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CRA: An Examiner's Perspective
Modernization of the CRA

By

Douglas Yarwood

This article is part of a series on CRA best practices from an examiner’s perspective. Although this column focuses on CRA best practices for financial institutions, the content may provide insights to community development organizations working with financial institutions to meet credit and community development needs. As a disclaimer, this series is only meant to represent best practices; financial institutions should consider the information presented in context of the requirements or guidance of their primary regulator and the business needs of their financial institution.

Since the inception of the Community Reinvestment Act (CRA), bankers, nonprofits and individuals have expressed their views on how to change the act and its regulatory guidance (Interagency Questions and Answers Regarding Community Reinvestment). These views have included thoughts on the evaluation processes and ratings, the types of activities that should be counted, the delineations of assessment areas, the impact of technology on delivery of products and services, and other issues. Given these conversations and acknowledgements from various regulators that the law is in need of revision, the Office of the Comptroller of the Currency (OCC) recently initiated the process to attempt a revision.

On Aug. 28, the OCC published its Advance Notice of Proposed Rulemaking (ANPR), which had input from both the Federal Deposit Insurance Corp. and the Federal Reserve. This action started the initial 75-day comment period on ways to modernize the regulatory framework for implementing the CRA.

The goal of this ANPR is to obtain additional public input on how to revise CRA regulations to encourage more local and national community and economic development—and thereby promote economic opportunity—by encouraging banks to lend to low- to moderate-income (LMI) areas, small businesses and other communities in need of financial services. The ANPR invites comments on a number of questions regarding improvements to CRA regulations related to:

  • Revising the current performance evaluation method
  • Moving to a metrics-based framework
  • Redefining communities and assessment areas
  • Expanding CRA-qualifying activities
  • Recordkeeping and reporting

Stakeholders are invited to comment on the OCC’s “Reforming the Community Reinvestment Act Regulatory Framework” through the Federal Register website at www.regulations.gov (Docket ID OCC-2018-0008). Comments related to the problems and possible solutions of the draft proposal brought forth in the ANPR may result in several outcomes, including presentment of a proposed rule or withdrawal of the ANPR.

While the initial comment period for the ANPR ended Nov. 19, the comment period will resume once the Notice of Proposed Rulemaking (NPRM) has been issued. The NPRM is the official document presenting how the agency plans to address problems or achieve goals presented in the ANPR based on the outcome of the initial commenting process. The second document will also indicate to stakeholders how the agency plans to amend the regulation and what its rationale is for doing so.

During the second comment period, stakeholders may comment on any portion of the proposed rule, which will also be available through the Federal Register website. This period may range from 30 to 60 days or longer. Comments received will aid the agency in drawing conclusions as to whether its plan will address the issues and goals brought forth initially in the ANPR or during the second comment period.

The proposed rule and public comments received will form the basis of the final rule. The final rule is what stakeholders, including examiners, will follow until the next round of regulatory change begins.

Douglas Yarwood is a senior examiner at the Federal Reserve Bank of St. Louis.