OCC TWEAKS CRA RATING POLICY

On August 15, 2018 the Office of the Comptroller of the Currency (OCC) published OCC Bulletin 2018-23 to make public the revised Policies and Procedures Manual (PPM) 5000-43, which clarifies the OCC’s policy for applying the regulatory framework to determine the effect of evidence of discriminatory or other illegal credit practices on the Community Reinvestment Act (CRA) rating of a national bank, federal savings association, or federal branch. The updated PPM replaces and rescinds OCC PPM 5000-43, “Impact of Evidence of Discriminatory or Other Illegal Credit Practices on Community Reinvestment Act Ratings” (October 12, 2017).

The revised PPM does not appear to be a change in policy, but rather a realignment of written policy with practices actually used by the OCC. While this action only impacts OCC regulated institutions other federal bank regulatory agencies tend to apply the same concepts to the institutions they regulate.

The revisions tweak the existing guidance on this subject.

  • For example the revised procedures clarify that in assigning a CRA rating, the OCC first evaluates a bank’s performance for the applicable time period under the regulatory performance criteria and then makes any adjustments that are warranted based on evidence of discriminatory or other illegal credit practices.
  • The PPM further clarifies that if, after completing an evaluation of a bank’s CRA performance, the OCC determines that a bank’s composite or component rating will be lowered based on evidence of discriminatory or other illegal credit practices directly related to the bank’s CRA lending activities, the OCC’s general policy is to downgrade the rating by only one rating level unless such illegal practices are found to be particularly egregious. Multi-level downgrades based on discriminatory or other illegal credit practices have occurred, but are rare.
  • The CRA regulations provide that in determining the adverse effect of evidence of discriminatory or other illegal credit practices, “the OCC considers . . . any corrective action that the bank has taken or has committed to take, including voluntary corrective action resulting from self-assessment.” This principle is consistent with a purpose of the CRA regulations, which is to consider whether discriminatory or other illegal credit practices have been, or are substantially being, addressed by the bank. The OCC’s policy is generally not to penalize a bank by lowering its CRA rating when examiners have determined the bank has taken appropriate remedial actions because penalties in such cases can unnecessarily distract and divert the bank’s resources from lending, investing, or serving the relevant communities and thereby frustrate the CRA’s purposes.

The updated Policies and Procedures Manual is available at:  https://www.occ.gov/publications/publications-by-type/other-publications-reports/ppms/ppm-5000-43.pdf

For comparison purposes the old PPM is available at:  https://buckleysandler.com/sites/default/files/Buckley%20Sandler%20InfoBytes%20-%20OCC%20Manual%20PPM5000-43%202017.10.12.pdf. (Thanks to Buckley Sandler for retaining the previous guidance on their website.)

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