[Federal Register: July 19, 2001 (Volume 66, Number 139)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 25
[Docket No. 01-16]
FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Regulation BB; Docket No. R-1112]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 345
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563e
[Docket No. 2001-49]
Community Reinvestment Act Regulations
AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC);
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision,
ACTION: Joint advance notice of proposed rulemaking.
SUMMARY: The OCC, Board, FDIC, and OTS (collectively, ``we'' or ``the
agencies'') are beginning a review of our Community Reinvestment Act
(CRA) regulations. This advance notice of proposed rulemaking (ANPR)
seeks public comment on a wide range of questions as part of our
review. We also welcome comments discussing other aspects of the CRA
regulations and suggesting ways to improve the efficacy of the
DATES: Comments must be received by October 17, 2001.
ADDRESSES: OCC: Please direct your comments to: Docket No. 01-16,
Communications Division, Public Information Room, Mailstop 1-5, Office
of the Comptroller of the Currency, 250 E Street, SW., Washington, DC
20219. You can inspect and photocopy all comments received at that
address. In addition, you may send comments by facsimile transmission
to fax number (202) 874-4448, or by electronic mail to
Board: Comments should refer to Docket No. R-1112 and should be
mailed to Ms. Jennifer J. Johnson, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, NW.,
Washington, DC 20551, or mailed electronically to
firstname.lastname@example.org. Comments addressed to Ms. Johnson may
also be delivered to the Board's mailroom between 8:45 a.m. and 5:15
p.m., and to the security control room outside those hours. Both the
mailroom and the security control room are accessible from the Eccles
Building courtyard entrance, located on 20th Street between
Constitution Avenue and C Street, NW. Members of the public may inspect
comments in Room MP-500 of the Martin Building between 9:00 a.m. and
5:00 p.m. on weekdays.
FDIC: Mail: Written comments should be addressed to Robert E.
Feldman, Executive Secretary, Attention: Comments/OES, Federal Deposit
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
Delivery: Comments may be hand delivered to the guard station at
the rear of the 550 17th Street Building (located on F Street) on
business days between 7:00 a.m. and 5:00 p.m.
Facsimile: Send facsimile transmissions to fax number (202) 898-
Electronic: Comments may be submitted to the FDIC electronically
over the Internet at http://www.fdic.gov/regulations/laws/
publiccomments/index.html. The FDIC has included a page on its web site
to facilitate the submission of electronic comments in response to this
ANPR concerning the CRA regulations (the EPC site). The EPC site
provides an alternative to the written letter and may be a more
convenient way for you to submit your comments or suggestions
concerning the ANPR to the FDIC. If you submit comments through the EPC
site, your comments will receive the same consideration that they would
receive if submitted in hard copy to the FDIC's street address. Like
comments or suggestions submitted in hard copy to the FDIC's street
address, EPC site comments will be made available in their entirety
(including the commenter's name and address if the commenter chooses to
provide them) for public inspection. The FDIC, however, will not use an
individual's name or any other personal identifier of an individual to
retrieve records or information submitted through the EPC site. You
will be able to view the ANPR directly on the EPC site and provide
written comments and suggestions in the spaces provided.
You may also electronically mail comments to email@example.com.
Public Inspection: Comments may be inspected and photocopied in the
FDIC Public Information Center, Room 100, 801 17th Street, NW.,
Washington, DC 20429, between 9:00 a.m. and 4:30 p.m. on business days.
OTS: Mail: Send comments to Regulation Comments, Chief Counsel's
Office, Office of Thrift Supervision, 1700 G Street, NW., Washington,
DC 20552, Attention Docket No. 2001-49.
Delivery: Hand deliver comments to the Guard's Desk, East Lobby
Entrance, 1700 G Street, NW., from 9:00 a.m. to 4:00 p.m. on business
days, Attention: Regulation Comments, Chief Counsel's Office, Attention
Docket No. 2001-49.
Facsimiles: Send facsimile transmissions to FAX Number (202) 906-
6518, Attention: Docket No. 2001-49.
E-Mail: Send e-mails to firstname.lastname@example.org, Attention
Docket No. 2001-49 and include your name and telephone number.
