WASHINGTON, DC — Today, a coalition of housing, consumer protection and community development organizations called on the three federal bank regulatory agencies that govern the Community Reinvestment Act (CRA) to issue uniform CRA regulations in an anticipated Notice of Proposed Rulemaking (NPR) — and ensure any metrics for CRA activities are focused on addressing community needs, not simply the dollar volume of bank activities.
In a letter from the National Community Reinvestment Coalition and 27 other organizations, the coalition urged the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to not twist a desire for greater clarity and consistency into a dollar volume metric that would not be meaningful for local communities.
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"There is broad agreement that well-designed metrics can provide greater clarity, consistency and transparency for banks and be impactful for LMI borrowers and communities," the letter said. "Enhancing benchmarks within component tests can provide greater clarity for banks in a way that is also meaningful for communities.
"However, we would have serious concerns about a metrics framework based primarily on a ratio of the aggregate dollar volume of a bank’s CRA balance sheet to the bank’s deposit or asset base, whether at the assessment area level or institution-wide, that would drive a presumptive CRA rating."
Read the full CRA regulations letter:
The Honorable Jerome H. Powell
Chairman, Federal Reserve Board of Governors
20th Street and Constitution Avenue NW
Washington, DC 20551
The Honorable Joseph Otting Comptroller of the Currency
400 7th St SW
Washington, DC 20219
The Honorable Jelena McWilliams
Chairman, Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Dear Chairman Powell, Comptroller Otting, and Chairman McWilliams:
We want to thank you all for reaching out to stakeholders across the country as you draft a Notice of Proposed Rulemaking (NPR) on the Community Reinvestment Act (CRA). We are writing to express our views on two critical issues that are essential to the success of any effort to modernize the CRA: that all three regulators should agree on a common NPR; and that metrics for CRA activity should be workable, flexible, robust, and address community needs.
CRA has successfully encouraged banks to serve low- and moderate-income (LMI) borrowers and communities, influencing where and how mortgages and small business loans are made, whether community development projects are financed, and how banks and communities work together. A properly designed regulatory framework will serve both communities and banks well for the next decade or longer. A fragmented and poorly designed framework would be disruptive to banks and communities and would likely be revisited after only a short time.
First, it is important that the three prudential banking agencies issue uniform CRA regulations. With few exceptions, the agencies have maintained substantially identical regulations since CRA’s enactment in 1977. Failure to act in coordination would perpetuate confusion and inconsistency and would create competitive inequities. While we share the desire to move forward with modernization, neither banks nor communities can have confidence that a new regulatory regime will endure without regulatory consensus and broad stakeholder support. A lack of regulatory consensus now will invite reversal by future regulators.
Second, there is broad agreement that well-designed metrics can provide greater clarity, consistency and transparency for banks and be impactful for LMI borrowers and communities. Enhancing benchmarks within component tests can provide greater clarity for banks in a way that is also meaningful for communities.
However, we would have serious concerns about a metrics framework based primarily on a ratio of the aggregate dollar volume of a bank’s CRA balance sheet to the bank’s deposit or asset base, whether at the assessment area level or institution-wide, that would drive a presumptive CRA rating.
Continue reading CRA Regulations letter here.