ABA, State Bankers Associations Urges FDIC, OCC to Further Refine Proposed CRA Overhaul

The OCC and FDIC have taken a “significant step” toward modernizing the Community Reinvestment Act regulations with their recent proposal to update the 30-year old framework, the American Bankers Association and 51 state associations said today. In a 65-page comment letterthe associations requested that the agencies refrain from finalizing the proposed CRA performance measures pending further study, but suggested that the agencies  finalize various aspects of the rule that have broad support—such as clarifications regarding qualifying activities, the creation of a qualified activities list and the creation of a prior approval process.

The associations emphasized the need for a durable CRA regulatory framework that is “clear and calibrated appropriately” and takes a data-centric approach to performance measures. While they supported the agencies’ efforts to establish quantifiable CRA performance metrics, they raised numerous concerns about the metrics outlined in the proposal, which include a CRA evaluation measure, a retail lending distribution test, and a two-percent community development minimum that together would generate a presumptive CRA rating.

The associations also raised concerns about the agencies’ proposed data collection, recordkeeping and reporting requirements, noting that they would be considerably more complex than existing CRA reporting mechanisms and overly burdensome for banks to implement. Additionally, given the significant amount of work that would be required for banks of all sizes to implement the changes if finalized, the associations recommended a two-year implementation period.

Finally, the associations emphasized that regulators should continue to pursue a CRA framework that can be adopted by all three agencies. (The Federal Reserve declined to join the FDIC and the OCC’s proposal, though Fed officials have expressed the agency’s commitment to CRA modernization.) “An interagency final rule with help to ensure that modernization stands the test of time,” the associations wrote. “In addition, failure to act in coordination would yield undesirable results—including perpetuating confusion and inconsistency—which would be contrary to the objective of the modernization effort.”