OCC Unilaterally Finalizes Community Reinvestment Act Changes

The OCC today issued its long-awaited final rule making significant changes to the regulations implementing the Community Reinvestment Act—the first overhaul of the CRA framework in more than three decades. The 370-page final rule makes critical changes in four key areas, including:

  • Qualifying activities. The final rule clarifies and expands the qualifying activities that can receive CRA consideration to include certain activities in areas of need that are not low-to-moderate-income communities and certain activities that benefit an entire community. A non-exhaustive list of qualified activities will be published on the OCC’s website in a searchable format and updated on an annual basis.
  • Determining bank assessment areas. The final rule preserves facility-based assessment areas, but also requires institutions to delineate deposit-based assessment areas where they have significant concentrations of retail domestic deposits.
  • Evaluating CRA performance. The final rule seeks to establish a more objective, consistent, and transparent means of evaluating CRA performance that will assess a bank’s retail lending and community development activities by analyzing the distribution of retail lending activities relative to LMI populations and census tracts in a bank’s assessment area as well as the impact of all CRA activity measured in dollars.
  • CRA reporting. The final rule will impose significant data collection, recordkeeping and reporting requirements that are intended to standardize the reporting process, increase transparency and reduce the lag time in preparing CRA exam reports.

The new rule—which will apply to OCC-regulated national banks and savings associations—will be effective on Oct. 1, 2020. The agency is providing a phase-in period for the new requirements, and institutions with less than $600 million in assets choosing to opt in to the new regime will have until Jan. 1, 2024, to comply. Community banks with assets of up to $2.5 billion will also have the option to opt out of the new performance standards.

“Stakeholders on all sides have acknowledged that the current CRA regime has failed to keep pace with the evolution of banking and community needs,” said American Bankers Association President and CEO Rob Nichols. “We appreciate that today’s final rule identifies a list of activities that qualify for CRA credit that will be effective immediately. Banks and the communities they serve will benefit from this certainty.”

However, Nichols expressed concern that the OCC acted alone in finalizing the rule. (While the FDIC joined the agency’s initial proposal, FDIC Chairman Jelena McWilliams declined to sign on to the final rule, citing the burden on banks responding to the coronavirus pandemic. The Federal Reserve did not join in the proposed rulemaking.)

“We have consistently advocated for CRA modernization that encourages banks to invest efficiently and effectively in every neighborhood they serve,” Nichols said. “As the only banking trade association that represents banks of all sizes and charters, we have also advocated for clear and consistent rules for all banks. The fact that only one of the three federal banking regulators overseeing CRA has adopted this final rule means it does not meet that goal.”

Nichols also raised concerns about the final rule’s performance measurement benchmarks, which he pointed out “present significant data collection challenges for banks.”