ABA Cautions Against Unilateral Efforts to Reform CRA in Letters to Fed, OCC

As the Federal Reserve contemplates updates to its Community Reinvestment Act regulations, the American Bankers Association emphasized the importance of working closely with the FDIC and OCC to “craft a modern regulatory framework that can be adopted by all three agencies.” ABA warned that “failure to act in coordination would yield undesirable results—including perpetuating confusion and inconsistency—which would be contrary to the objectives of the modernization effort.”

ABA also outlined several objectives and principles that should guide any CRA modernization effort, noting that, among other things, a modernized framework should be durable, tailored and aimed at improving consistency, transparency and effectiveness. Additionally, ABA also highlighted the need to make changes to assessment areas to account for digital banking trends, include both quantitative and qualitative assessments, reduce overall complexity and be mindful of excessive data burdens or new reporting requirements.

The Fed’s concept—which it outlined in an advance notice of proposed rulemaking last year—involves a retail test, which would consist of a retail lending subtest and a retail services subtest, as well as a community development test, which would consist of a community development financing subtest and a community development services subtest. Small retail banks could elect to be evaluated under the current CRA framework or choose to be evaluated under the retail lending subtest alone. Small banks could also elect to have their retail services and community development activities evaluated.

In related news, ABA and eight other financial trade groups echoed the call for interagency coordination on CRA reform in a letter to the OCC. In the letter, the groups raised concerns about the OCC’s CRA information collection survey, which will gather bank-specific information from institutions subject to the general performance standards established in the agency’s 2020 CRA rule.

The groups urged the OCC to publicly announce that it will coordinate with the Fed and the FDIC on a joint CRA rulemaking. In support of this joint rulemaking, the OCC should delay the compliance date of the 2020 CRA rule for a period of at least two years, formally withdraw the information collection in the spirit of the Biden administration’s Jan. 20 regulatory freeze memo, and discontinue work to establish performance benchmarks for the 2020 rule. The groups made similar recommendations in a letter to the OCC earlier this month.

“We strongly support modernizing the regulations that implement the Community Reinvestment Act and reiterate our commitment to engaging in a constructive dialogue with the banking agencies and other CRA stakeholders in order to develop an updated regulatory framework that serves communities, banks, and regulators well,” the groups said. “However, proceeding with the proposed information collection would be counterproductive and would not advance an interagency effort.”