After months of deliberation, Comptroller of the Currency Joseph Otting announced a tentative deadline for a proposal to overhaul an anti-redlining rule.
Otting told a group of more than 50 community organizers, redevelopment organizations and bankers on Aug. 19 in Washington, D.C. that the goal is for the Community Reinvestment Act reform proposal to be released by the end of September.
The CRA aims to ensure that minority and low-income communities have access to banking services. The act was signed into law in 1977 and handed over to the OCC, Federal Deposit Insurance Corp. and Federal Reserve to regulate. But as technology has dramatically changed banking, the CRA has failed to keep up.
Since taking office in late 2017, Otting has led an effort to update the rule to reflect modern banking habits. The proposed rule will cap months of comment reviews as well as stakeholder and regulator meetings, and it will be the CRA's first update since 2005.
In an Aug. 19 roundtable discussion, Otting reiterated the four objectives the agency hopes to accomplish through rule modernization. Chief among them is improving measurement of banks' CRA compliance. Otting said the OCC is ironing out a proposal for a single, objective ratio with a variety of multipliers and weighted factors to paint a complete picture of banks' CRA activities.
The agency has floated a single ratio in the past, calculated by dividing the total dollar value of a bank's CRA-qualifying activities by its total assets. But the idea of a single ratio has been heavily criticized by consumer groups that argue that a single ratio only shows how much money a bank has lent and not how many loans a bank has made. Those groups say that a bank could game the system by making only a few large loans, effectively excluding dozens of other borrowers.
But Otting insisted that any proposed ratio would include variable multipliers and "extra credit" doled out to lenders who provide funds to Native American communities, disaster zones, rural areas and Community Development Financial Institutions, or CDFIs.
"It has to be more than just mortgages," Otting said. "I think we would want to use a multiplier where CRA needs to have a bigger impact" incentivizing banks to lend money in times of economic stress, he added.
Lisa Mensah, CEO of the Opportunity Finance Network, which serves more than 260 CDFIs in all 50 states, urged Otting to change his mind on the single ratio. She said she worries the ratio will obscure banks' work with community groups, which might discourage banks from making future investments in the groups.
As the agency approaches formal rulemaking procedures, Otting said he is "open to other multiplier constructs." Otting also told the group that the agency is considering limits on any single factor calculated into a metric.
"You can't have an institution that writes a $1 billion check and say, 'We're done,'" Otting said. "We are trying to create granularity with that approach."
Otting also said the rule, when finalized, would aim to clarify which activities would qualify for CRA credit. The proposed rule, he said, will include a list of 75 specific activities that qualify. While he declined to disclose specific examples, Otting stressed that the list would be comprehensive and clear for lenders and community groups alike.