Public Inspection: Comments and the related index will be posted on
the OTS Internet Site at http://www.ots.treas.gov. In addition, you may
inspect comments at the Public Reference Room, 1700 G Street, NW., by
appointment. To make an appointment for access, call (202) 906-5922,
send an e-mail to email@example.com, or send a facsimile
transmission to (202) 906-7755. (Prior notice identifying the material
you will be requesting will assist us in serving you.) Appointments
will be scheduled on business days
between 10:00 a.m. and 4:00 p.m. In most cases, appointments will be
available the next business day following the date a request is
FOR FURTHER INFORMATION CONTACT: OCC: Karen Tucker, National Bank
Examiner, Community and Consumer Policy Division, (202) 874-4428;
Margaret Hesse, Special Counsel, Community and Consumer Law Division,
(202) 874-5750; or Patrick Tierney, Attorney, Legislative & Regulatory
Activities Division, (202) 874-5090, Office of the Comptroller of the
Currency, 250 E Street, SW., Washington, DC 20219.
Board: William T. Coffey, Senior Review Examiner, (202) 452-3946;
Catherine M.J. Gates, Oversight Team Leader, (202) 452-3946; or
Kathleen C. Ryan, Senior Attorney, (202) 452-3667, Division of Consumer
and Community Affairs, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue, NW., Washington, DC 20551.
FDIC: Deanna Caldwell, Senior Policy Analyst, (202) 942-3366;
Stephanie Caputo, Fair Lending Specialist (202) 942-3413; or Robert
Mooney, Assistant Director, (202) 942-3378, Division of Compliance and
Consumer Affairs; or Ann Johnson, Counsel, Legal Division, (202) 898-
3573, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
OTS: Celeste Anderson, Policy Analyst, Compliance Policy, (202)
906-7990; Theresa A. Stark, Project Manager, Compliance Policy, (202)
906-7054; or Richard Bennett, Counsel (Banking and Finance), (202) 906-
7409, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC
The Federal financial supervisory agencies are jointly undertaking
a review of our CRA regulations, in fulfillment of our commitment to do
so when we adopted the current regulations in 1995. See 60 FR 22156,
22177 (May 4, 1995). This ANPR marks the beginning of our assessment of
the effectiveness of the regulations in achieving their original goals
of (1) emphasizing in examinations an institution's actual performance
in, rather than its process for, addressing CRA responsibilities; (2)
promoting consistency in evaluations; and (3) eliminating unnecessary
burden. Any regulatory changes that we determine to be necessary to
improve the regulations' effectiveness will be made in a rulemaking
after completion of this review.
With our initiation of this comprehensive review of the
regulations, we seek to determine whether, and if so, how, the
regulations should be amended to better evaluate financial
institutions' performance under the CRA, consistent with the authority,
mandate, and intent of the statute. We encourage comments from the
industry and the public on all aspects of this ANPR, as well as other
concerns regarding the regulations that may not be represented, in
order to ensure a full discussion of the issues.
In 1977, Congress enacted the CRA to encourage federally insured
banks and thrifts to help meet the credit needs of their entire
communities, including low-and moderate-income neighborhoods,
consistent with safe and sound banking practices. 12 U.S.C. 2901 et
seq. In the CRA, Congress determined that:
(1) Regulated financial institutions are required by law to
demonstrate that their deposit facilities serve the convenience and
needs of the communities in which they are chartered to do business;
(2) The convenience and needs of communities include the need for
credit services as well as deposit services; and
(3) Regulated financial institutions have continuing and
affirmative obligation[s] to help meet the credit needs of the local
communities in which they are chartered. (12 U.S.C. 2901(a).) Further,
Congress directed the agencies to assess an institution's record of
meeting the credit needs of its entire community, and to consider that
record when acting on an application for a deposit facility.
In 1993, we initiated a reform of our CRA regulations. The goal of
the reform was to develop revised rules that would clarify how we would
evaluate the performance of the institutions we supervise. It also was
our goal to develop a new system of evaluating financial institutions'
records with respect to CRA that would focus primarily on objective,
performance-based assessment standards that minimize compliance burden
while stimulating improved performance.
After holding seven public hearings and publishing two proposed
rules, we jointly issued final rules (the ``regulations'') on May 4,
1995 (60 FR 22156). See 12 CFR 25, 228, 345, and 563e, implementing 12
U.S.C. 2901 et seq. We published related clarifying documents on
December 20, 1995 (60 FR 66048) and May 10, 1996 (61 FR 21362). To
assist financial institutions and the public, we have also provided
interpretive guidance about the regulations in the form of questions
and answers published in the Federal Register. See 65 FR 25088 (April
Under the regulations, the agencies evaluate a financial
institution through a performance-based examination, the scope of which
is determined by the institution's size and business strategy. Large,
retail-oriented institutions are examined using the lending,
investment, and service tests. Small institutions are examined using a
streamlined small institution test. Wholesale and limited purpose
institutions are examined under a community development test. And,
finally, all institutions have the option of being evaluated under a
strategic plan. No matter which evaluation method is used, each
institution's performance is evaluated in a ``performance context''
that examiners factor into their CRA evaluations. The performance
context includes consideration of factors such as each institution's
business strategy and constraints, as well as the needs of, and
opportunities afforded by, the communities served.
