CBA Comment Letter on OCC-FDIC Community Reinvestment Act NPR

Nick Simpson

CBA Comment Letter on OCC-FDIC Community Reinvestment Act NPR

Applauds efforts to increase consistency and transparency, proposes alternative approach in some areas


WASHINGTON – The Consumer Bankers Association yesterday submitted comments to the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation on the agencies’ joint Community Reinvestment Act notice of proposed rulemaking. Through CRA, banks invest approximately $500 billion into low- to moderate-income communities across the nation. The current rule, passed in the 1970s and only updated once in the mid-1990s, is antiquated and the OCC and FDIC’s attempt to modernize and bring transparency to CRA should be applauded.


“CBA supports the goals of the Community Reinvestment Act and believes banks have an affirmative obligation to help meet the credit needs of their communities. Since CRA was enacted, banks have invested billions of dollars in their communities and banks remain committed to further supporting the communities they serve,” CBA President and CEO Richard Hunt said. “The OCC and FDIC paved the way to modernize CRA and bring consistency and transparency to the process. This was a monumental step to take CRA back to its original intent with a focus on serving LMI communities instead of the political and fundraising tool it has become.”


CBA’s letter thanked the regulators for their efforts to establish a consistent set of metrics to examine a bank’s CRA activity and creating a list of qualifying activities. The NPR also offered incentives to achieve an “Outstanding” CRA rating, something CBA noted was lacking from the existing CRA rule.


CBA’s letter also stated, “In an effort to perfect the CRA framework, CBA outlines … alternative approaches that better achieve objectivity, consistency, and transparency for all regulated entities.”


CBA’s recommendations are discussed below:


  • Need for Additional Clarity on Metric Calculation & Presumptive Rating Thresholds: The current NPR offers insufficient data for banks to calculate the impact the NPR would have on existing CRA programs because banks do not currently conduct bank-wide monthly collection of average outstanding amounts on a bank’s balance sheet or geocode  depositor addresses. The NPR notes giving a rating under the proposed framework is “difficult to assess or accurately quantify with currently available information.” CBA suggests the thresholds are reset after two years of data collection.


  • Balance Sheet-Based Metrics: CBA supports adoption of a balance sheet approach, as outlined in the NPR, for community development loans and investments. However, CBA suggests retail lending should continue to be measured based on originations and purchases  rather than on a balance sheet basis. The NPR’s approach would insufficiently consider key LMI lending activity like mortgages and small business loan programs – which are vital to communities but often do not carry large dollar volumes. Also, just judging the dollar amount of loans could inadvertently harm a bank’s CRA rating if the bank operates in areas with lower costs of living. CBA supports a unit based approach for qualifying retail lending activities to help maintain incentives to originate LMI mortgages and business loans.


  • Assessment Areas: CBA’s letter applauds the OCC and FDIC for acknowledging the transformative nature of banking and consumers’ increased use of online and mobile banking. CBA also endorsed the NPR’s policy goals to more evenly spread CRA investments by reducing so-called “hot spots” and “deserts.” However, a strictly deposit-based assessment area framework, would likely exacerbate both. CBA’s letter explains “deposits sourced through the Internet largely come from population centers … the same areas traditionally known as hot spots.  Mandating the deposit-based assessment areas as outlined in the NPR will result in more banks having CRA responsibilities in the same highly populated areas.” To address these concerns, and provide flexibility, CBA believes banks’ Internet deposits should be viewed as part of a broader “cyber-community” rather than a specific geographic area. These deposits would still count toward the overall investment thresholds banks have to meet and once a “satisfactory” rating is achieved in the traditional facilities-based area, banks can continue to invest anywhere in the country to receive an “outstanding” CRA rating.


If regulators decided to proceed with a deposit-based assessment area, CBA would propose once the 5% threshold of non-facility based deposits is reached, banks should be allowed to invest in a broader geographic areas, such as entire state or wider. This approach could still fulfill the agencies’ goal of eliminating CRA deserts and hot spots.


In its letter, CBA notes implementing dramatic changes to CRA will be a worthwhile yet monumental effort for the banking industry. Banks will need as much time as possible to implement new rules. Further, CBA raises the NPR was drafted prior to the COVID-19 outbreak and the agencies should fully consider the impacts of this emergency when moving forward with the rulemaking process. CBA also requested an extended implementation period for banks to best comply while continuing to serve their communities during this pandemic.


A full copy of the letter is available here.


More information on CBA’s work on CRA modernization is available here.




About the Consumer Bankers Association:

The Consumer Bankers Association represents America’s leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on Twitter @consumerbankers.