ABA-Three Takeaways from CRA Modernization.

ENPNewswire-July 10, 2020--ABA-Three Takeaways from CRA Modernization

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Release date- 09072020 - The regulatory rulemaking process in Washington is known for being thoughtful and deliberative.

Some would characterize it as bureaucratic and slow.

After nearly two years of extensive stakeholder outreach, the OCC issued a final rule on May 20 that overhauls the agency's regulations implementing the Community Reinvestment Act. To those outside of the Beltway, two years may seem like a leisurely pace. But it is warp speed for a regulatory revamp. In fact, the OCC finalized the new rule a mere 41 days after the close of the public comment period.

OCC staff, led by former Comptroller Joseph Otting, are to be commended for this herculean effort. Crafting a new rule was not easy-the needs of communities vary widely, bank business models are not monolithic and technology has forever changed consumer preferences for accessing financial products and services. These are complex issues, particularly for a rule as consequential as CRA. In addition, CRA is not an arcane banking regulation that only bankers, regulators and lawyers care about and understand. Consumer and community advocates, academics, economic development and revitalization experts and members of Congress also have a deep interest in the public policy outcomes resulting from an updated CRA regulatory framework. This wide range of stakeholders makes the pace of the OCC's rulemaking all the more remarkable.

The speed of rulemaking isn't the only defining feature of the OCC's new CRA rule. Some aspects of the new rule have been well received, such as the creation of a publicly available list of CRA-qualifying activities and the establishment of a pre-approval process to confirm that a contemplated activity will receive CRA credit. These provisions will make CRA examination more consistent and predictable and have enjoyed widespread support. Other portions of the rule, however, have been met with skepticism. In particular, both banks and other CRA stakeholders have expressed doubt as to whether the creation of numerical benchmarks to measure banks' CRA performance will yield desirable policy results for communities and the banks that serve them.

This skepticism has been compounded by the fact that the banking agencies were unable to develop a modernized CRA framework on an interagency basis. In the end, the FDIC and the Federal Reserve opted...

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