Yesterday, I had the pleasure of attending one of a series of OCC roundtable sessions on the progress and direction of the agency’s plans for comprehensive CRA modernization. During this 90-minute session, which was held at the OCC’s headquarters in Washington, DC, Comptroller of the Currency Joseph Otting and several members of the OCC’s senior management team engaged with a gathering of approximately 25 stakeholders, representing a variety of community development organizations from around the country. Given the nature of our lending activity, as well as the importance of the support provided by our member banks, we are monitoring this modernization effort very closely. This stakeholder meeting was a wonderful opportunity to learn about the direction that the OCC is considering, and to share some our thoughts and concerns.
Last September, the OCC issued an Advanced Notice of Proposed Rulemaking (ANPR) seeking comments on a proposal to update the Community Reinvestment Act (CRA). Updating this regulation, which was passed in 1977, has been a focal point of the OCC since Otting was seated as Comptroller of the Currency in 2017. The ANPR generated nearly 1,500 responses, including a letter provided by Centrant Community Capital. During yesterday’s meeting, Otting began by outlining four primary themes that emerged from those comments:
- What “counts” for CRA? The OCC hopes to provide greater clarity and standardization of what constitutes a CRA-eligible activity. By eliminating ambiguity around this issue, banks would be able to act confidently when seeking opportunities to meet their CRA obligations. This would also help to eliminate uncertainty of how those activities are considered and treated during future CRA evaluations.
- Where does it count? The 1977 CRA regulations emphasize delineated geographic assessment areas (AAs) that are tied to where a bank gathers its deposits – a concept that is harder to define in the modern-day, technology-driven banking environment. Otting emphasized that the OCC’s CRA modernization effort would not eliminate AAs or a consideration of a bank’s market/deposit share, in keeping with the original intent of the regulation; however, he noted that the proposed rulemaking would seek to clarify an enhanced definition of the term, perhaps encompassing secondary AAs or greater allowance for activities in the broader statewide or regional area in which a bank’s AAs are located.
- How is it counted? Some of the greatest concerns about CRA in its current form revolve around the significant judgement involved in the evaluation process. Otting noted that banks are currently “scored” on how they meet their CRA obligations in their AAs, but acknowledged that this scoring process relies heavily on an examiner’s subjective analysis of a bank’s performance. This is particularly difficult when it comes to determining if and when a bank has done “enough” to meet CRA requirements within their AAs, and whether to allow a consideration of activities pursued outside of the AAs. While subjective analysis would not be eliminated completely, Otting stressed that one of the primary goals of CRA modernization is to create a more objective standard that examiners can use as the starting point when discussing a banks’ CRA performance. He also shared that he did not think that this would entail a one-size-fits-all standard metric or ratio, about which some groups have expressed concerns. Finally, he noted that any such metric would also need to include appropriate limits or boundaries, to encourage a diversity of CRA activity.
- Aggregation of CRA data: A final goal of the CRA modernization effort would be to create a better system of compiling the total volume and impact of CRA-related data. Not only would this allow a more comprehensive assessment of what banks are doing relative to the CRA needs of their markets, but it would also allow regulators to identify trends across a broader range of activities and geographic areas.
When asked about a coordinated, interagency effort around CRA modernization, Otting noted that approximately 70% of CRA-related activities fall under the purview of the OCC, which is why it is such a high priority for the agency. While he was optimistic that all three agencies would be able to work toward an agreed-upon framework for CRA modernization, Otting did state that the OCC was prepared to move forward on its own if necessary.
Looking ahead, the OCC hopes to finalize a draft of the Notice of Proposed Rulemaking (NPR) by mid-September, and to issue the final NPR for public comment in late September or early October.