OCC Formally Rescinds June 2020 CRA Rule and Usually Reinstates 1995 CRA Bank Branch Rule | Locke Lord LLP

On December 14, 2021, the United States Office of the Comptroller of Currency (“OCC”) adopted a new final rule (“Final Rule”) under the Community Reinvestment Act of 1977, as amended ( CRA) which will come into force on January 1, 2022, with certain compliance requirements postponed to April 1, 2022. The final rule replaces the Community Reinvestment Act rule that was proposed by the Trump administration on the 5th June 2020 (the “” June 2020 Rule ”), which comes into force from October 1, 2020 until it is replaced by the Final Rule; some of the most important aspects of the June 2020 rule had delayed compliance dates starting on January 1, 2023 or January 1, 2024. Since substantial parts of the June 2020 rule had not been implemented, the final rule, in short, keeps much of the CRA’s existing rules in effect and provides a platform for future rule-making by the OCC, the Board of Governors of the Federal Reserve System (“Board ) And Federal Deposit Insurance Corporation (“FDIC” and, collectively with the OCC and the Board, the “Bank Agencies”).

The main objective of the ARC is to encourage Insured Depository Institutions (“IDIs”) to help meet the credit needs of the communities in which they are licensed, including low and moderate income neighborhoods, in accordance with the safe functioning of these institutions.

The final rule is largely a re-establishment of the 1995 CRA Rules (“1995 CRA Rules”) which were jointly promulgated by the bank branches. The OCC states in the final rule that it is intended to foster cooperation among bank branches for collaboration to make further improvements to the CRA and that another benefit of the final rule is the reestablishment of the ‘uniformity of the application of the ARC requirements on IDI among the Banking Agencies. The June 2020 rule was adopted unilaterally by the OCC without the approval of the board of directors or the FDIC.

It is important to note that the final rule generally re-adopts the 1995 CRA rule definitions of “qualifying activities”. Bank branches believe this change will foster confidence that (1) IDIs will be considered for activities that bank branches have collectively recognized as helping to meet the credit needs of the community; (2) consistent rules from each bank branch will apply to all IDIs; (3) IDIs will receive a credit for dollars already legally committed; and (4) the OCC will be able to work more effectively with the board of directors and the FDIC to determine the types of activities that should be considered under future CRA rules for bank branches. The final rule includes a provision in Subpart D that explains when activities will be eligible for CRA consideration in CRA reviews based on the rule that was in effect when the activities took place. been carried out.

The Final Rule proposes the following key changes to the repealed June 2020 rule.

The final rule restores different tests and performance standards for banks of different sizes, structures and operations. More specifically, the final rule provides an evaluation method for:

  • Small banks, which emphasizes loan performance. The test of loans to small banks could also have included the consideration of community development (CD) loans. Qualified investments and CD services could have been considered at the bank’s choice for an “exceptional” rating, but only if the bank met or exceeded the criteria for the loan test in the performance standards for small banks;
  • small intermediary banks, which focus on lending and CD activities (ie CD lending, investments and services);
  • large retail banks, which focus on lending, investment and service performance. The loan and service tests would have taken into account both retail and CD activities, while the large banks’ investment test will focus on qualified investments; and
  • wholesale and limited use banks, which is based on the business of CD.

The final rule allows any bank, regardless of its size or business strategy, to authorize its prudential regulator to assess it as part of its strategic plan (see below for updates to the requirements of the strategic plan) .

The final rule too:

  • Requires that an IDI prudential regulator, when determining the IDI rating of the ARC, take into account IDI’s violations of, inter alia, the Equal Opportunities Act credit, to the Fair Housing Act, to the Property and Equity Protection Act, the prohibition of or deceptive acts or practices in Article 5 of the Federal Trade Commission Act, l ‘Section 8 of the Real Property Settlement Procedures Act, the Loan Truth Act, Credit-Related Violations of the Military Loans Act (MLA), and the Military Civilian Relief Act ; in each case, on the basis of guidance prior to the June 2020 Rule;
  • allows IDIs to receive consideration for affiliate activities as provided for in the Final Rule, which (1) allows IDIs to maintain their existing business models for engaging in CRA activities; (2) ensure that IDIs are considered for CRA eligible activities; and (3) promotes the continued efforts of IDIs to serve their communities;
  • allows strategic plans approved under the June 2020 rule to remain in effect, but those plans must comply with the provisions of the final rule. For example, provisions of strategic plans that include objectives for activities outside a bank’s assessment area (s) will no longer apply and will no longer be assessed when assessing the performance of the bank. ;
  • includes a number of non-substantial or technical changes to the proposed Part 25 and its annexes to reflect the integration of national rules for banks and savings associations. For example, Section 25.11 (c) (1) (iii) of the Final Rule explains that the term “appropriate federal bank agency” will mean the OCC when the institution is a national bank or a federal savings bank. association and FDIC when the establishment is a state savings association; and
  • excludes for review all CRA activities that do not directly or indirectly serve a bank’s valuation area (s) or the broader statewide or regional area (s) that include the assessment areas of a bank.

The final rule delays until April 1, 2020, some new requirements under:

  • §25.43, which will require IDIs to maintain a public record containing, among other things, (1) all written comments received from the public for the then-ended three-year period that relate specifically to the performance of IDIs to help meet the credit needs of the community, and any response to comments; and (2) a copy of the public section of the IDI’s most recent credit rating agency performance review prepared by its prudential regulator; and
  • §25.44, which will require IDIs to post in the public hall of its main office and each of its branches the appropriate Notice of the Community Reinvestment Act which, among other things, invites the community to provide feedback on the performance of the the IDI in matters of CRA.

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