As stated, our goal was to make CRA examinations more objective and
performance-based. To this end, the regulations require large
institutions to collect, report, and disclose data on small business,
small farm and community development loans, as well as limited data
about home mortgage lending outside metropolitan statistical areas
(MSAs), if the institution is subject to the Home Mortgage Disclosure
Issues for Comment
A fundamental issue for consideration is whether any change to the
regulations would be beneficial or is warranted. Industry
representatives, community and consumer organization representatives,
members of Congress, and the public have discussed the regulations with
the agencies over the years, e.g., during examinations, in the
application process, at conferences, and at other meetings. Some
suggest that the regulations work reasonably well and that little or no
change is necessary. Others suggest that more extensive changes may be
needed to reflect the significant changes in the delivery of services
and expansion of products offered by financial institutions as a result
of new technologies and financial modernization legislation. Still
others advise that regulatory changes are inherently burdensome, so the
benefit of any change should be weighed against the cost of effecting
The following discussion identifies some of the issues that may
warrant our review. The discussion is by no means exhaustive of all the
issues that could be raised or the viewpoints that could be expressed.
Commenters are invited to respond to the questions presented and to
offer comments or suggestions on any other issues related to the CRA
regulations, including developments in the industry that may impact how
we evaluate CRA performance in the future. The agencies also welcome
suggestions on what, if any, other steps we might undertake instead of,
or in addition to, revising the regulations.
1. Large Retail Institutions: Lending, Investment, and Service Tests
Large retail institutions are subject to the lending, investment,
and service tests. These tests primarily consider such things as the
number and dollar amount of loans, qualified investments, and services,
and the location and recipients of these activities. The tests also
call for qualitative consideration of an institution's activities,
including whether, and to what extent, loans, investments, and services
are responsive to community credit needs; whether and to what extent
they are innovative, flexible, or complex activities; and, in the case
of investments, the degree to which the investments are not routinely
provided by private investors. Thus, the regulations attempt to temper
their reliance on quantitative factors by requiring examiners to
evaluate qualitative factors, because not all activities of the same
numerical magnitude have equal impact or entail the same relative
importance when undertaken by different institutions in different
Nonetheless, because the tests first consider the number and dollar
amount of loans, investments, or services, some are of the opinion that
CRA evaluations have become simply a ``numbers game.'' They question
whether the regulations strike the right balance between evaluation of
the quantity and quality of CRA activities. They suggest, for example,
that the regulations provide too little consideration for an
institution's focus on smaller projects `` whether or not
``innovative'' `` that are particularly difficult to carry out, but are
especially meaningful and responsive to the institution's community.
Institutions' CRA ratings reflect the principle that lending is the
primary vehicle for meeting a community's credit needs. In the 1995
preamble to the regulations, the agencies published a ratings matrix
for examiners to use when evaluating large retail institutions under
the lending, investment, and service tests. Under this matrix, it is
impossible for an institution to achieve a ``satisfactory'' rating
overall unless it receives at least a ``low satisfactory'' rating on
the lending test. The agencies continue to use this ratings matrix.
With respect to the emphasis placed on each category of an
institution's activities, some question whether lending should be
emphasized more than investments and services. They assert that a CRA
evaluation should allow for adjustment of this emphasis in a manner
that more nearly corresponds with the activities of the institution and
the particular needs of its community. For example, they assert, if an
institution does not significantly engage in retail lending and,
therefore, makes few loans, the lending test should not receive more
emphasis than the investment and service tests for that institution's
Others contend, however, that lending should always be stressed,
because they believe that deposits derived from communities should be
reinvested in those communities through loans. Still others assert that
lending should be the only basis upon which institutions are evaluated.
Finally, with respect to the three tests, some have argued that an
institution's record of providing services should be given more
emphasis than it currently is given. Others assert that providing
services is not relevant to assessing whether an institution is meeting
the credit needs of its community.
