WASHINGTON — Top federal bank regulators Tuesday reaffirmed their support for
"There's nothing more important, more impactful for people around the country in dire need of access to credit, investment, and basic banking services than the finalization and implementation of this rule," said Federal Deposit Insurance Corp. Chairman Martin Gruenberg. "This final rule that we're now in the process of implementing is a careful, balanced and strong adaptation of CRA to the changing nature of the banking business and it is essential that we follow through on its implementation."
Accompanying Gruenberg at Tuesday's regulatory roundtable at the 2024 National Interagency Community Reinvestment Conference were the heads of the other two main bank regulatory agencies shepherding the
The agency heads articulated throughout the discussion that their agencies' staff made painstaking efforts to strengthen and modernize the CRA while ensuring various obligations under the rules are tailored to ensure banks — especially smaller firms less immediately capable of adapting to the complex regulations — are not unduly burdened. Under the rule banks under $2 billion have no additional data collection responsibilities.
Barr noted that this tailoring is a crucial aspect of the final rule, since many of the updates attempt to deal with problems — like accounting for geographically distributed online lending activity — with greater relevance at larger, more complex firms.
"The smallest banks, for example, can use the new rule or they can use the old rule and the old rule for some of them might be what they'd like to do," he said. "Deposit data and deposit product rules apply only to the very largest banks over $10 billion. The rule is designed to take into account the diversity of sizes and types of business models and banks in our country."
Barr highlighted what he saw as a win-win for banks and communities: the clarity and consistency in the rule that should make CRA compliance more predictable for the banking industry.
"The metrics that are used for the retail lending test I think will provide both banks and communities with a better sense of what the playing field looks like, what other institutions are doing, and what the community needs," he said. "With respect to community development [the final rule has] an illustrative list of the activities that are eligible and then we have a process that banks and communities can come forward and say: Is this activity also eligible for CRA consideration?"
Acting Comptroller Hsu said a central goal of regulators during this rewrite was to strengthen the extent to which their implementing regulations achieve the core mission of the original CRA statute with a sort of regulatory carrot and stick approach. Dinging banks for unfair lending, he says, is a crucial aspect of upholding fair lending.
"If an institution is engaged in discriminatory practices, that is explicitly taken into account — we need to take that into account in the CRA assessment process," he said. "At the same time, there's opportunity [for instance with] special purpose credit programs, that's a special part of that, that is given CRA recognition."
A cohort of trade groups representing the banking industry — which has long opposed some aspects of CRA reform —
"Congress gave broad authority to the agencies to set up how that system would work — that was exercised in 1995 and again in this rulemaking process," he said.
During the panel, Gruenberg provided a personal recounting of his time as a congressional aide working for his local congressman in the Bronx at a time when the area had thousands of vacant and crumbling rental properties. Just a few years after the CRA was enacted, he sat in on a meeting between a community organization and a cohort of local bankers.
"The bankers walked into the basement and they sort of looked like they were walking onto the Dark Side of the Moon," he said. "They really had a look of, 'What are we doing here?'"
While the meeting was somewhat tense, he argued it was ultimately groundbreaking and constructive as banks and the community organizations prior to that had very little interaction.
"It's important to understand that the reason those bankers were in that basement attending that meeting was because of this new law that had recently been enacted," he said. "Over the course of a generation — literally 20-plus years — those community organizations working with local financial institutions and the local and state officials building-by-building, block-by-block, neighborhood-by-neighborhood rebuilt the Bronx."
