As banking agencies consider amending the regulations that implement the Community Reinvestment Act, they should preserve the broader framework while making changes to better tailor supervision, increase regulatory thresholds and focus on lending, the American Bankers Association and 45 state bankers associations said today in a letter to the FDIC and the Office of the Comptroller of the Currency.
In July, the FDIC and OCC proposed a series of amendments to CRA regulations, which represent the agencies’ third attempt in eight years to update the rules. ABA and the other associations said that while many aspects of the current CRA framework should be preserved, they support amending the regulations to incorporate longstanding guidance and interpretation, as well as to ensure CRA evaluations remain appropriately tailored to the financial institutions subject to supervision. They also supported the agencies’ goal of reducing regulatory burden and appreciated the proposal’s renewed focus on credit needs and not deposit products.
Still, the associations had several recommendations for what regulators should consider as they revisit the CRA framework:
- The agencies should adopt a rule that provides clear and durable expectations, thereby reducing the uncertainty and disruption associated with repeated rounds of regulatory change.
- The small and intermediate bank thresholds should be increased to $1 billion and $10 billion, respectively, and they should be indexed to nominal GDP.
- The final rule should preserve examination options tailored to different business models.
- Retail lending evaluations should focus on material lending activity.
- The community development framework should support a broad range of activities and provide greater certainty regarding CRA eligibility.
- Retail service evaluations should remain focused on credit.
- Assessment area requirements should preserve flexibility.
- Data collection and implementation requirements should support examinations without creating unnecessary burden.
- Large banks should receive at least two years before becoming subject to new data collection and reporting requirements. Banks that move to a different asset classification should have the option either to transition to the applicable framework on Jan. 1 of the following calendar year or to complete the current evaluation period under the existing rules. For all other banks, examinations should not transition between frameworks mid-cycle.
