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Your All-in-One Guide to the OCC's ANPR about CRA Reform

August 29, 2018 | Posted by Kinsey Sullivan
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18 Minute Read

Yesterday, the OCC released an Advanced Notice of Proposed Rulemaking that outlines their efforts to modernize the Community Reinvestment Act. Since the OCC regulates slightly more than a fifth of all active banks in the US, this change has big implications for the industry. In this article, you'll learn all about what the ANPR says, and what it might mean for your bank - even if the OCC isn't your regulator.

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The Office of the Comptroller of the Currency, one of the nation's four federal bank regulators, yesterday announced their Advanced Notice of Proposed Rulemaking (ANPR) for Community Reinvestment Act updates. This long-awaited step toward CRA modernization has been widely welcomed by the industry.

For now, the OCC is going it alone. However, there is still hope that all the agencies will work together on joint rulemaking in the future.

The OCC's move to modernize the Community Reinvestment Act has big implications for the banking industry. The OCC regulates 1,172 of the 5,533 active banks in the United States. Slightly more than 20 percent of all banks in the US would be impacted by these potential CRA changes.

Wondering what all this means for you?

Get ready, because we're sharing everything we know - and everything you need to know - about this latest step toward CRA modernization in this article.

This Advanced Notice of Proposed Rulemaking is essentially a request for public comment. The OCC's is a multi-faceted document that provides details on the purpose and history of the CRA; outlines important topics under consideration in CRA modernization discussions; solicits feedback on topics and specific questions seen to be central to future rules and regulations; and provides insight into the direction of their CRA modernization goals.

linkedin-sales-navigator-402819-unsplashIn this article, you'll learn:

  • The purpose of the ANPR.
  • What the ANPR actually says about CRA compliance and modernization.
  • Who is impacted by the OCC's ANPR.
  • Who supports the OCC's efforts.
  • Whether it's important that the OCC took this step alone.
  • How and when you can submit a comment.
  • Where you can learn more.

What's the purpose of this ANPR?

Essentially, the goal of the ANPR is to solicit feedback about potential CRA reforms. In general, the ANPR is focused on getting feedback on:

  • How to encourage community and economic development nationwide and promoting economic opportunity for areas and people who need it most. In particular, it focuses on how to encourage more lending to low-to-moderate income (LMI) areas, businesses, and other communities that need access to financial services.
  • How to improve the CRA evaluations process in general, and provide more flexibility for banks with different business strategies. They're hoping to make the CRA evaluations clearer, more consistent, and more timely.
  • How to update Assessment Area definitions so they can accommodate digital lending channels, while still focusing on the importance of the physical community where branches are located.
  • How to broaden and clarify the community and economic development activities that qualify for CRA consideration.
  • If and how metric-based thresholds could be applied to evaluate CRA performance. For example, the OCC has introduced the idea of "quantitative benchmarks" - but we'll talk more about that in the next section.
  • How to reduce the cost and overall burden of CRA compliance.

Issuing an ANPR is not a required step in the legislative process, so it's sometimes seen as a way to float ideas and gauge public interest. In this case, it's possible that the OCC is trying to signal that they're focused on and interested in collaborating, even though they're taking this first step on their own.

In total, they pose 31 specific questions for the public to weigh in on. That said, any feedback about any aspect of CRA compliance is welcomed.

joseph-otting-occ“As a long-time banker, I have seen firsthand the benefit of CRA investment and how it makes communities vibrant. I applaud the effort of community development practitioners and bankers who work together to make an important difference in our nation’s neighborhoods. I have also seen how limitations in the current CRA regulation can fail to provide consideration to a bank that wants to lend and invest in a community with a need for capital, including many low- and moderate-income areas. Unfortunately, the operation of the current CRA regulation can result in restricted resources. It is time for a national discussion on how we can make the CRA work better.

- Joseph M. Otting, Comptroller of the Currency

What does this ANPR actually say about CRA reform?

First of all, this Advanced Notice of Proposed Rulemaking says quite a lot about CRA compliance's past, present, and future. Here is a quick outline of the ANPR, with important concepts highlighted:

  • Background and Introduction of the Community Reinvestment Act
  • Description of the Changing Banking Environment
  • Objectives of the ANPR
  • Overview of the Current CRA Regulatory Approach
    • Performance Evaluation Methods
      • "Some stakeholders have expressed the view that the current regulatory framework is too complex, the asset thresholds for the performance tests and standards have not kept pace with bank asset sizes, and the standards are not applied transparently or consistently in performance evaluations."
    • Community and Assessment Areas
      • The current CRA statute and regulations do not define "community." Instead, banks define their assessment area, which is often the de facto "community." However this might lead to some confusion and also limits what would qualify for CRA credit.
      • "Stakeholders have expressed concern that, in practice, the lack of clarity in the regulations and guidance limits banks’ willingness or ability to engage in CD activities outside of their assessment area(s)."
    • Questions about the Current Regulatory Approach
  • A Modernized CRA
    • Revising or Transforming the Current Regulatory Approach
      • Revising the Current Performance Evaluation Method
      • Metric-Based Framework
      • Redefining Communities and Assessment Areas
      • Expanding CRA-Qualifying Activities
      • Recordkeeping and Reporting

One section should stand out to you: "A Modernized CRA." This is the heart of the ANPR, the part that describes what a modernized CRA might actually look like. Let's dive in.


