Federal Reserve Board ("FRB") Chair Jerome Powell supported FRB Governor Lael Brainard's proposed approach to Community Reinvestment Act ("CRA") oversight to use metrics on retail banking services and community development to evaluate banks in low- and moderate-income ("LMI") neighborhoods.
As previously covered, the OCC and FDIC proposed amendments to the CRA that were not consistent with those endorsed by the FRB.
In his testimony, Chair Powell stated that while he was "comfortable" with using metrics for CRA oversight, he would not comment on the OCC's and FDIC's proposal, asserting that "[i]t's just not appropriate to do." He argued that updating the CRA would be a "win-win" for both LMI communities and banks by clarifying "what does and doesn't qualify." In addition, he agreed with Ms. Brainard's sentiments that an interagency rule would be the best outcome, and that the FRB's "entire focus" has been on reaching an agreement with the OCC.
In her speech (see previous coverage), Ms. Brainard proposed a different approach from the OCC and FDIC, while maintaining that a "strong common set of interagency standards is the best outcome." Specifically, Ms. Brainard argued for a retail test and a community development test that would use a "strong common set of interagency standards." She emphasized that conducting separate tests is an important way to: (i) specifically evaluate retail banks in an assessment area and remain consistent with the CRA's purpose of providing credit in underserved communities; (ii) tailor expectations for banks of varying sizes; and (iii) widen the scope in order to "calibrate the evaluation metrics to the opportunities available in the market." Based on the "best available data," she stated, the FRB determined that CRA metrics tailored to local conditions and varying types of banks would best serve the credit needs of LMI neighborhoods.
The OCC and the FDIC proposed amendments to the regulations implementing the Community Reinvestment Act to encourage banks to provide more qualified lending, investment and financial services to underserved communities.
In a notice of proposed rulemaking, the Office of the Comptroller of the Currency requested feedback on the ways it could modernize the Community Reinvestment Act regulatory framework.