WASHINGTON—The Office of the Comptroller of the Currency (OCC) has released its final rule it says modernizes the Community Reinvestment Act (CRA), but the FDIC has released a statement saying it isn’t prepared to finalize the proposal at this time.
In a statement, the OCC said the final rule will increase bank CRA-related lending, investment, and services in low- and moderate-income communities where there is significant need for credit, more responsible lending, and greater access to banking services.
There has been speculation the OCC has to get the finalized CRA rules in place before its director, Joseph Otting, leaves his post.
Changes Made
The OCC said it reviewed 7,500 comment letters in response to the notice of proposed rulemaking announced on Dec. 12, 2019. The OCC further said it made several changes to the proposal in response to those letters, including:
- Clarifying the importance of the quantity and quality of activities as well as their value
- Increasing credit for mortgage origination to promote availability of affordable housing in low- and moderate-income areas
- Clarifying credit for athletic facilities to ensure they benefit and support low- and moderate-income communities
- Deferring establishment of thresholds for grading banks’ CRA performance and delineating banks’ deposit-based assessment areas until the OCC assesses improved data required by the final rule
The OCCU further said the final rule will benefit communities, businesses, and banks by:
- Clarifying what qualifies for CRA consideration
- Updating how banks define assessment areas by retaining immediate geographies around branches and establishing additional assessment areas for banks that do not rely on branch networks to serve their customers
- Evaluating bank CRA performance more objectively through quantitative measures that assess the volume and value of activity
- Making reporting more transparent and timelier
- Providing greater support for small businesses, small and family-owned farms, and Indian Country
- Thoroughly evaluating banks’ CRA performance in all their assessment areas, not just a limited evaluation in some of them
The CRA was initially enacted in 1977 in response to the practice of redlining by many banks, which did not make loans or provide other services in low-income communities. It has long been the subject of pushback from banks, which have consistently called for the rules to also apply to credit unions.
The final CRA rule applies to national banks and savings associations, which conduct the majority of all CRA activity.
FDIC Response
In response to the final rule, FDIC Chairman Jelena McWilliams issued a statement saying,“The CRA proposal the OCC and the FDIC issued last December was a culmination of a multi-year effort by the prudential banking regulators to modernize CRA regulations for the first time in a quarter of a century…There are many provisions in the final rule that will greatly benefit low- and moderate-income communities, and provide greater clarity to banks on CRA expectations.
“While the FDIC strongly supports the efforts to make the CRA rules clearer, more transparent, and less subjective, the agency is not prepared to finalize the CRA proposal at this time,” McWilliams continued. “The FDIC recognizes the herculean effort community banks are making to support America’s small businesses and families during this challenging time and encourages financial institutions to work constructively with borrowers affected by COVID-19.”