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Photo by Matthew G. Bisanz | Wikimedia / CC BY-SA 3.0
In another step in its overhaul of the Community Reinvestment Act, the Office of the Comptroller of the Currency said it would gather data from banks before creating new performance standards to evaluate how well banks meet the credit needs of their communities.
Under these new standards, the OCC wants the proportion of banks receiving the highest two ratings, outstanding and satisfactory, to remain the same as the proportion under the old system.
The OCC on Tuesday issued a notice of proposed rulemaking that explains the regulator’s approach to determining the CRA evaluation benchmarks, thresholds for a test that measure how retail lending was distributed and minimums for community development activity.
The proposal follows the OCC’s final rule issued in May that overhauled the CRA without specifying the evaluation benchmarks, thresholds and minimums. The OCC will accept public comments on the proposed rule for 60 days after publication in the Federal Register.
“Once finalized, the OCC expects to periodically review and adjust these benchmarks, thresholds, and minimums, as necessary, to ensure that these measures are incentivizing banks to engage in appropriate levels of CRA activities, while taking into consideration market conditions and changes in economic cycles,” the OCC said in the proposed rule.
Adopted in 1977, the CRA had not been revamped in 25 years. The regulations encourage financial institutions to meet community credit needs, including in low- and moderate-income neighborhoods, and prevent discrimination through redlining.
The OCC is one of three federal bank regulators evaluating CRA. The Federal Reserve and FDIC decided not to adopt the OCC’s rule, which was issued shortly before the resignation of then-comptroller, Joseph Otting. Acting Comptroller Brian Brooks has moved forward with the OCC’s overhaul. Earlier this month, the White House issued a statement saying it had nominated Brooks to become permanent comptroller of the currency.
The Fed issued its own proposal in September. Both the banking industry and community organizations would prefer a single CRA framework from all regulators.
Those banks subject to the OCC rule will be asked to provide the OCC with data through an Information Collection Survey to gather information to help the OCC determine its benchmarks, thresholds and community development minimums.
Under the new rule issued in May, banks will be evaluated using deposit-based assessment areas. The OCC plans to collect data about banks’ main office, branch presence and deposit activity and use this information to see how banks would have performed under the new measurement system.
The OCC will also look at the dollar value of banks’ CRA and community development activities both to see how banks would have performed under the new guidelines and to create community development minimums. The OCC also wants to know retail loan originations and branch locations.
“Once the OCC analyzes the public comments on this proposal and the data it receives, the OCC plans to issue a final rule that will adopt an approach for setting the benchmark, threshold, and minimum values that correspond to the presumptive ratings (i.e., outstanding, satisfactory, needs to improve, and substantial noncompliance) for banks assessed under the general performance standards,” the OCC said.
The OCC also said that the new benchmarks, thresholds and community development minimums would provide banks with objectivity and transparency while also encouraging CRA activity “at a level no less than the status quo.”
“To accomplish these goals, the OCC is proposing to establish benchmarks, thresholds, and minimums that correspond to a proportion of banks that would have received a hypothetical bank-level presumptive CRA rating of outstanding and satisfactory that is no greater than the historical proportion of banks that have received a bank-level assigned CRA rating of outstanding and satisfactory,” the OCC said.
The rule also proposes that banks with performance declines of more than 10 percent under the new CRA framework would risk having their ratings affected.
