WASHINGTON — Acting Comptroller for the Currency Michael Hsu said Friday that the largest banks will bear the most significant burden of a forthcoming Community Reinvestment Act implementation rule from the Federal Deposit Insurance Corp., Federal Reserve and Comptroller of the Currency designed to expand bank lending and investments to underserved communities.
"It's a long rule — don't print it all out at one time, you're going to run out of ink" Hsu said at the annual conference of the National Bankers Association, which represents minority depository institutions. "But at a high level, there's got to be more, it has to be better and it's got to be faster. In very simple terms, that's it: The amount of CRA investments and lending has to go up."
Hsu said the
"It has to be better — more targeted," Hsu said. "Not every locale is equal — one size doesn't fit all. So it has to be better calibrated to those situations. And it's got to be faster. We can't be sitting around and trying to do a lot of different determinations on a bunch of different things. So we try to do that across the board."
Hsu added that the final rule takes into account the compliance burdens associated with the proposed changes and the limited capacity of smaller banks — including minority depository institutions and community development financial institutions — to meet higher compliance costs.
"We got a lot of comments about this. The biggest burden for the data and changes are really on the largest banks," Hsu said. "So, for smaller banks we've really tailored our expectations. And for MDIs, CDFIs and others, we've tried to put the wind at their backs. I can't go into any details on that, stay tuned, go read it on Tuesday, but we're very excited for it."
The Community Reinvestment Act was passed in 1977, and requires banks to extend credit, investments and services to all communities within its service area — not just the most affluent and therefore profitable communities. But the CRA's definition of service area has traditionally been linked to a bank's branch network, even as more banking services are performed digitally. Banks and community groups have
Former Comptroller of the Currency Joseph Otting made CRA reform the
Speaking separately at the National Bankers Association event Friday, FDIC Chair Martin Gruenberg emphasized that a core aspect of the reform is to decouple CRA activities from communities solely in which banks have physical branches. As outlined in last year's notice of proposed rulemaking, banks with lending activity above a certain threshold will be required to meet CRA obligations whether they have a physical branch in those communities or not.
"If that lending done in communities where a bank does not have a physical presence is not subject to a CRA evaluation, over time the relevance of CRA to the banking market in the United States — and to ensuring that banks serve all the communities in which they do business — will diminish," Gruenberg said. "The core thing this rulemaking, as the NPR proposed, will do will be to extend CRA evaluations of banks whether or not [they] have a physical presence in the community."
