TITLE
Recommendation to request City Manager to engage regional stakeholders, including the Gateway Cities Council of Government and the Southern California Association of Governments, regarding the Office of the Comptroller of the Currency’s efforts to modernize the Community Reinvestment Act (CRA) regulatory framework; and
Request City Manager to participate in the commenting period by articulating the City’s vision for a modified CRA.
DISCUSSION
The Community Reinvestment Act of 1977 was passed by Congress to encourage banks to meet the credit needs of the communities they serve, through lending and other activities. The statute establishes a set of requirements for financial institutions to comply with, and directs federal supervisory agencies to periodically assess a bank's ability to service an entire community, including its low and moderate income (LMI) neighborhoods. As banks present facts and data to support their performance assessments, each institution is rated according to their ability to meet the CRA criteria. Traditionally, CRA ratings determine whether an institution can merge with another bank, open a new branch or relocate, as banks with below "satisfactory" ratings are restricted from certain activities.
The Problem
Experts within the financial industry have expressed concerns regarding the ambiguity of the Community Reinvestment Act's regulations. Consequently, the CRA has seen substantial revision in both 1995 and 2005. From varying assessment area sizes, to complex, inconsistent processes, and a shift in consumer behavior, the CRA's regulatory framework is reflective of an older, traditional banking system, and does not effectively evaluate banks' performances.
Critiqued for lack of clarity and consistency, federal agencies are again engaging stakeholders and soliciting feedback on how to update the CRA. On August 28, 2018, the Office of the Comptroller of the Currency (OCC) issued a notice of proposed rulemaking, soliciting publ...
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