The federal bank regulators have traditionally been in lockstep when it comes to rules affecting the whole industry. A common set of standards bolsters consistency across different charter types and reduces banks’ incentive to favor one regulator’s charter over another.
The regulatory process takes so long in large part because agencies take so long to iron out differences and agree. In the CRA’s case, past rules and guidance have been issued jointly with agreement from the OCC, Federal Reserve and the Federal Deposit Insurance Corp.
But the OCC’s push for CRA reform this time has bucked that precedent. Comptroller Joseph Otting began focusing on a reform plan soon after he was confirmed in late 2017, suggesting many times the OCC would be willing to propose its own CRA plan. Sure enough, the agency issued a notice without the other agencies last year seeking public comment on CRA reform, yet all the regulators later reviewed the comments.
Since the OCC began work on reform in December 2017, other regulators have spent the better part of the last two years demurring on questions about their own plans for CRA, which was not on the agendas of the FDIC or Fed before Otting’s campaign.
In recent weeks, the OCC and FDIC have signaled they are ready to support the imminent proposal without the Fed. The divide between the agencies reportedly stems from disagreements over
how regulators would measure CRA investment and impact in a final plan.
In a statement last month, a Fed spokesperson said it was “unfortunate that these efforts have so far not been successful and that the agencies were unable to reach agreement on metrics that would be tailored to bank size and business model and reflect the different credit needs of the local communities that are at the heart of the statute.”
The FDIC plans a Dec. 12 board meeting to vote on the proposal, all but confirming the agency is on board with the OCC. But as recently as this month, FDIC Chairman Jelena McWilliams said while she was “inclined” to support issuing the proposal, she
still had reservations, namely with OCC’s proposed metric system and approach to assessment areas.
If the FDIC chooses to join the OCC’s proposal, regulators have said it will be published Dec. 12 — the same day the FDIC has a board meeting planned. Without the FDIC, regulators have said to expect the rule the day after, on Dec. 13.
Some observers have raised concern about the prospect of disjointed rulemaking, even though McWilliams and Otting have said their agencies combined oversee about 85% of CRA activity.
“The OCC’s approach to this has been to barrel in without building consensus first on how to proceed,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition. He raised the possibility that the FDIC’s support could be contingent on some kind of carve-out for smaller banks. “It will be telling if the FDIC signs on with a clause to let their banks opt out. Talk about a vote of confidence.”
But others noted that there is nothing stopping the agencies from advancing a plan before there is consensus.
“From a legal perspective, there’s no reason why one agency can’t move forward without the other two,” said Bill Stern, a partner with Goodwin Procter LLP. “But it makes sense to make the changes together. There’s not really a justification from a policy perspective why a national bank should be regulated differently than a state bank, or a nonmember FDIC bank.”
And the issuance of a proposal without support of all three agencies
does not preclude their ultimately agreeing on a final rule.
"We are only at the point of whether a notice of proposed rulemaking will go out. We are not at the point of a final rule. And the objective ought to be that at the end all three agencies will join in a final rule," Fed Vice Chairman of Supervision Randal Quarles said at a recent congressional hearing.
