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On December 12, 2019 the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) announced a proposal to modernize the regulations under the Community Reinvestment Act (CRA) that have not been substantively updated for nearly 25 years.
The proposed rules are intended to:
- Increase bank activity in low- and moderate-income communities where there is significant need for more credit, more responsible lending, greater access to banking services, and improvements to critical infrastructure.
- Clarify what qualifies for credit under the CRA, enabling banks to better implement reinvestment and other activities that can benefit communities.
- Create an additional definition of “assessment areas” tied to where deposits are located—ensuring that banks provide loans and other services to low- and moderate-income persons in those areas.
- Change the definition of small bank, which in turn will require more banks to collect and report CRA data.
- Address digital banking changes and to further encourage lending to low- and moderate- income borrowers living in underserved communities, such as rural areas and tribal lands far removed from urban centers where bank branches are concentrated.
Conspicuously absent from this rulemaking is the Federal Reserve Board (FRB). The OCC has been bulling this proposal through the revision process. The advanced notice of proposed rulemaking was published by the OCC in August 2018 without participation from the FRB or the FDIC. The agencies stated at that time they would be in sync when the proposed rule was published. That did not happen. Now the agencies are stating they will be unified when the final rules are published. Time will tell whether the latest proclamation happens or not. This process would be more palatable if all of the agencies were fully involved.
The 240-page proposal is on a fast track. Comments will be accepted for 60 days after publication in the Federal Register, which is expected soon.
Many banks do not get involved in the proposal process. The proposed revisions are game changers. All banks need to understand:
- What is about to happen;
- How the proposed revisions will impact your bank; and
- What actions can be taken to influence the direction of the proposal?
This two-hour recording addresses each of these questions.
After reviewing the recording you’ll understand:
- The addition of a second definition of an assessment area, which allows a bank that receives 50 percent or more of its retail domestic deposits from geographic areas outside of its facility-based assessment area to delineate separate, non-overlapping assessment areas in the smallest geographic area where it receives 5 percent or more of its retail domestic deposits;
- The concept of qualifying activities, which includes revised definitions for community development loans, investments and services;
- The revised definition of small bank, which includes institutions with assets of $500 million or less, and the evaluation process for such banks;
- The full revised and expanded data collection, recordkeeping and reporting requirements that apply to banks with assets in excess of $500 million in assets and the new requirements that require small banks to collect and maintain certain data;
- What is the CRA Evaluation Measure, how is it calculated, and how high does it have to be in order to get a satisfactory or outstanding CRA rating;
- What is the Community Development Minimum and how high must it be to get a satisfactory or outstanding CRA rating;
- What are the differences between bank-level performance standards and assessment area performance standards;
- What is a retail domestic deposit and how is it used in the proposed new rules;
- What is the Geographic Distribution Test, the Geographic Demographic Comparator Threshold, and the Geographic Peer Comparator Threshold and how are these numbers used, and what numbers are satisfactory;
- What is the Borrower Distribution Test, the Borrower Demographic Comparator Threshold, and the Borrower Peer Comparator Threshold and how are these numbers used, and what numbers are satisfactory;
- How the changes impact your financial institution; and
- Why and how to comment on the proposal.
The recording is designed for management of the loan department, Compliance Officers, CRA Officers, marketing staff and auditors.