Revising the Current Performance Evaluation Method

First, the OCC introduces the idea of revising the current performance evaluation method. They are looking for ways to streamline the existing CRA performance tests, potentially with a new method of conducting evaluations and/or including more and better metrics in the tests.

Here's what the OCC said:

"One such alternative evaluation method could replace existing performance tests and standards and separately evaluate retail or CD activities for all banks, accounting for variations in size, business model, and other factors. This approach could include updated metrics that take into account information on a bank’s performance context, such as the demographic characteristics and the economic and financial conditions of specific communities."

Metric-Based Framework

This is one of the more dramatic potential changes posed by the OCC. The ANPR outlines the following three ideas related to metric-based framework:

  1. Increase the transparency of how a bank’s CRA performance is evaluated by using quantitative benchmarks for specific ratings and clear standards for quantifying CRA activities.
  2. Define “community” more broadly to include additional domestic geographies in which the bank engages in the business of banking.
  3. Expand the types of activities that would receive CRA consideration in a CRA evaluation, with a focus on lending, investments, and services for LMI geographies and individuals and other geographies and populations in need of financial services.

This approach would rely on a performance measurement system with thresholds or ranges, i.e. benchmarks, that correspond to the four CRA ratings. One idea is to have a "macro" benchmark for obtaining a specific rating. This high-level score, for lack of a better term, would be calculated based on all of the so-called "micro" components of CRA-qualifying lending, investments, and services.

One example for such a benchmark might be the dollar value of CRA-qualified activity. This benchmark could then be used to create a ratio, by dividing the dollar value of CRA-qualified activity by something like domestic assets, deposits, or capital. The ratio would then correspond to the CRA performance evaluation rating.

This data-driven approach is really interesting, and it really highlights the importance of strong and proactive CRA data analysis. Even if the metric-based performance evaluations don't eventuate, it's clear that the regulators are focused on leveraging the data at hand to make understanding CRA risk exposure clear.


Redefining Communities and Assessment Areas

One of the biggest challenges in modernizing CRA is the fact that so much of banking happens digitally. Banks that have embraced new technologies like mobile apps and online banking can now effectively serve customers all over the US.

According to the ANPR, the OCC wants to explore:

  • Ways to give banks credit for work they are doing outside of their Assessment Area.
  • Broadening the definition of Assessment Area to include additional areas that are relevant to the bank's business, such as high concentrations of loans or deposits, non-bank affiliate offices, or LPOs.
    • This would expand the places and activities that would qualify for CRA, including areas that have been excluded from CRA consideration: remote rural areas and Native American land.
  • Making CRA more accommodating to banks that do not have physical branches, or whose services reach beyond their physical branch locations.

"Under an updated approach, banks would continue to receive consideration for CRA-qualifying activities within their branch and deposit-taking ATM footprint," the ANPR says, "and could receive consideration for providing these types of beneficial activities in LMI areas outside of their branch and deposit-taking ATM footprint and other underserved areas."

As we've written about in the past, updating your Assessment Area can seem like a headache. Some CRA analysis software, like TRUPOINT Analytics, can help. We work with our CRA Analytics customers to define the Assessment Area. In some cases, we may help create multiple potential AAs to evaluate how these definitions might impact performance. 

Expanding CRA Qualifying Activities

As it currently stands, CRA-qualifying activities are typically either "retail" or "community development." However, beyond that, it can be difficult to determine what activities will qualify for CD credit. The OCC wants to clarify that process.

In particular, they're interested in expanding what activities could support community and economic development, while remaining focused on LMI populations and areas. They also want to make it easier to determine whether an activity qualifies.

They also want to provide credit for banks that develop unique and innovating approaches to meeting the needs of LMI individuals, businesses, and communities. 

Recordkeeping and Reporting

As it currently is written, the CRA is not particularly conducive to tracking, monitoring, and comparisons of CRA performance, the ANPR says. 


"One advantage of a modernized CRA framework that uses objective reportable metrics could be to allow for better tracking by banks of their overall CRA level of performance on a regular, periodic basis," the ANPR states. "If a metric-based framework and clarified standards for identifying and measuring qualifying activities were 23 implemented, such an approach could also allow stakeholders to better understand the level of a bank’s CRA performance on a straightforward and timely basis."

The OCC seems interested in the tracking and monitoring benefits a metric-based framework could provide. This would probably require updated data collection and monitoring. 

