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Photo by James Sanna | Banker & Tradesman Staff
Even as many banks and housing agencies remain focused on the financial crisis caused by the coronavirus pandemic, two federal bank regulators plan to move forward with changes to the Community Reinvestment Act.
One day after the April 8 deadline for submitting comments on the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation’s proposal to update the CRA, Comptroller of the Currency Joseph Otting said in a statement that he would move forward with the proposal and issue a final rule within the first half of the year. That time frame gives the regulators less than three months to issue the final rule.
More than 7,400 comments were received on the proposal, Otting said, noting that he had already read many of them.
“Over the last month, as the nation has managed its response to COVID-19, it has become even clearer to me that communities need even more access to lending, capital, and services during this difficult time,” Otting said. “It is our intention to craft a final rule that will encourage banks to lend and invest more in the communities they serve, including low- and moderate-income neighborhoods.”
The CRA has not been substantially updated since 1995, and Otting said further delay would prevent resources from “reaching those who need them most in this time of national emergency.”
The third bank regulator, the Federal Reserve, has not endorsed the OCC and FDIC proposal.
Local Reaction Negative
Several local stakeholders submitted comments to the OCC or signed joint letters with other organizations. While they acknowledge a need to update the CRA, organizations have concerns about increased cost and regulatory burdens, the new rating system, integrity of the results, and whether the changes would accomplish the CRAs mission to meet communities’ credit needs.
The Massachusetts Bankers Association joined the American Bankers Association for a 65-page submission. Massachusetts Housing Partnership and MassHousing were among multiple banks and organizations endorsing the National Association of Affordable Housing Lenders’ 26-page letter.
Boston Private, which received the highest rating, “outstanding,” on its most recent CRA examination in 2018, submitted a seven-page letter to the OCC.
“We share NAAHL’s and the ABA’s assessment that there will be unintended negative consequences for both communities and banks if the Agencies finalize the proposed rule,” Esther Schlorholtz, Boston Private’s Director of Community Investment, wrote in her comment letter. “We urge the OCC and FDIC to work with all stakeholders, including banks and communities, and we encourage you to obtain appropriate and adequate data that the proposal will not result in substantial negative consequences for banks or communities.”
Boston Private’s comments included concerns that the CRA proposal would limit lending in small population centers and rural areas, incur costs and difficulties when adding deposit-based areas to the CRA assessment, and create conflicts when managing liquidity and balance sheets.
The Massachusetts Community & Banking Council also submitted comments. MCBC Executive Director Regan St. Pierre began her five-page letter by saying that banking and community resources should be focused on serving low- and moderate-income families and communities during the pandemic rather than implementing updates to the CRA.
“The impact of this emergency on the LMI populations is unknown, and we do not envision a point in time in the foreseeable future where we will be able to reallocate resources to the extensive implementation of the proposed rule,” St. Pierre said. “To ensure that CRA reform is done right, MCBC respectfully requests that the rule making process be suspended until such time as the state of emergency brought on by COVID-19 is lifted and regulators, banks and community groups are able to dedicate sufficient resources to this endeavor.”
