated debt, but the subordinated debt would not be secondary capital.
6 Section 104d5B of the Act.
7 Sections 104Ad58 of the Act.
8 Sections 104Ae, f of the Act.
9 Section 104Ah of the Act.

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under ECIP is no longer held, in full or in part, by Treasury or a Treasury affiliate, or a custodian, trustee, or agent acting on behalf of Treasury or a Treasury affiliate, and iii the date that is ten years after the ECIP investment date. The restrictions apply to the ECIP
recipient on a consolidated basis.
Treasury anticipates that the ECIP
period will provide sufficient time to ensure that ECIP investments are deployed in a manner that supports the statutory objectives. Accordingly, the requirements of the interim final rule will cease to apply when the ECIP
investment is no longer held by Treasury or an entity established by Treasury Treasury affiliate.
1. Restrictions on Compensation The restrictions on executive compensation under the interim final rule include i a requirement to ensure that the total compensation paid to senior executive officers is appropriate and not excessive; ii a restriction on severance pay for an ECIP recipients senior executive officers if the ECIP
recipient is in troubled condition; and iii a requirement to adopt policies and procedures prohibiting excessive or luxury expenditures as defined below.
Each of these compensation-related restrictions is intended to help ensure that the proceeds of ECIP investments have the effect intended by Section 104A of the Act and are not to fund excessive compensation for ECIP
recipients executives.
The restrictions on excess compensation apply to total compensation, which is defined as all compensation, other than any severance payment, provided by an ECIP recipient to an officer or employee, including salary, wages, bonuses, awards of stock, deferred compensation, and other financial benefits.
A senior executive officer means an ECIP recipients president, any vice president in charge of a principal business unit division or function such as sales, administration, or finance, any other officer who performs a policy making function, or any other person who performs similar policy making functions.
i. Policies and Procedures Prohibiting Excessive Compensation Under the interim final rule, an ECIP
recipient is required to ensure that the total compensation paid to its senior executive officers is appropriate and not excessive. Unless informed otherwise by Treasury, an ECIP recipient is considered to have satisfied the requirements regarding excessive executive compensation under the
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