Do the regulations strike the appropriate balance between
quantitative and qualitative measures, and among lending, investments,
and services? If so, why? If not, how should the regulations be
A. Lending test. The agencies evaluate an institution's lending
performance by considering the number and amount of loans originated or
purchased by the institution in its assessment area; the geographic
distribution of its lending; characteristics, such as income level, of
its borrowers; its community development lending; and its use of
innovative or flexible lending practices to address the credit needs of
low- or moderate-income individuals or geographies in a safe and sound
One aspect of the lending test that some have raised with the
agencies is that the regulations allow equal consideration for loan
originations and purchases. Some assert that only loan originations
should be considered in an institution's evaluation. Supporters of this
position maintain that consideration of loan purchases does not
encourage institutions to increase capital in their communities.
Rather, they believe equal consideration may prompt institutions to buy
and sell the same loans repeatedly to influence their CRA ratings. On
the other hand, some contend that loan purchases free up capital to the
selling institution, thus enabling it to make additional loans. Still
others argue that both purchases and originations should be considered,
but originations should be weighted more heavily because they require
more involvement by the institution with the borrower.
A related issue focuses on how the agencies should treat secondary
market activity. The regulations currently capture purchased loans
under the lending test and purchased asset-backed securities under the
investment test. Some find this distinction to be artificial, and
propose that purchased loans and purchased asset-backed securities
should be captured under the same test, although they differ on which
test should be used.
In addition, some are concerned that the regulations generally seem
to provide consideration of loans without regard to whether the lending
activities are appropriate. They recommend that a CRA examination also
should include consideration of whether certain loans contain harmful
or abusive terms and, therefore, do not help to meet community credit
Does the lending test effectively assess an institution's
record of helping to meet the credit needs of its entire community? If
so, why? If not, how should the regulations be revised?
B. Investment test. The agencies evaluate large retail
institutions' performance under the investment test based on the dollar
amount of qualified investments, their innovativeness or complexity,
their responsiveness to credit and community development needs, and the
degree to which they are not routinely provided by private investors.
The agencies included the investment test in CRA evaluations in
recognition that investments, as well as loans, can help meet credit
With respect to whether it is appropriate to evaluate institutions'
investment activities, some suggest that investments by financial
institutions are invaluable in helping to meet the credit needs of the
institutions' communities, particularly in low- and moderate-income
areas. Still others assert that the agencies should only consider
investment activities to augment institutions' CRA ratings. In their
view, although investments may help an institution to meet the credit
needs of its community, particularly in low- and moderate-income areas,
CRA ratings should be based primarily on lending
activity. Others state, however, that it is inappropriate for the
agencies to evaluate investments under the CRA as a means of meeting
The availability of qualified investments has also been an issue of
concern to some. Although some have observed that since the regulations
went into effect, the market of available CRA-related investments has
grown and continues to grow, others assert that appropriate investment
opportunities may not be available in their communities. Further, some
of the retail institutions subject to the investment test have
indicated that, in some cases, it has been difficult to compete for
investment opportunities, particularly against much larger
In addition, some have raised concerns that the innovative and
complex elements of the investment test lead to a constant demand to
change programs, even where existing programs are successful, just to
maximize CRA consideration. Others have asked the agencies to reduce
the uncertainty of how investments will be evaluated in an examination.
Does the investment test effectively assess an
institution's record of helping to meet the credit needs of its entire
community? If so, why? If not, how should the regulations be revised?
C. Service test. Under the service test, the agencies consider an
institution's branch distribution among geographies of different income
levels, its record of opening and closing branches, particularly in
low- and moderate-income geographies, the availability and
effectiveness of alternative systems for delivering retail banking
services in low- and moderate-income geographies and to low- and
moderate-income individuals, and the range of services provided in
geographies of all income levels, as well as the extent to which those
services are tailored to meet the needs of those geographies. The
agencies also consider the extent to which the institution provides
community development services and the innovativeness and
responsiveness of those community development services.
The criteria for evaluating retail services have led to discussion
on the test's effectiveness. Some argue that the service test depends
too heavily on the provision of brick and mortar banking services,
particularly when one considers that many services are now provided by
telephone, mail or electronically. Others assert that brick and mortar
banking facilities should be weighted heavily because they are
necessary, especially in low- and moderate-income neighborhoods where
consumers may not have access to electronic banking services. These
issues have led some to propose that the evaluation should consider not
only the delivery method and type of service, but also the
effectiveness of the delivery method, i.e., the extent to which low-
and moderate-income persons actually use the services offered. In
addition, some have suggested that the test should provide more
consideration for flexible and innovative deposit accounts.
As for community development services, such as providing technical
assistance on financial matters to nonprofit organizations serving low-
and moderate-income housing needs, some suggest that these services are
not given adequate consideration. In particular, they state that
community development services are often a critical component of
delivering or supporting activities considered under the lending test.
