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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations recipient must adopt an excessive or luxury expenditures policy, provide such policy to the Department of the Treasury and the ECIP recipients appropriate Federal banking agency, and post the text of such policy on its internet website, if the ECIP recipient maintains an internet website.
2 If, after adopting an excessive or luxury expenditures policy, the board of directors of the ECIP recipient makes any material amendments to such policy, within ninety days of the adoption of the amended policy the board of directors must provide the amended policy to the Department of the Treasury and the ECIP recipients appropriate Federal banking agency and post the amended policy on its internet website, if the ECIP recipient maintains an internet website.
3 The ECIP recipient must maintain, and continue the disclosure of any material amendments to, the excessive or luxury expenditures policy during the ECIP period, unless the Department of the Treasury determines that discontinuation of the policy would not be contrary to the public interest.
d Material changes in policies or procedures. An ECIP recipient must obtain prior approval from the Department of the Treasury before making any material change to the policies or procedures that it maintains for purposes of compliance with paragraph a, b, or c of this section.
A change to the compensation, severance pay, or excessive or luxury expenditures policies or procedures will be considered material for purposes of this section if the change is likely to have a negative effect on the financial condition of the ECIP recipient, limit the ability of the ECIP recipient to make payments under the terms of an ECIP
instrument, or otherwise impair the ECIP recipients ability to meet its obligations to the Department of the Treasury under the ECIP.
1 A request to make a material change to compensation, severance pay or excessive luxury expenditures policies or procedures, must be submitted by an ECIP recipient in writing and received by the Department of the Treasury at least thirty days prior to the effective date of the policy change. The request should describe the change, reason for the change, and anticipated financial or other impact of the change on the condition of the ECIP
recipient.
2 The request will be deemed approved thirty days after the ECIP
recipient has provided a complete request to the Department of the Treasury, unless, prior to the expiration of the thirty-day period, the Department
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of the Treasury objects to the proposed change or notifies the ECIP recipient that additional time is required in order to complete review of the proposed change to policy or procedures 35.23 Restrictions on dividends, share buybacks, and other capital distributions.

a Restriction on capital distributions due to nonpayment. An ECIP recipient shall not make any capital distribution on a non-senior security, unless:
1 If the ECIP investment is in the form of preferred stock, the ECIP
recipient has paid in full the dividends for the last completed dividend period on the preferred stock; or 2 If the ECIP investment is in a form other than preferred stock including, subordinated debt, the ECIP recipient has paid in full the principal, interest, and other amounts due and payable under the terms of the ECIP investment, and no amount that has been deferred remains unpaid.
b Limit on amount of capital distributions. 1 If an ECIP recipient is an insured depository institution, bank holding company, or savings and loan holding company, the ECIP recipient shall obtain the approval of the Department of the Treasury prior to making any capital distribution if the total of capital distributions made during the calendar year, including the proposed capital distribution, exceeds its eligible distributable income;
provided, however, that any prior approval of a capital distribution by the Department of the Treasury does not supersede any applicable regulatory requirements of the ECIP recipients appropriate Federal banking agency, or other actions taken by such agency. For purposes of this paragraph, eligible distributable income means the sum of the ECIP recipients reported year-todate net income as of the end of the most recent calendar quarter, plus net income for the two preceding calendar years, less any dividends or distributions for the year to date as of the end of the most recent calendar quarter and the two preceding calendar years, where each amount is calculated in accordance with the instructions to the Call Report or applicable reporting form.
2 If the ECIP recipient is federally insured credit union, the ECIP recipient shall obtain the Department of the Treasurys prior approval to make any capital distributions if the distribution would:
i In the case of a dividend, be payable from retained earnings as defined in 12 CFR 702.2f other than undivided earnings; or
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ii Cause the ECIP recipients net worth classification to fall below adequately capitalized as defined in 12 CFR 702.102a2.
c Exception for Subchapter S
Corporations and other pass-through entities. Notwithstanding anything to the contrary in paragraphs a and b of this section, any ECIP recipient that is an S corporation, as defined in 26 U.S.C.
1361a, or other pass-through entity may make capital distributions, to the extent reasonably required to cover its owners tax obligations in respect to the entitys earnings. Such distributions shall be subject to an annual reconciliation, with any surplus or deficiency to be deducted or added to distributions, as applicable, in the following year. Any tax-related distributions permitted under this paragraph c must also comply with any applicable limitations or determinations established by an ECIP
recipients Federal regulators.
35.24

Annual certification
On an annual basis an ECIP recipient shall, in accordance with the terms and conditions of its ECIP investment agreement, submit to the Department of the Treasury a certification executed by two senior executive officers one of which must be either its principal executive officer or principal financial officer that the ECIP recipient is in compliance with each of the excessive compensation, severance pay, and excessive or luxury expenditures requirements and restrictions on capital distributions set forth in 35.22 and 35.23.
35.25

Exemptive relief.

The Department of the Treasury may grant exemptions or waivers from some or all of the restrictions on share buybacks and dividend payments under this part if such exemption or waiver is necessary or appropriate to effectuate the goals of the ECIP or to protect the public interest. Such exemptions or waivers may be subject to such terms and conditions as deemed necessary or appropriate by the Department of the Treasury.
Appendix A to 31 CFR Part 35
Emergency Capital Investment Program Model Excessive or Luxury Expenditures Policy I. Introduction A participant in the Emergency Capital Investment Program ECIP recipient, as defined at 31 CFR 35.21 is required to establish and maintain policies designed to eliminate excessive or luxury expenditures.
The term excessive or luxury expenditures means excessive expenditures on any of the following to the extent such expenditures are
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