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Even as many banks and housing agencies remain focused on the financial crisis caused by the coronavirus pandemic, two federal bank regulators plan to move forward with changes to the Community Reinvestment Act.
One day after the April 8 deadline for submitting comments on the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation’s proposal to update the CRA, Comptroller of the Currency Joseph Otting said in a statement that he would move forward with the proposal and issue a final rule within the first half of the year. That time frame gives the regulators less than three months to issue the final rule.
More than 7,400 comments were received on the proposal, Otting said, noting that he had already read many of them.
“Over the last month, as the nation has managed its response to COVID-19, it has become even clearer to me that communities need even more access to lending, capital, and services during this difficult time,” Otting said. “It is our intention to craft a final rule that will encourage banks to lend and invest more in the communities they serve, including low- and moderate-income neighborhoods.”
The CRA has not been substantially updated since 1995, and Otting said further delay would prevent resources from “reaching those who need them most in this time of national emergency.”
The third bank regulator, the Federal Reserve, has not endorsed the OCC and FDIC proposal.
Several local stakeholders submitted comments to the OCC or signed joint letters with other organizations. While they acknowledge a need to update the CRA, organizations have concerns about increased cost and regulatory burdens, the new rating system, integrity of the results, and whether the changes would accomplish the CRAs mission to meet communities’ credit needs.
The Connecticut Bankers Association joined the American Bankers Association for a 65-page submission.
“We are grateful for the agencies’ leadership in soliciting ideas to modernize these regulations and in crafting a proposal. Updates to these regulations are long overdue,” the ABA said in the joint letter of bank trade organizations. “While our letter identifies significant concerns with the proposed rule, we remain optimistic that it is possible to improve the effectiveness and administration of CRA on an interagency basis following additional study, scenario analysis, and perhaps the creation of a pilot program to test a new framework before it becomes final.”
Waterbury-based Webster Bank, a leader in offering Health Savings Accounts through its HSA Bank, submitted an eight-page letter addressing implications in the CRA proposals of including HSA deposits in a banks’ assessment area. Webster urged the OCC to exclude or substantially limit the impact of HSA deposits on CRA performance, adding that lending in the bank’s geographic region could be affected.
New England Housing Network, which includes the Connecticut Housing Coalition, urged the OCC and FDIC to withdraw the proposal and create unified regulations with the Federal Reserve.
“NEHN agrees that CRA modernization is an important priority, but the flaws in the CRA examination framework outweigh any potential positive updates,” the NEHN said. “Any CRA reform must create more access to capital and credit for underserved [low- and moderate-income] communities by incentivizing high impact investments based on communities’ needs while also downgrading ratings for activities that cause displacement or other harm.”
