In the past few weeks, both Federal Deposit Insurance Corporation (“FDIC”) Chairman Jelena McWilliams and Comptroller of the Currency Joseph Otting have spoken publicly about ongoing efforts by their agencies, and by the Federal Reserve Board, to reform regulations implementing the Community Reinvestment Act (“CRA”).
The federal bank regulatory agencies have been working on reforms to the CRA regulations for over a year. In April of last year, the Treasury Department released a report outlining potential changes to the CRA. In August, the OCC published an advanced notice of proposed rulemaking (“ANPR”) describing, among other things, a proposed “metrics-based framework” for assessing compliance with the CRA. The OCC’s proposed framework would: (i) rely more heavily on quantitative benchmarks to assign CRA ratings; (ii) change the geographical assessment area for certain banks, including to consider their online presence in addition to their physical branches; and (iii) expand the types of activities considered in CRA evaluations. Finally, in June, the Federal Reserve Board published a summary of feedback received during a series of 29 roundtable discussions with bankers and community members on the CRA.
Speaking at the end of July, Chairman McWilliams indicated that it would still be some months before the agencies were ready to publish a proposed rule, and signaled that the agencies were attempting to think “outside of the box.” As an example, Chairman McWilliams noted that the agencies were considering whether to provide CRA credit for investments in rural broadband. Such investments may already qualify for CRA credit under existing OCC guidance, but the Chairman’s statement suggested that the relevant rules might be relaxed or extended to other investments in digital infrastructure.
Last week, Comptroller of the Currency Joseph Otting provided another preview of aspects of the proposed rule. Most of the reforms that the agencies have previously discussed in public would expand banks’ ability to obtain CRA credit. Consistent with that approach, Comptroller Otting stated last week that the agencies were considering whether to make CRA credit available for investments in Opportunity Zones — i.e., zones designated by states, with the concurrence of the Internal Revenue Service, as “economically distressed,” and where new investments may be eligible for preferential tax treatment. On the other hand, Comptroller Otting also suggested that the agencies are considering whether to restrict the ability of banks to receive CRA credit when they originate mortgages to high-income families and individuals who move into lower-income areas. That may happen, for example, in gentrifying neighborhoods where the average incomes of new buyers may significantly exceed the average incomes of existing residents.
Neither Chairman McWilliams nor Comptroller Otting offered a firm estimate of when the agencies would publish a proposed rule. And neither commented on whether, or to what extent, the new rule would adopt the proposals in the ANPR. Nevertheless, their comments clarify that the agencies are working actively on CRA reform, and that they may be considering proposals that go beyond the OCC’s ANPR, in addition to the proposals set out in the ANPR itself.