InfoBytes Blog
Hsu predicts CRA proposal in “not-too-distant” future
On February 14, acting Comptroller of the Currency Michael J. Hsu announced that the OCC, Federal Reserve Board, and the FDIC plan to release a joint notice of proposed rulemaking for strengthening and modernizing the Community Reinvestment Act (CRA) in the “not-too-distant future.” Speaking before the National Community Reinvestment Coalition, Hsu stressed the importance of expanding financial access and inclusion for low- and moderate-income (LMI) communities, and explained that while banks have made substantial CRA investments in these communities, “significant disparities continue to exist in many LMI areas and are most prevalent for Black, Hispanic, and Native American communities and borrowers across our nation.” As previously covered by InfoBytes, the OCC’s 2020 final rule to modernize the CRA was formally rescinded in December to facilitate ongoing interagency work. Stating that the Fed’s September 2020 Advance Notice of Proposed Rulemaking on CRA modernization (covered by InfoBytes here) has served as the “basic framework” for current interagency discussions, Hsu outlined several overarching objectives including: (i) increasing levels of CRA activity to help persistent disparities, particularly in LMI communities, “to ensure that banks are engaging with and being responsive to local stakeholders and the local needs of LMI communities, not just applying one-size fits all solutions”; (ii) increasing “the clarity, consistency, and transparency” of CRA supervisory expectations and standards regarding eligible CRA activities and how these activities are evaluated and assessed; and (iii) updating “CRA standards to reflect changes in the business of banking, in particular the increased use of mobile and internet delivery channels”—a business model, Hsu noted, that did not exist when the regulators last updated the CRA regulations. Pointing out that trends and studies have shown that it is insufficient to evaluate a bank’s CRA performance solely on a branch-based model, as banks are increasingly closing branches and focusing on online and mobile banking, Hsu stressed the need to broaden regulators’ evaluation of banks’ CRA performance “to more appropriately reflect the communities the banks serve” in order to fulfill the CRA’s core mission.