Pub. 9 2019-2020 Issue 5

14 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S www.coloradobankers.org J ust like a classic 1977 Chrysler Sunbeam, all great models need an overhaul from time to time. The Community Reinvestment Act (CRA) is no exception — enacted over 40 years ago, this legislation required the Federal Reserve and other federal banking regulators to encourage financial institutions to meet the credit needs of their communities in which they did business, including low- and moderate- income (LMI) neighborhoods. Three federal banking agencies remained responsible for CRA: the FDIC, the FRB, and the OCC. But a lot has changed since 1977 — technological advances have abounded, consumer needs have changed and as such, the current banking industry itself is lightyears ahead of its predecessors. Yet, for as groundbreaking as the CRA initiative was, it failed to change with the times. But fear not! Modernization may be coming, and soon. Banks invested nearly $500 billion last year into LMI neighborhoods.1 But that amount fails to include additional funds banks spent tomeet regulatory compliance on community reinvestment and development, and to a lesser extent, historic preservation and renewable energy. Decades worth of exam results show discretionary CRA ratings — regulators are given broad outlines on what constitutes sufficient reinvestment activity, but banks are subject to “rogue examiner” arbitrary decision-making, with little to no recourse. Although the three regulators follow the same CRA regulation and exam procedures, even different regions of the same regulator can provide disparate results: 6%of CRA ratings issued by the FDIC since 2014 have been “Outstanding,” compared to 18% for the OCC and 9% for all agencies.2 Fintech redefining deposit-taking facilities demands a bank’s CRA assessment area to be redrawn. CRAmust account for a new environment dictated by customer preferences and digital progressions. On December 12, 2019, two of the three agencies, the FDIC and OCC, published their Notice of Proposed Rulemaking (NPR) to update the CRA’s data collection and reporting. Despite only two agencies participating, the FDIC and OCC are heavy-hitters in CRA, with an estimated 70% of CRA activities conducted by banks overseen by OCC, and another 15%of CRA- driven institutions overseen by the FDIC. To simplify, the NPR can be broken down into three key areas: • Assessment Areas; • Updating CRA-eligible activities; and • Performance Measurements. Who Says You Can’t Teach an Old Dog New Tricks? Notice of Proposed Rulemaking to the Community Reinvestment Act By Elizabeth K. Madlem, Associate General Counsel and Compliance Officer, Compliance Alliance