Some also argue, however, that there is no incentive for an institution
to engage in what might be labor intensive endeavors because community
development services are only a small component of its overall
evaluation. Others suggest that community development services should
be evaluated within the context of other community development
activities, such as lending and investments, because evaluating them
separately could result in artificial designations and may not give
adequate consideration to the integral relationship among the
activities. Still others suggest that the community development and
retail services components should be combined. See related discussion
Does the service test effectively assess an institution's
record of helping to meet the credit needs of its entire community? If
so, why? If not, how should the regulations be revised?
D. Community development activities of large retail institutions.
Under the regulations, ``community development'' means affordable
housing (including multifamily rental housing) for low- or moderate-
income individuals; community services targeted to low- or moderate-
income individuals; activities that promote economic development by
financing small businesses and farms; and activities that revitalize or
stabilize low- or moderate-income geographies.
The definition of ``community development'' has spurred discussion
since the regulations were published. Some assert that the definition
of ``community development'' is not broad enough to cover the full
range of activities that should receive favorable consideration. For
example, some indicate that many projects intended to revitalize or
stabilize rural communities do not qualify under the current regulatory
definition of community development because they are not located in
low- or moderate-income geographies, as defined in the regulations.
Others assert that the definition does not adequately value activities
benefiting communities or projects involving persons with a mix of
Issues also have arisen with respect to the geographic location of
an institution's community development activities. For large retail
institutions, the agencies consider community development activities in
their assessment areas or a broader statewide or regional area that
includes their assessment areas. Some suggest that large retail
institutions should receive full consideration for community
development activities anywhere they are conducted, as long as the
institutions have adequately addressed the needs of their assessment
areas. They contend that such consideration should be similar to the
consideration of community development activities given wholesale and
limited purpose institutions that are evaluated under the community
development test. Others express concern, however, that if retail
institutions are given the opportunity to receive consideration for
community development activities outside their assessment areas and the
broader statewide or regional areas that include their assessment
areas, such an opportunity may be interpreted as a requirement to serve
these areas. Still others argue that allowing activities further afield
to receive consideration would diminish institutions' incentives to
serve their own communities.
As discussed above, the community development loans, qualified
investments, and community development services of large retail
institutions are considered separately under the lending, investment,
and service tests, respectively. Some suggest this evaluation method
leads institutions to be overly concerned with whether they have
``enough'' of each activity. They argue that all community development
activities, whether loans, investments or services, should be evaluated
in one separate test, rather than in the existing three tests. Under
such a test, an institution would receive consideration for community
development loans, investments, and services needed in its community,
based on the opportunities that exist and the ability of the
institution to respond.
Are the definitions of ``community development'' and
appropriate? If so, why? If not, how should the regulations be changed?
Are the provisions relating to community development
activities by institutions that are subject to the lending, investment,
and service tests effective in assessing those institutions'
performance in helping to meet the credit needs of their entire
communities? If so, why? If not, how should the regulations be revised?
2. Small Institutions: The Streamlined Small Institution Evaluation
A ``small institution'' is defined as an institution with total
assets of less than $250 million that is independent or is affiliated
with a holding company with total bank and thrift assets of less than
$1 billion as of the two preceding year ends. Some suggest that the
asset thresholds for being considered a small institution are too low.
Others assert that holding company assets are irrelevant--if a bank has
less than $250 million in assets, it should be considered small even if
it is affiliated with a large holding company. Still others suggest
that holding company assets are relevant only if the holding company
provides support for CRA activities or otherwise directs the CRA
activities of an institution.
Small institutions are evaluated under a streamlined test that
focuses primarily on lending. When evaluating a small institution, an
agency considers its loan-to-deposit ratio; the percentage of loans in
its assessment areas; its record of lending to borrowers of different
income levels and businesses and farms of different sizes; the
geographic distribution of its loans; and its record of taking action,
if warranted, in response to written complaints about its performance
in helping to meet credit needs in its assessment area(s).
The small institution performance standards generally have been
favorably received. Some, however, express concerns that the small
institution assessment method does not provide for adequate
consideration of non-lending-related investments, retail-related
services, or community development services. Others assert that the
small institution performance standards do not adequately consider the
activities small institutions are performing in their communities,
particularly in highly competitive markets. Others say that the
standards do not create a sufficient incentive for small institutions
to seek out and make investments, provide new services, or strive for
higher ratings. Some also argue that institutions evaluated under the
streamlined method should not be eligible for an ``outstanding'' rating
based on their lending activities alone--that a small institution
should be engaged in making investments and providing services in order
to receive a rating higher than satisfactory.
