|Comptroller of the Currency Otting Testifies Before the House Financial Services Committee
On January 29, Comptroller of the Currency Joseph Otting testified before the House Financial Services on the Federal Deposit Insurance Corporation’s (FDIC) and the Office of the Comptroller of the Currency’s (OCC) joint notice of proposed rulemaking (NPR) to modernize the Community Reinvestment Act (CRA). In his testimony, Otting discussed the NPR’s major proposed changes to the CRA regulations: 1) clarifying what type of activities count for CRA credit; 2) updating the definition of CRA assessment areas; 3) evaluating CRA performance more “objectively,” requiring the assessment of retail lending distribution and the impact of CRA activities; and 4) improving the transparency and timeliness of CRA reporting. Some critics of the NPR argued that the proposed changes would weaken banks’ accountability for serving their communities by relying on a single metric in determining bank’s CRA rating, straying from the law’s focus on low- and moderate-income (LMI) communities, and allowing banks that fail in as many as half of its assessment areas to pass CRA evaluations. Otting pushed back, claiming that the opposition to the rule change is based on “misperceptions.”
Support for these proposed changes among Committee members was largely split along party lines. Chairwoman Maxine Waters (D-CA-43) argued that the proposed changes would lead to “widespread bank disinvestment from low- and moderate-communities throughout the country” and urged the two U.S. banking regulators to extend the NPR’s public comment period to at least 120 days to allow for a “heightened level of public scrutiny.” Other objections that were raised by lawmakers during the hearing included: disincentivizing investments in and lending to community development activities in LMI areas by enacting a 2% threshold for such CRA activities as well a single ratio evaluation process; continuing to consider activities perceived to be outside of the original intent of the law (like building stadiums in distressed areas) as eligible CRA activities; providing banks with CRA credit for eligible volunteer hours on a one-to-one basis; discouraging maintaining and creating local branches by amending the definition of assessment areas; and creating two separate CRA rating systems by moving forward without the Federal Reserve Board’s (the third banking regulator’s) approval on these changes.
Public comments on the NPR are due on Monday, March 9. Enterprise, along with its partners, will closely monitor efforts to modernize the CRA and will continue to encourage regulators to emphasize robust investment in affordable housing and community development programs that create opportunity for LMI people. For more information, stay tuned to Enterprise’s blog and sign up to receive our policy newsletters.
Read Otting’s testimony before the House Financial Services and Rep. Water’s opening statement at the hearing, and learn more about the hearing in an American Banker article.