Bank Overseer Ready to Begin Community Lending Rewrite

By Evan Weinberger

The Office of the Comptroller of the Currency is prepared to move first on a rewrite of bank lending rules for low- and moderate-income communities with a proposal coming as soon as this month, a source with knowledge of the situation told Bloomberg Law.

The OCC is planning an advance notice of proposed rulemaking that would seek input from banks, community groups, and other interested parties on reshaping the Community Reinvestment Act, a 1977 law that seeks to spur banks’ lending to lower-income communities. The outline would be the first step in the rulemaking process, asking detailed questions that will reveal regulators’ current thinking on how to rewrite the CRA’s rules while getting feedback to supplement that thinking.

Advocates for overhauling the CRA say that banks should get credit for more than just the mortgages, small business and other defined community development loans that are currently counted for their ratings, and that evaluations should take into account digital offerings such as online loans. Those calculations can be key, because a poor CRA grade from regulators can cause problems for proposed bank mergers and branch openings.

The OCC oversees compliance with the law, which last saw a major overhaul of its implementing rules in 1995, along with the Federal Deposit Insurance Corp. and the Federal Reserve. At this point, those two regulators do not appear prepared to sign on to the OCC’s notice to kick off the rulemaking process.

Volcker Precedent

But that doesn’t prevent the Fed and the FDIC from joining a future proposal to overhaul the CRA regulations.

A similar pattern played out when the OCC, then operating under former acting Comptroller Keith Noreika, released an outline in August 2017 related to potential changes to the Volcker Rule, the Dodd-Frank Act’s ban on proprietary trading by banks.

Ultimately, the other agencies with oversight responsibilities for the Volcker Rule, including the Fed, the FDIC, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, joined with the OCC in releasing a proposed rule May 29.

Branch Differences?

The OCC has long been seen as willing to move forward with a CRA rewrite without its fellow regulators.

Comptroller of the Currency Joseph Otting has made a compliance update one of his top priorities. The agency updated CRA exam schedules and other changes specifically for OCC-regulated banks in guidance issued June 15.

Otting, the former chief executive at OneWest Bank, has also discussed potential changes to the CRA assessment areas for banks. OneWest and Otting faced criticism over its CRA compliance when the bank merged with CIT Group Inc. in a deal announced in 2015 that closed the following year.

Banks are measured on their lending to low- and moderate-income neighborhoods near physical branches. Updated CRA rules should take into account banks’ digital offerings, since those products allow banks to provide services beyond their physical branch networks, Otting and the Treasury Department have said.

New FDIC Chairwoman Jelena McWilliams recently told The Wall Street Journal that too much de-emphasis of branches in assessment areas could lead to decreased services for rural communities.

That was seen by many as a split with Otting.

Bryan Hubbard, an OCC spokesman, told Bloomberg Law that while the coming advance notice of proposed rulemaking would seek answers on how to “expand and redefine assessment areas to better capture where bank services occur,” branches would not be taken out of the equation.

“Branches remain an important part of how banks deliver services to their communities, including low- and moderate-income communities,” he said in an Aug. 9 email.

Representatives for the FDIC declined to comment. The Fed could not immediately be reached Aug. 9 for comment.

To contact the reporter on this story: Evan Weinberger in New York at

To contact the editor responsible for this story: Michael Ferullo at

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