CFI status. (i) Definition of ‘‘CFI’’— Determination of CFI status based on calculation of three-year total assets average. The Modernization Act defines a ‘‘community financial institution’’ as an FDIC-insured institution that has, as of the date of the transaction at issue, less than $500 million in average total assets, based on an average of total assets over the three years preceding that date. See Modernization Act, § 602 (to be codified at 12 U.S.C. 1422(13)). The proposed rule included a definition of ‘‘CFI’’ in § 900.1 that mirrored the statutory definition. A number of commenters recommended that the Banks be allowed to determine the status of their members by calculating the average total assets of their members on an annual basis, based on calendar year-end financial data available from the institutions’ regulatory financial reports filed with their regulators, or, in the alternative, based on data available from the institutions’ quarterly regulatory financial reports for the preceding three years. Commenters stated that it would be confusing to determine CFI status on a quarterly or monthly basis when § 925.22(b)(1) of the Membership Regulation requires the Banks to calculate annually each member’s minimum capital stock requirement using calendar year-end financial data. Commenters stated that calculation of CFI status on a quarterly or monthly basis would result in unnecessary administrative burdens and expense. Other commenters supported quarterly calculations of average total assets based on the institutions’ quarterly regulatory financial reports over the three preceding years. Commenters also stated that calculation of CFI status on a quarterly or monthly basis would cause some members’ CFI status to fluctuate more frequently, which, for members approaching the CFI asset cap, could have a negative effect on their reliance on Bank funding secured by CFI-eligible collateral. The Finance Board finds merit in these comments and believes it would be reasonable and less burdensome for the Banks to determine their members’ CFI status by calculating annually the members’ average total assets based on data drawn from the members’ regulatory financial reports for the three most recent calendar year-ends. The April 1 effective date adopted in the final rule provides sufficient time for the Banks to use calendar year-end data available from the regulatory financial reports. The issue of how to calculate the three-year total assets average also arises in the con...