Do the provisions relating to asset size and holding
company affiliation provide a reasonable and sufficient standard for
defining ``small institutions'' that are eligible for the streamlined
small institution evaluation test? If so, why? If not, how should the
regulations be revised?
Are the small institution performance standards effective
in evaluating such institutions' CRA performance? If so, why? If not,
how should the regulations be revised?
3. Limited Purpose and Wholesale Institutions: The Community
The community development test is the evaluation method used for
limited purpose and wholesale institutions. A limited purpose
institution offers only a narrow product line (such as credit card or
motor vehicle loans) to a regional or broader market and must request
and receive designation as a limited purpose institution from its
regulatory agency. A wholesale institution is not in the business of
extending home mortgage, small business, small farm, or consumer loans
to retail customers, and similarly must obtain a designation as a
Some question whether the definitions of limited purpose and
wholesale institutions are appropriate. For example, they ask whether
the definition of limited purpose should be expanded to a limited
extent to capture retail institutions that offer more than a narrow
product line on a regional or national basis.
Under the community development test, the agencies consider the
number and amount of community development loans, qualified
investments, or community development services; the use of innovative
or complex qualified investments, community development loans, or
community development services and the extent to which the investments
are not routinely provided by private investors; and the institution's
responsiveness to credit and community development needs. Wholesale and
limited purpose institutions may receive consideration for community
development activities outside of their assessment areas (or a broader
statewide or regional area that includes their assessment areas) as
long as they have adequately addressed the needs of their assessment
Some question whether the community development test for wholesale
and limited purpose institutions is as rigorous as the lending,
investment, and service tests are for large retail institutions. Others
suggest that the community development test may be an appropriate test
not only for limited purpose and wholesale institutions, but also for
other types of institutions, such as branchless institutions that
provide a broad range of retail services nationwide by telephone, mail,
or electronically. Still others assert that the community development
test may be an appropriate test for any retail institution.
Are the definitions of ``wholesale institutions'' and
``limited purpose institution'' appropriate? If so, why? If not, how
should the regulations be revised?
Does the community development test provide a reasonable
and sufficient standard for assessing wholesale and limited purpose
institutions? If so, why? If not, how should the regulations be
Would the community development test provide a reasonable
and sufficient standard for assessing the CRA record of other insured
depository institutions, including retail institutions? If so, why and
which ones, and how should the regulations be revised? If not, why not?
4. Strategic Plan
The agencies developed the strategic plan option to provide
institutions with more flexibility and certainty regarding what aspects
of their performance will be evaluated and what quantitative and
qualitative measures will be applied. To exercise this option, an
institution must informally seek suggestions from the public while
developing its plan, solicit formal public comment on its plan, and
submit the plan to its regulatory agency (along with any written
comments received from the public and an explanation of any changes
made to the plan in response to those public comments).
To be approved by an agency, a CRA strategic plan must have
measurable goals and address how the institution plans to meet the
credit needs of its assessment area, in particular, low- and moderate-
income geographies and individuals, through lending, investments, and
services, as appropriate. Although strategic plans should generally
emphasize lending goals, the rule allows institutions the flexibility
to choose a different emphasis, as necessary, given their business
strategy and the needs of their community.
Strategic plans must contain goals that, if met, would constitute
``satisfactory'' performance. An
institution may also include goals that would constitute
``outstanding'' performance. Upon examination, an institution that
substantially achieves its goals under its approved plan will receive
the rating attributed to those goals in its plan.
Only a few institutions have used the strategic plan option. These
institutions indicate that they prefer the certainty provided by having
a strategic plan. On the other hand, others have said that they have
chosen not to pursue this option because of concern about the public
nature of the process and the plan itself, including concern that their
competitors might obtain information about their business strategy.
Some indicate that they have found it difficult to develop a strategic
plan with measurable goals. These concerns have led some to suggest
that the strategic plan option should be reformed, while others suggest
that it should be eliminated.
Some suggest that a strategic plan allows non-traditional
institutions, such as institutions that provide a wide range of
products nationwide via the Internet or through other non-branch-based
delivery systems, to set performance goals that better reflect the
markets they serve. Some suggest that a strategic plan should be
mandatory for certain non-traditional institutions, particularly an
institution for which the vast majority of retail lending activity
occurs outside of its assessment area as defined by the regulation.
Others suggest that the strategic plan option could be used to blend
existing assessment methods for different business lines within one
institution, for example, in the context of a bank with a retail branch
network in one part of the country and wholesale operations in another,
or an Internet presence nationally.
Does the strategic plan option provide an effective
alternative method of evaluation for financial institutions? If so,
why? If not, how should the regulations be revised?
