In a new letter, the American Bankers Association cited several concerns about the Office of the Comptroller of the Currency’s recent revisions to its standards for designating minority deposit institutions, saying the changes create uncertainty for institutions seeking to qualify or maintain MDI designation.
The OCC unveiled the changes last month as part of the Trump administration’s Department of Government Efficiency deregulatory initiative, which instructed agencies to identify regulations that “implicate matters of social, political or economic significance that are not authorized by clear statutory authority.” Among its concerns, ABA said the revised standard used to evaluate “socially and economically disadvantaged” status should be transparent, consistent and operationally practical.
“We are concerned that the new policy could introduce a subjective and individualized framework for evaluating qualifying ownership and control, which may create uncertainty for prospective bank organizers, investors and existing MDIs,” ABA said. “Without a clear and consistently applied standard, institutions will face difficulty determining whether they qualify for, or can maintain, MDI status, particularly in connection with mergers, acquisitions, ownership changes, capital raises or other strategic transactions.”
Another concern is that the OCC’s definition of an MDI for federal mutual savings associations imposes a three-part test requiring a majority of the board of directors, account holders and the community served each be predominantly minority, ABA said. “This standard may be difficult to achieve because banks cannot control the composition of their depositor or account holder base.”
Finally, ABA urged the OCC to clarify what constitutes a “material change” and what factors will guide the agency’s annual review of existing designations.
“Additional guidance, including clear objective criteria or illustrative examples, would help banks understand whether routine business developments — such as changes in ownership, board composition, executive leadership, capital structure, mergers, acquisitions or other strategic transactions could affect their MDI status,” ABA said.