Each of the above sections also includes specific questions posed to the public. In your comments and responses to the ANPR, use the questions as a guide. You can view them all here.

To learn more about how CRA modernization might impact your financial institution, check out this blog, "What CRA Modernization Would Mean for American Banks Like Yours."

Who is Impacted by the OCC's ANPR?

The ANPR is requesting feedback on CRA modernization efforts from anyone, so in essence, everyone is impacted. However, it's of greatest importance - right now, at least - to individuals at OCC-regulated institutions and their community members.

That said, because OCC-regulated institutions make up more than a fifth of active banks today, it has big implications for the industry as a whole. 

Who Supports the OCC's Efforts?

In general, both the spirit of the CRA and idea of CRA modernization enjoys broad, bi-partisan support. The world of banking has changed dramatically in recent years, and the CRA has not exactly kept up. Even though everyone involved in these discussions in committed to the purpose of the CRA, they also realize that there exists some room to improve.


In addition to the OCC, the Treasury Department, the Federal Reserve Board, and even the Government Accountability Office have expressed support for CRA modernization efforts. While we haven't heard other regulators' opinions on the ideas in the ANPR, some of them are in line with Treasury recommendations. 

Many bankers associations support the OCC's efforts; the American Bankers Association has been a particularly strong supporter.

Is it Important that the OCC Took This Step Alone?

In general, other regulators have signaled that they're interested in reforming CRA compliance. While all the regulatory agencies were involved in joint rulemaking efforts, it appears that the OCC decided to take this step alone because they wanted to move more quickly.

Usually, the regulators will try to work together on large legislative efforts so that the rules are consistent nationwide.

It's not necessarily a big deal that the OCC decided to issue this request for comment alone, as it is still part of the information-gathering phase. The OCC has also said that they will share all information they receive with the other regulatory agencies, so that everyone can benefit from the insights gathered.

"We are pleased to hear that the information OCC gathers will be shared with other regulatory agencies, helping pave the way for a future joint rulemaking. We look forward to participating in the process, and encourage all of our members to share their views and real-world experiences with CRA to help inform regulators in their efforts."

- Rob Nichols, President and CEO of the American Bankers Association

As the ABA reported, Comptroller Otting is very focused on "moving the CRA ball forward" and has even expressed a willingness to keep going alone if necessary.

It's unlikely that a final CRA rule would happen without inter-agency cooperation. Otting's willingness and desire to make CRA modernization happen is great momentum, but the OCC and the other regulators appear to be committed to achieving reform together.

How and When Can You Submit a Comment?

You can submit a comment up to 75 days after the ANPR was published. That is, you have until the November 9, by our calculations, to submit a comment.

The OCC recommends that comments be submitted through the Federal eRulemaking Portal or email, if possible. Otherwise, you can also send it to them using post, courier, or fax.

  • Portal: www.regulations.gov
    • Enter “Docket ID OCC-2018-0008” in the Search box and click “Search.”
    • Click on “Comment Now” to submit public comments.
    • Use the title “Reforming the Community Reinvestment Act Regulatory Framework” to facilitate the organization and distribution of the comments. 
  • Emailregs.comments@occ.treas.gov
    • Use the title “Reforming the Community Reinvestment Act Regulatory Framework” to facilitate the organization and distribution of the comments. 
  • Mail: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219 
  • Courier: 400 7th Street SW, Suite 3E-218, Washington, DC 20219
  • Fax: (571) 465-4326.
    • Include “OCC” as the agency name and “Docket ID OCC-2018- 0008” in your comment.
    • "In general, the OCC will enter all relevant comments received into the docket and publish your comment on the Regulations.gov website without change, including any business or personal information that you provide, such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure."

You can view all comments online at www.regulations.gov, also by searching for the Docket number.

Where Can You Find More Information?

Here is a link to the ANPR. As always, you can stay tuned to TRUPOINT's blog for more news on CRA modernization as it develops. The ABA has also done a really great job of reporting on this issue, so we definitely recommend that you keep an eye on their materials, too.

TRUPOINT Viewpoint: CRA is a priority for you, and it's a priority for us, too. We offer lots of wonderful free resources on CRA compliance, as well as CRA software for analysis and transmittal.

If you'd like to learn more about how we can help you improve CRA compliance - particularly in the face of changes - get a free, guided walk-through of CRA Analytics here.

In the meantime, you may appreciate the slides from a recent webinar we did on CRA compliance. In it, you'll learn how to leverage your CRA analysis into real action!

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Kinsey Sullivan

Kinsey Sullivan

After studying Journalism at the University of North Carolina at Chapel Hill, I switched to the other side of content: Marketing, Advertising and PR. At TRUPOINT, I love turning complex data and ideas into high-impact content and campaigns. In my free time, I make art, read, and listen to a lot of podcasts on long walks with my dog, Charlie "Bird" Barker.