OCC enters new part of CRA reform with scoring proposal

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WASHINGTON — The Workplace of the Comptroller of the Forex issued a long-awaited proposal on Neighborhood Reinvestment Act scoring, however stated the company nonetheless wants extra knowledge from banks earlier than the brand new framework is full.

The proposal unveiled Tuesday, which accompanies broader CRA reforms finalized in Could first proposed by former Comptroller Joseph Otting, stops wanting offering concrete scoring requirements that the company says will finally make the CRA course of extra goal for banks. Relatively, the OCC introduced plans to require banks to submit extra knowledge about their CRA exercise to assist inform the scorecard.

The objective of the brand new scoring requirements finally is to ascertain minimal benchmarks for “passable” and “excellent” scores on sure points of the CRA examination.

“As soon as the OCC analyzes the general public feedback on this proposal and the information it receives,” the company wrote in its proposed rule, “the OCC plans to problem a ultimate rule that can undertake an strategy for setting the benchmark, threshold, and minimal values that correspond to the presumptive scores … for banks assessed below the overall efficiency requirements.”

The OCC appeared to make key commitments aimed at appeasing critics who claim that the new CRA regime will make it far easier for banks to pass their CRA exams.

The OCC appeared to make key commitments geared toward appeasing critics who declare that the brand new CRA regime will make it far simpler for banks to move their CRA exams.

Bloomberg Information

On the identical time, the OCC appeared to make key commitments geared toward appeasing critics who declare that the brand new CRA regime will make it far simpler for banks to move their CRA exams. For instance, the proposal stated the scoring methodology is not going to result in grade inflation in comparison with previous exams.

“[T]he OCC is proposing to ascertain benchmarks, thresholds, and minimums that correspond to a proportion of banks that will have obtained a hypothetical bank-level presumptive CRA score of excellent and passable that’s no higher than the historic proportion of banks which have obtained a bank-level assigned CRA score of excellent and passable,” the proposal stated.

The OCC additionally proposed a brand new requirement that will scrutinize a financial institution’s CRA efficiency below the brand new framework towards its personal historic CRA knowledge.

If the OCC finds a decline of 10% or higher between banks’ historic efficiency and precise efficiency below the brand new regime that “can’t be defined by market circumstances or different elements,” the company wrote in its proposal, regulators would think about a “downward adjustment in figuring out the financial institution’s assigned score.”

The OCC went out by itself to finalize the broader CRA reform rule in Could, because the Federal Deposit Insurance coverage Corp. and Federal Reserve Board declined to assist the regulation. The Fed launched its personal CRA reform define and plenty of stakeholders have held out hope that the three businesses finally will formulate a joint plan.

The election of Joe Biden as president additionally casts uncertainty over the management of the OCC. If the incoming administration tries to exchange appearing Comptroller Brian Brooks, who’s the Trump administration’s nominee for the permanent job, it may lead the company to start out over on CRA reform.

The OCC’s scoring requirements will likely be decided by the information the OCC receives by way of a forthcoming obligatory Info Assortment Survey, or ICS, which is able to make clear banks’ CRA-related knowledge.

In keeping with Tuesday’s proposed rule, the OCC stated it could request 4 discrete varieties of financial institution knowledge in its survey.

The primary kind would concentrate on nationwide banks’ “presence,” together with knowledge on banks’ essential places of work, financial institution branches and different deposit taking services. The second kind of knowledge would come with the “quantified greenback worth of banks’ CRA qualifying actions,” which will likely be processed below the framework the OCC finalized in Could.

The third kind of knowledge would concentrate on retail mortgage purposes relative to banks’ CRA qualifying mortgage originations.

The fourth and ultimate kind requests geographic knowledge exhibiting how banks have distributed their branches in low-to-moderate earnings areas in comparison with higher-income areas.