The Community Reinvestment Act is a powerful tool to promote the vitality of our neighborhoods and encourage lending, investment and other banking activities that promote economic opportunity and serve the needs of low- and moderate-income communities across the nation. We have a once-in-a-generation opportunity to build upon that legacy of community development and make the Community Reinvestment Act work better for everyone.
On Tuesday, the Office of the Comptroller of the Currency published an advance notice of proposed rulemaking seeking comment from all stakeholders, including community development organizations, civil rights groups, bankers and other regulators, about what works with the current CRA regulatory framework and what can be modernized to encourage more lending, investment, and services where they are needed most.
As a banker for more than 30 years, I saw firsthand the benefit of CRA activity and how it makes communities vibrant. I believe in the power of community reinvestment to reinvigorate financially distressed areas and to give residents of those neighborhoods hope and, more importantly, prosperity and opportunities. I have been involved in investing hundreds of millions of dollars in community development, reinvestment and support for groups that provide important services to their communities. I applaud the work of these groups and the bankers they work with to positively affect our nation’s neighborhoods.
As a result of how the CRA regulations have evolved during the last 40 years, I have also seen how the limitations of these regulations can restrict lending and lead to investment deserts that CRA activity often fails to reach by preventing banks from receiving consideration when they want to lend and invest in communities with a need for capital. Over those four decades, the regulations implementing the law have become cumbersome, complex and outdated. While the law has been amended and regulations have changed through the years, CRA regulations have failed to keep up with the evolution of how bank services are delivered, most significantly as a result of interstate branching and the digitization of service. Another drawback of the current approach is the fact that performance evaluations take too long, lack transparency and suffer from subjectivity that causes inconsistency from bank to bank. This inefficiency wastes resources and frustrates community development practitioners, bankers and regulators alike.
Stakeholders of all kinds have spoken out repeatedly that we need to make CRA regulations work better.
My experiences as a longtime banker and now as comptroller of the currency have confirmed this feedback after conversations with hundreds of stakeholders representing community development organizations, civil rights groups, bankers and other regulators over the past eight months. From those conversations, a broad consensus has emerged that we can make a dramatic improvement in how the CRA works and increase lending, investment and other banking activity where it is needed most by:
· Clarifying and expanding what qualifies for CRA consideration.
· Establishing metric-based thresholds for CRA performance ratings.
· Making CRA performance evaluations more timely and useful.
· Revisiting how we define the communities that banks serve.
Such changes could make bank performance under the CRA more transparent and enhance incentives for lending to low- and moderate-income individuals, in low- and moderate-income areas and in other underserved or distressed areas identified by federal, state, local or tribal entities. Transparent and objective metrics would support more timely regulatory decisions that rely on CRA performance ratings. Such metrics would also make institution and industry comparisons more possible and allow regulators to aggregate data in meaningful ways that are impossible today.
Tuesday’s ANPR is an early step in the process. I encourage all stakeholders to provide their thoughts on how to improve our approach to the CRA so that insured depository institutions can better meet the credit needs of our communities, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of these institutions.
I look forward to reviewing the comments, continuing an inclusive process and working with fellow regulators toward a regulatory change that enhances our approach to the CRA for everyone. For years we have resisted amending our approach to the CRA out of fear of what could happen, but we have reached a point where we should be more afraid that CRA will become increasingly ineffective if we fail to modernize our approach to implementing this important statute.
