Revised OCC Exam Policy Aligns Ratings with CRA Purposes

The OCC has changed its Community Reinvestment Act supervision policies to ensure a “logical nexus” between banks’ CRA-related activities and CRA performance evaluation ratings and to give “full consideration” to banks’ efforts to take corrective action, the agency said today. The OCC issued a revised section of its policies and procedures manual that outlines how examiners will approach CRA ratings.

“The Community Reinvestment Act was established 40 years ago to encourage insured depository institutions to serve consumer credit needs and community reinvestment opportunities by lending, serving, and investing in the communities they serve,” said Acting Comptroller of the Currency Keith Noreika. “Related OCC policies and practices must always work toward that goal and should never result in the unintended consequence of making it harder for banks to support the consumers, businesses, and communities they exist to serve.”

For example, the policy now states that “limited, technical, or immaterial instances of discriminatory or illegal credit practices directly related to CRA lending activities in the context of otherwise good-to-excellent performance” may warrant criticism in the performance evaluation but that a downgrade of the composite rating “should be supported by strong evidence of quantitatively and qualitatively material instances of discriminatory or illegal credit practices directly related to CRA lending activities that have resulted in material harm to customers.”

Likewise, the OCC will “fully consider” corrective actions taken by the bank. “[A]s a general matter, if the bank has remediated or taken appropriate corrective actions to address the evidence of discriminatory or other illegal credit practices, the ratings of the bank should not be lowered solely based on the existence of the practice prior to commencement of the CRA evaluation,” the policy says, noting that rating penalties for activities already being addressed “unnecessarily distract and divert the bank’s resources from lending, investing, or serving the relevant communities and thereby frustrate the CRA’s purposes.”

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