WASHINGTON–More Than 1,350 comment letters were filed with the Comptroller of the Currency in response to a proposal to make changes to rules around the Community Reinvestment Act (CRA).
Among those filing a letter was the Independent Community Bankers of America, which outlined what it said are “needed reforms” to the legislation, which has long been opposed by the banking industry.
Comptroller of the Currency Joseph Otting said the proposal marks an “important milestone in a decade-long process” to reform CRA. Otting indicated that over time more than 7,400 letters have been received on the CRA. An analysis of the actual number of comment letters filed on the most recent proposal was first reported by Regulatory Report.
“I have already read many of the comments and appreciate the thoughtfulness and support for updating regulations that have not changed significantly since 1995,” Otting said in a statement. “We will begin reviewing those comments, which we will consider carefully in developing a final rule.”
The comment letters follow a January proposal from the OCC and the FDIC that outlined sweeping changes to CRA rule. In issuing the proposal, the FDIC said it would “create more descriptive and expansive criteria for the types of activities that qualify for CRA credit,” and further provide “defined criteria” that identify the types of activities that meet the credit needs of banks’ communities and, thus, can be considered qualifying activities.
“These criteria would both encompass the many activities that currently qualify for CRA consideration and include additional activities that meet the credit needs of banks’ communities, such as expanding credit to areas considered distressed or underserved and ‘Indian country,’” the agency said at the time.
Other Parts of Proposal
Other parts of the proposal would:
- Would require both agencies to periodically publish a list of non-exhaustive, illustrative examples of qualifying activities, and establish a process for stakeholders to seek agency determination if an activity is a qualifying activity.
- Establish new performance standards to evaluate banks that have assets of $500 million or less in each of the previous four calendar quarters and give those banks the option of being evaluated under the current small bank performance standards or to opt into the proposal’s new performance standards.
Bankers’ Group Urges ‘Needed Changes’ in CRA
Among those filing a letter was the Independent Community Bankers of America, which called on federal regulators to make “needed changes” to a proposal to reform Community Reinvestment Act regulations, saying the changes will “promote equitable, consistent, and transparent implementation of the law.”
The ICBA said it generally supports modernizing CRA regulations to enhance transparency and reflect banking industry changes driven by technology. The grade group said it also specifically appreciates provisions in the proposal to create a list of pre-approved CRA activities and a process by which banks can receive regulator confirmation that a loan or activity qualifies for CRA credit. However, ICBA said, community banks are concerned the new regulatory framework is too complex and would impose new and excessive data-collection costs.
Specific Requests
"ICBA and the nation's community banks appreciate regulatory efforts to modernize the Community Reinvestment Act, whose mission of maximizing the availability of financial services and credit in local communities is the essence of community banking," ICBA President and CEO Rebeca Romero Rainey said in a statement. "We hope that the federal banking regulators will continue to work with stakeholders to create a more refined, uniform, and transparent rule."
Among its recommendations, ICBA is calling on regulators to:
- Allow community banks up to $5 billion in assets to opt into the revised framework to avoid excessive burdens on these local institutions and a one-size-fits-all approach
- Exempt traditional, branch-based banks from tracking the location of deposits and delineating deposit-based assessment areas
- Continue working with the Federal Reserve Board to create a uniform CRA rule
- Publish examiner’s guidance on documentation requirements before beginning exams under the new framework to alleviate uncertainty
Additional Requests
The ICBA also wants regulators to continue working with stakeholders to “develop a metric that addresses changing technology and stays true to CRA’s purpose of expanding access to credit in low- and moderate-income communities before finalizing a performance evaluation framework.”
To that end, the ICBA said:
- The proposed complex dollar-based metric favors large loans and investments over more numerous small loans to LMI families while undervaluing activities such as community development services.
- Nationwide benchmarks to establish a presumptive rating are not sufficiently tailored for individual banks, especially community banks, and deemphasize the CRA’s core focus on serving the needs of individual communities.