In case you missed it, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) recently issued a proposal to modernize CRA rules. CRA, as you may know, has not seen any substantial updates in nearly 25 years.
When soliciting feedback to determine what improvements could be made to the CRA, the general opinions were that the CRA regulatory framework lacks objectivity, transparency, and fairness. Further, many feel the existing framework is difficult to understand and is applied inconsistently. As a result, the proposal seeks changes in the following key areas:
- Clarifying and expanding what qualifies for CRA credit;
- Expanding where CRA activity counts;
- Providing an objective method to measure CRA activity; and,
- Revising data collection, record-keeping, and reporting requirements.
The proposed rule would consider a “small bank” to be defined as assets of $500 million or less in each of the prior four quarters. The existing “intermediate small bank” designation would go away and everyone else would be a “large bank”. Data collection and record-keeping would, to some extent, be required of ALL institutions, which is not currently the case for “small banks”. In addition, there are potentially significant changes as to how a bank would determine its CRA assessment area. Among other things, the location of a bank’s deposit customers would be a new factor to consider. It also includes a requirement for banks to conduct an annual CRA self-evaluation to be completed and submitted to regulators for validation.
We typically don’t get too excited about proposals but this is one you may want to take a look at and submit comments, especially if you’re a small bank for CRA. Our review of the proposal noted some positives, some problems, and some clear contradictions, but perhaps most telling is some conflict among the regulators. The Federal Reserve Board was notably absent in issuing this proposal and has since been critical of some of the content. The comment period is set to end March 9, 2020. We encourage you to review the proposal, submit your feedback, and stay tuned. If there is one thing that seems to be certain, it is that there will be changes of some kind.