On Wednesday May 20th 2020, the Office of the Comptroller of the Currency (OCC) released a final rule incorporating changes made to modernize the agency’s regulations under the Community Reinvestment Act (CRA). The Final Rule applies to national banks and federal savings associations and is designed to reflect changes in the banking industry while encouraging these institutions to meet the credit needs of local communities. It is important to note that neither the Federal Reserve nor the FDIC adopted changes to their existing CRA regulations, so this new rule is particularly important for OCC regulated institutions. Banks that are supervised by the Federal Reserve and the FDIC continue to be subject to existing regulations.
The final rule makes significant and fundamental changes to many aspects of the OCC’s CRA regulations. Changes made by the OCC include: 1) Clarifying the importance of the quantity and quality of activities; 2) Increasing credit for mortgage origination of affordable housing in low- and moderate-income areas; 3) Clarifying credit for athletic facilities to ensure they benefit and support low- and moderate-income communities; and, 4) Deferring establishment of thresholds for grading banks’ CRA performance and delineating banks’ deposit-based assessment areas until the OCC assesses improved data required by the final rule.
The OCC’s final rule revises the definition of “small bank” to mean an institution with assets of $600 million or less, and both changes the definition of “intermediate small bank” to “intermediate bank” and increases the corresponding asset size threshold to $2.5 billion. Both small and intermediate banks may either opt into the new framework, or choose to be evaluated under the current CRA performance standards. The final rule also retains the separate performance standards in the current regulations applicable to “wholesale” or “limited-purpose” banks. The “strategic plan” evaluation option continues to be available to any bank as proposed.
The OCC’s final rule becomes effective on October 1, 2020. There is, however, a transition period for compliance, based on a bank’s size and business model:
- Small and intermediate banks that opt in will be required to comply by January 1, 2024.
- Banks under the general performance standards, as well as wholesale and limited purpose banks, will have until January 1, 2023 to become compliant with the new requirements.
This commentary does not address any additional issues or concerns beyond the availability of the rules.
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