Top Regulators Discuss CRA Reform

Senior officials from the federal bank regulators recently provided a little more insight into their plans for modifying Community Reinvestment Act (CRA) regulations, partially in response to the Treasury Department’s April 3 memorandum laying out a series of CRA-related issues and recommendations. In a speech to the Independent Community Bankers of America, Joseph Otting, the Comptroller of the Currency, said revamping CRA is OCC’s top priority. Otting said OCC was working to develop a consistent grading system for CRA compliance that would apply to all banks regardless of size. He indicated OCC also would try to broaden the scope of activities for which banks can receive CRA credit to include small business and student lending.

At a House Financial Services Committee hearing this week, Randal Quarles, Vice Chairman for Supervision at the Federal Reserve, described the current CRA regulations as "formulaic and ossified" and said they needed to be updated to ensure the law continues to meet its core purpose. Quarles added that the Treasury memorandum provided a good framework for considering CRA regulatory reforms.

Also this week, Lael Brainard, a colleague of Quarles on the Federal Reserve Board of Governors, expressed support for CRA reform during a speech in Baltimore. Brainard said CRA rule changes should include a new definition of assessment areas that addresses the credit needs of affected communities, a reconsideration of the relationship between major and smaller markets in CRA evaluation, an approach that accommodates the different sizes and complexities of financial institutions, more consistent examinations across institutions, and an integrated approach to other fair lending laws. Differing with Otting, Brainard said it may not be possible for regulators to develop common CRA standards that can apply equally to large and smaller banks.

The Federal Reserve, OCC, and FDIC are working together to develop proposed rulemakings to revise the CRA regulations. It is not yet known whether the three agencies will issue their proposed changes separately or as a joint rulemaking. In either case, NCSHA will remain actively engaged. Please email Greg Zagorski with any comments on potential CRA reform you would like NCSHA to consider.

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