5. Performance Context
The regulations provide that an institution's performance under the
tests and standards is evaluated in the context of information about
the institution, its community, its competitors, and its peers. Such
information may include, among other things, demographic data about the
institution's assessment areas; the institution's product offerings and
business strategy; lending, investment, and service opportunities in
its assessment areas; any institutional capacity and constraints; and
information about the institution's past performance and the
performance of similarly situated lenders.
Some assert that performance context provides a means to evaluate
the qualitative impact of an institution's activities in a community,
striking the right balance between the quantity and quality of an
institution's activity. The appropriate information helps to assess the
responsiveness of an institution's activities to community credit
needs. Performance context may also provide insight into whether an
activity involving a lower dollar amount could meet community needs to
a greater extent than an activity with a higher dollar amount, but with
less innovation, complexity, or impact on the community.
Others assert that consideration of a performance context may
create uncertainty about what activities will be considered and how
they will be weighted during a CRA examination. They contend that more
specific and quantifiable measures are needed to understand CRA
evaluations more fully, despite the quantitative and qualitative
factors outlined in the regulations and interagency guidance.
On the other hand, others have raised concerns that prescribing
performance ratios for institutions would result in rigid performance
requirements, and thereby eliminate the advantages of a performance
context analysis. They maintain that the performance context provides
examiners with the latitude needed to conduct a meaningful evaluation.
They contend this latitude is important given the different types of
institutions and communities, and the wide variety of business, market,
economic, and other factors that can affect an institution's ability to
respond to community credit needs.
Are the provisions on performance context effective in
appropriately shaping the quantitative and qualitative evaluation of an
institution's record of helping to meet the credit needs of its entire
community? If so, why? If not, how should the regulations be revised?
6. Assessment Areas
The regulations contain guidelines for institutions to use in
defining their assessment areas. The assessment area is the geographic
area in which the agencies will evaluate an institution's record of
meeting the credit needs of its community. The regulations provide that
an institution's assessment area should consist generally of one or
more metropolitan statistical areas or one or more contiguous political
subdivisions, and include geographies where the institution has its
main office, branches, and deposit-taking ATMs, as well as surrounding
geographies where the institution has originated or purchased a
substantial portion of its loans. An institution may adjust the
boundaries of its assessment area to include only the portion of a
political subdivision that it can reasonably expect to serve. However,
an institution's assessment area may not reflect illegal discrimination
and may not arbitrarily exclude low- or moderate-income geographies,
taking into account the institution's size and financial condition.
Some indicate that the assessment area delineation in the
regulations has proven appropriate for most institutions. They assert
that assessment areas are appropriately limited to the geographic areas
around an institution's main office, branches, and deposit-taking ATMs.
They contend that this is an appropriate and practical way to give
focus to an institution's responsibility to help meet the credit needs
of its community. Further, they contend that an institution is most
familiar with the areas in which it is physically located and is in the
best position to help meet credit needs in those areas. Still others
are concerned about setting expectations on where institutions should
be conducting their business if assessment areas were to include areas
in which the institutions are not physically located.
On the other hand, some assert that the regulations' designation of
assessment areas `` based upon the location of the main office,
branches, and deposit-taking ATMs of an institution--ignores a variety
of deposit acquisition and credit distribution channels used by an
increasing number of institutions to serve the retail public, often
reaching widely dispersed markets. They argue that these channels
should be considered part of an institution's ``community.'' Others
suggest that the regulations' approach to assessment area may create a
disincentive for institutions to engage in community development
activities in low- and moderate-income communities and rural areas
where they have no physical presence and which are not part of their
To address these and other concerns, some recommend that
institutions be required to delineate geographically defined assessment
areas wherever they deliver retail banking services, whether or not
they have physical deposit-gathering branches or ATMs in each locale.
Others suggest that the assessment area should not be limited to
metropolitan statistical areas (MSAs), but that the regulations should
allow statewide and even national assessment areas. Some others suggest
assessment areas without a geographical delimitation should be allowed,
such as one based on a type of customer--similar to the way an
institution that predominantly serves military personnel is permitted
by the statute to delineate its entire deposit customer base as its
assessment area. Finally, some propose that the agencies should create
a distinct evaluation method with respect to the assessment area for
institutions that gather deposits and deliver products and services
without using deposit-taking branches or ATMs, for example, those
institutions that use the Internet almost exclusively to gather
deposits and deliver products.
Do the provisions on assessment areas, which are tied to
geographies surrounding physical deposit-gathering facilities, provide
a reasonable and sufficient standard for designating the communities
within which the institution's activities will be evaluated during an
examination? If so, why? If not, how should the regulations be revised?
