Alert September 06, 2018

OCC Seeks Comment on Ways to Modernize CRA Regulations

Summary

The Office of the Comptroller of the Currency (OCC) is soliciting public comment on possible revisions to its regulations implementing the Community Reinvestment Act (CRA). The OCC is seeking input on ways to better define the assessment areas in which it measures CRA performance to take into account changing bank business models, how to make the process of evaluating performance under the CRA more transparent and predictable, and the types of activities that should qualify for consideration under the CRA.

The OCC has released an Advanced Notice of Proposed Rulemaking (ANPR) related to its regulations implementing the CRA. The ANPR seeks public comments on a variety of issues related to the way banks define the geographic areas in which they are evaluated under the CRA, the types of activities that may be considered for CRA purposes, and how to measure a bank’s CRA qualifying activities. The OCC stated in the ANPR that it is seeking input on how to revise its CRA regulations to encourage more local and nationwide community and economic development.

The CRA requires each federal banking agency, including the OCC, to evaluate the record of performance of each bank it supervises in meeting the credit needs of the entire community served by the bank, including low- to moderate-income (LMI) areas. The OCC stated that its objective in releasing the ANPR is to solicit comments from the public on “building a new framework to transform or modernize” its CRA regulations. While the ANPR does not make any specific policy recommendations, it is notable because (1) the OCC has solicited comments on a wide range of issues that suggest it is open to considering revisions to its CRA regulations that would represent a significant departure from the manner in which the statute has been implemented by the federal banking agencies and (2) the OCC released the ANPR unilaterally, in contrast to the historic practice of the federal banking agencies of adopting revisions to their CRA regulations and related guidance provided in an Interagency Questions and Answers document on a coordinated, joint basis. 

Among other matters, the ANPR requests public comment on how best to define a bank’s assessment area for CRA purposes, including how a bank could capture digital lending channels in its assessment area and whether areas such as those where a bank has a concentration of deposits, lending, employees, or borrowers should be considered in addition to the areas where the bank’s branches and deposit-taking ATMs are located. The OCC has also requested comment on whether it would be appropriate to implement a metrics-based approach whereby a bank’s performance under the CRA might be measured by comparing the amount of a bank’s CRA-qualified activities against “readily available and objective criteria, such as, a percentage of domestic assets, deposits or capital . . . to calculate a ratio that could correspond to the benchmark established for each rating category.” The ANPR suggests that such an approach might “bring clarity to the determination of CRA ratings” and “allow flexibility to accommodate bank capacity and business models while facilitating the comparison among banks of all sizes and business models and the evaluation against an objective, transparent threshold.” Further, the ANPR solicits input on whether there are additional types of activities that should receive consideration for purposes of the CRA, including various categories of consumer lending aside from home mortgage lending and what types of activities promote community and economic development.

While the ANPR is limited to seeking public comment and does not recommend specific changes to the OCC’s CRA regulations, the matters on which the OCC has sought comment in many respects reflect the recommendations made by the Treasury Department in the memorandum it released in April 2018, including “[u]pdating the definitions of geographic assessment areas to reflect the changing nature of banking arising from changing technology, customer behavior, and other factors,” and “[i]ncreasing clarity and flexibility of CRA examinations to increase transparency and effectiveness of CRA rating determinations.”

Comments on the ANPR are due by November 19, 2018.