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Amid CRA questioning, Otting says he has 'never observed' discrimination

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Amid CRA questioning, Otting says he has 'never observed' discrimination

Comptroller of the Currency Joseph Otting has "never observed" discrimination in the U.S. along racial, ethnic, gender or socioeconomic lines, he said at a June 13 House Financial Services Committee hearing.

His comments were in response to strong questioning by Rep. Michael Capuano, D-Mass., during a hearing largely dedicated to sussing out the Office of the Comptroller of the Currency's plans for re-evaluating the Community Reinvestment Act.

Otting said that while he has never personally observed discrimination in America, "people have told me it exists, so I trust those people when they tell me that."

Otting said there are "core problems" that the OCC needs to solve, including implementing a more objective system to measure banks' CRA success, expanding the definition of what qualifies as CRA activity, and simplifying the examination process.

"I want financial institutions to do more in the communities across America that need it," Otting said. "In some regards, we haven't created the on-ramp for them to do that. And we've done that by not allowing certain products and services to be counted as CRA, and they just fundamentally should."

Otting said CRA never included fair lending components, and instead has focused on whether banks serve the entire community in which they operate, with a general emphasis on low- to moderate-income communities.

"I don't see how a bank, personally, who is not doing fair lending can't have some impact," he added.

Rep. Gregory Meeks, D-N.Y., noted that one reason the CRA was enacted in 1977 was to combat redlining and discriminatory lending.

"[Fair lending] to me should be very much a part of one's CRA ratings," Meeks said. "Because if there's discrimination going on, that's a problem."

In other news, Otting said the "world has changed dramatically" since his predecessor Thomas Curry first mentioned the possibility of granting bank charters to fintech companies in 2016.

Otting said the OCC will take a stance in July on the issue of offering special-purpose bank charters to fintech companies. But he said the majority of fintech companies are now more interested in partnering with a bank than in becoming one.

"Most are realizing that because of the capital liquidity and commitment to the community they have to provide, most don't want to be banks anymore," Otting said. "But they want to be providers of services to banks."

Otting is also calling for the modernization of the Bank Secrecy Act, or BSA, and anti-money laundering rules. He outlined a number of items he believes could be improved through legislation, including potential changes to the threshold requiring mandatory suspicious activity reports and currency transaction reports. Currently, the BSA requires currency transaction reports to be filed with the Financial Crimes Enforcement Network for transactions greater than $10,000.

"I think we produce a lot of paper, and I'm not sure it gets to the point where we're catching the right people," he said, but did not say what he believes the threshold should be raised to.

In April, Otting said federal regulators would soon release proposals on reforming the regulatory approach to the CRA and the BSA.