7. Activities of Affiliates
Under the lending, investment, and service tests and the community
development test, an institution may elect to have activities of its
affiliates considered as part of its own record of performance. An
``affiliate'' is defined as any company that controls, is controlled
by, or is under common control with another company. Subsidiaries of
financial institutions are considered affiliates under this definition.
Some assert that activities of affiliates, and in particular,
subsidiaries of a financial institution, should always be considered in
an institution's CRA evaluation. They contend that, because the
regulations provide for consideration of affiliates' activities only at
an institution's option, some institutions may book loans, make
investments, and provide services for low- and moderate-income persons
primarily in the institution, while offering other products and
services more predominantly targeted to middle- and upper-income
persons in their affiliates or by lending through consortia. Thus, they
argue, institutions may be using their affiliates' activities to
manipulate their CRA ratings. Others contend that if institutions can
opt for consideration of affiliates' activities to enhance their CRA
performance, their CRA performance should also be affected if their
affiliates engage in abusive lending activities.
Others suggest that affiliate activities should be required to have
a direct impact on an institution's assessment area. Still others
assert that only the activities of an insured depository institution
should be considered in its CRA evaluation. Affiliate activities should
be irrelevant, they argue, when rating an institution's CRA performance
and should not be considered, even at the option of the institution. On
the other hand, others have indicated that the current treatment of
affiliate activities is appropriate because the CRA applies only to
insured depository institutions.
Are the provisions on affiliate activities, which permit
consideration of an institution's affiliates' activities at the option
of the institution, effective in evaluating the performance of the
institution in helping to meet the credit needs of its entire
community, and consistent with the CRA statute? If so, why? If not, how
should the regulations be revised?
8. Data Collection and Maintenance of Public Files
The regulations require large institutions to collect and report
data on small business, small farm and community development lending,
as well as limited data about home mortgage lending outside MSAs, if
the institutions are subject to HMDA. The data requirements were
designed to avoid undue data collection, reporting, and disclosure
burden by: (1) Conforming data requirements to the extent possible with
data already collected under HMDA, call reports, and thrift financial
reports; (2) limiting data reporting to large institutions; and (3)
making reporting of certain types of data optional.
Some question the agencies' authority to require collection and
reporting of data under the CRA regulations. Others express concerns
about the limitations of the data collected and reported. For example,
small business and small farm data are aggregated at the census tract
level, while community development loans are aggregated at the
institution level. Still others question whether the collected and
reported data are sufficiently detailed to be of use. Some also suggest
that investment data, as well as data on lending, are necessary to
properly evaluate institutions' performance under CRA.
Some indicate that collection of the required data and maintenance
of a public file is burdensome and that very few interested parties ask
to see the public files. However, others assert that institutions'
public files provide valuable information for the public to use to
monitor the extent to which they serve their communities.
Are the data collection and reporting and public file
requirements effective and efficient approaches for assessing an
institution's CRA performance while minimizing burden? If so, why? If
not, how should the regulations be revised?
With this ANPR, we seek input to assist us in determining whether
and, if so, how the CRA regulations should be revised. We welcome
comments on all aspects of the CRA regulations and encourage all
interested parties to provide their views. Hearing from parties with
diverse viewpoints will help us to determine the most appropriate way
to approach the review of the regulations.
Executive Order 12866
OCC and OTS: The agencies do not know now whether they will propose
changes to the CRA rules and, if so, whether these changes will
constitute a significant regulatory action under the Executive Order.
This ANPR neither establishes nor proposes any regulatory requirements.
OCC and OTS have submitted a notice of planned regulatory action to OMB
for review. Because this ANPR does not contain a specific proposal,
information is not available with which to prepare an economic
analysis. OCC and OTS will prepare a preliminary analysis if they
proceed with a proposed rule that constitutes a significant regulatory
Accordingly, we solicit comment, information, and data on the
potential effects on the economy of any changes to the CRA rule that
the commenter may recommend. We will carefully consider the costs and
benefits associated with this rulemaking.
Dated: July 11, 2001.
John D. Hawke, Jr.,
Comptroller of the Currency.
Dated: July 12, 2001.
Jennifer J. Johnson,
Secretary of the Board, Board of Governors of the Federal Reserve
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Dated at Washington, DC, this 10th day of July, 2001.
Robert E. Feldman,
Dated: July 10, 2001.
Director, Office of Thrift Supervision.
[FR Doc. 01-18033 Filed 7-18-01; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P