Toomey demands tougher enforcement on banks' deals with community groups

WASHINGTON — The top Republican on the Senate Banking Committee is urging federal banking regulators to change the rules governing public disclosures around certain types of community benefit agreements under the Community Reinvestment Act, arguing that more transparency is needed.  

In a letter obtained by American Banker and sent to leaders of the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency on Wednesday, Sen. Pat Toomey, R-Pennsylvania, criticized the degree of "opacity" surrounding some community benefit plans — or written agreements between banks and community groups ahead of a merger that often involve multibillion-dollar commitments to make loans and investments in local markets. 

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"Although these [community benefit plans] are meant to show compliance with the law, the CBP details are often shielded from public scrutiny," Toomey wrote in the letter dated Sept. 7 and addressed to Fed Vice Chair Lael Brainard, acting Comptroller Michael Hsu and acting FDIC Chair Martin Gruenberg. "Greater transparency is critically necessary for Congress and the public to judge the efficacy of the CRA and its implementing regulations."

"We've received the letter and plan to respond," a spokesperson for the Federal Reserve said. Representatives of the FDIC and OCC declined to comment.

Under the CRA, banks are required to direct a certain amount of loans and other resources to low-to-moderate-income communities in their service areas. When a bank with poor CRA scores attempts to enter into a merger, community reinvestment groups can object to the deal and put it at risk. 

Oftentimes, community objections to a deal under the CRA will be resolved by a community benefit plan in which the bank involved commits to dedicating a certain amount of money toward specific initiatives. U.S. Bancorp announced a five-year, $100 billion community benefit plan in May as it attempts to complete its acquisition of MUFG Union Bank, for instance. 

In the letter, Toomey points to the Gramm-Leach-Bliley Act of 1999, which among other things required that any community agreement made by banks under the CRA be "in its entirety fully disclosed." Toomey argued that existing federal regulations had made it too easy for such plans to not be covered by the law, and that regulators under the Biden administration could change that. 

"This circumvention of congressional intent is egregious in its own right," Toomey said in the letter, "but the growth in prevalence and dollar value of CBPs in recent years only underscores the need to update the regulations implementing the GLBA's CRA sunshine provision." 

Toomey urged the regulators to "establish a public, searchable database on the agencies' websites containing all CRA-related agreements in full, including CBPs, and provide comprehensive data on such agreements."