Community Development Changes a 'First Step' in CRA Update: Curry

WASHINGTON — Comptroller of the Currency Thomas Curry said Wednesday that regulators are contemplating more changes to guidelines implementing the Community Reinvestment Act, sparking hopes by community groups they may win support for some key revisions.

The federal regulators in November finalized guidance on treatment of banks' community development activities, part of an effort to update CRA implementation. The primary change was to give more CRA consideration for activities outside a bank's immediate market where it is assessed for compliance, but advocates have pushed regulators to take the more ambitious approach of expanding assessment areas.

While he did not provide details in his prepared remarks, Curry signaled to members of the National Community Reinvestment Coalition that more alterations are on their way.

"I want to emphasize that the changes that we made last fall to our CRA guidance were only a first step," Curry said at the coalition's Washington conference. "The agencies are continuing to evaluate other CRA-related concerns and we are considering additional improvements."

The guidance — proposed in March 2013 nearly three years after regulators held public hearings on improving CRA implementation — is meant to make more CRA credit available for community development support a bank offers in a broader statewide or regional area that includes but is not limited to its branch network. (CRA assessment typically covers only areas where banks have branches.)

Under the changes, regulators will consider CRA credit for broader state or regional activities beyond the assessment area as long as they do not overlook needs of the assessment area in the process.

Curry's speech focused on how CRA can extend opportunities in rural communities, and expressed hope the recent changes to the question-and-answer document used as guidance for CRA policy encourage more development initiatives like steps already taken in rural areas of Appalachia.

"The final guidance clarified that an institution can receive CRA consideration for community development activities in a broader statewide or regional area that includes an institution's assessment area, provided that the bank or thrift has been responsive to needs and opportunities in its assessment area," Curry said.

"We believe this approach provides a more flexible standard for evaluating CRA consideration for community development activities in rural areas, and we hope these changes will lead banks to look outside their assessment areas to consider more opportunities to lend and invest in rural communities."

He lauded a public-private project in Appalachia — where the region's poverty, its remoteness and lack of education for many residents are among "characteristics that make rural community development challenging," Curry said.

"Our financial system needs to work for all parts of the country, and it is my firm belief that CRA should play just as important a role in addressing the credit needs of rural areas as it does in metropolitan areas," he said.

The region's Appalachia Regional Commission launched the Appalachian Capital Policy Initiative — involving private investors, regulators and banks — to raise the focus of financial institutions on the area.

"We hope to see more successful initiatives, similar to those taking place in Appalachia, as a result of our most recent efforts to clarify CRA consideration for activities in rural areas. To spread the word, the OCC will continue to educate bankers and community development specialists about successful rural financing opportunities," Curry said.

"We also will continue efforts to explain in more detail how these new CRA Questions and Answers will be administered. To accomplish this we are working closely with our agency partners to issue examination guidance and to develop webinars and additional training for examiners, bankers, and community practitioners."

Still, even though some observers say regulators are right to move cautiously on making CRA changes, reinvestment advocates have pushed the agencies to adopt a more dramatic approach.

Their main argument is a bank's branch network is no longer a reliable yardstick for establishing its CRA assessment area since technology easily allows institutions to lend to a broader area.

"The agencies are thinking about this backwards," John Taylor, the NCRC's chief executive, said in a November press release responding to the final guidance. "Instead of bending over backwards to permit community development outside of assessment areas, the major emphasis on reform should be expanding assessment areas to include those areas in which a bank makes significant amounts of retail loans but does not contain branches.

"If the agencies undertook this reform, then the number of assessment areas would expand and banks would not feel as great a need to expand beyond their assessment areas to find community development lending and investment opportunities."

Curry said regulators will continue to rely on the reinvestment coalition for "insight and ideas for enhancing CRA's effectiveness.

"You input will help guide us as we pursue our common goal of helping banks and thrifts meet community credit needs," he said.