ABA Letter to OCC on Proposal to Rescind the 2020 Rule

Chief Counsel’s Office
Attention: Comment Processing
Office of the Comptroller of the Currency
400 7th Street SW, Suite 3E–218
Washington, DC 20219

Ladies and Gentlemen:

The American Bankers Association (ABA)  welcomes the opportunity to respond to the Office of the Comptroller of the Currency’s (OCC) proposal to rescind the agency’s 2020 rule implementing the Community Reinvestment Act (the 2020 Rule) and replace it with a rule that largely tracks the agency’s 1995 Rule, as amended (1995 Rule).  Under this approach, all definitions, performance tests and standards, related data collection, recordkeeping, reporting, and other requirements would revert to those that were in place prior to the issuance of the 2020 Rule.

In discussing its rationale for the proposal, the OCC noted that its work to set performance benchmarks and minimums for the 2020 Rule made clear the burden and complexities associated with the data collection and reporting requirements of the 2020 Rule. Moreover, the OCC anticipates that rescinding the 2020 Rule will assist the interagency effort to modernize the CRA regulatory framework and create a consistent CRA regulation for all insured depositories. 

We welcomed the July 20, 2021 statement by the OCC, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) expressing their commitment to work together to modernize the regulations implementing the CRA. We agree that joint agency action will best achieve a consistent, updated framework that will help to meet the credit needs of communities, including low- and moderate-income neighborhoods.  

However, reinstating the 1995 Rule on a temporary basis is not as simple as it seems. Banks have implemented some, but not all, provisions of the 2020 Rule. As such, reverting back to the 1995 Rule in its entirety would be disruptive and wasteful, particularly since banks will still need to implement a future interagency rule. Furthermore, OCC Bulletin 2021-50—issued three days prior to the close of the comment period on the proposal—illustrates the potential for significant confusion associated with reinstating the 1995 Rule.   

Therefore, as the agencies work to develop a joint proposal to modernize the CRA regulations, we request that the OCC minimize the number of regulatory transitions, associated burden, and inevitable confusion that will come with implementing multiple regulatory regimes within a short timeframe. We urge the OCC to provide banks with ample flexibility as they manage their CRA programs during this period of ongoing regulatory change and uncertainty.  

With these principles in mind, we support the recommendations of the October 29, 2021 joint letter that the banking trade associations, including ABA, submitted in response to the OCC’s proposal. As explained in that letter, banks should not be required to unwind the changes that they made to their CRA programs in accordance with the 2020 Rule. Our members provided additional feedback to supplement the views expressed in the joint trades letter, which we discuss below.

Maintain the 2020 Rule’s size thresholds pending the issuance of an interagency rule.

The 2020 Rule revised the asset size thresholds for classifying institutions as Small, Intermediate, or Large Banks. An institution’s classification determines the performance standards and reporting requirements to which it is subject. The OCC proposes to reinstate the 1995 Rule’s asset size thresholds for determining whether an institution is classified as a Small, Intermediate Small, or a Large Bank. 

Under this approach, many institutions that were Small Banks under the 2020 Rule would be reclassified as Intermediate Small Banks under the 1995 Rule. Similarly, many institutions that were Intermediate Banks under the 2020 Rule would be reclassified as Large Banks under the 1995 Rule. Institutions that would transition from a Small Bank under the 2020 Rule to an Intermediate Small Bank under the 1995 Rule would not receive additional time to transition to the Intermediate Small Bank performance standards. Similarly, reinstated data collection and reporting requirements would apply to institutions that are re-designated as Large Banks; these institutions would have to begin collecting data on January 1, 2023 and would report CRA data the following year.   

Banks made plans for their CRA programs based on the 2020 Rule’s asset size thresholds, which have been in effect for over a year. In addition, pursuant to OCC guidance released on November 9, 2020, institutions that transitioned from Large Banks to Intermediate Banks under the 2020 Rule are not currently required to collect data required under the 1995 Rules for calendar years 2021 forward or report data for calendar years 2022 forward.  

Temporarily reverting to the 1995 Rule’s asset classifications and associated reporting requirements would subject many community banks to unnecessary regulatory churn. These institutions have limited staff and are acutely impacted by regulatory change.  Further, we understand that the size thresholds for the Small, Intermediate, and Large Bank classifications are being evaluated for possible revision as part of the interagency effort to modernize the CRA regulations. It would be wasteful for institutions to begin preparations to align with the 1995 Rule’s classifications only to unwind those steps based on a future interagency rulemaking. Accordingly, we request that the OCC maintain the 2020 Rule’s size thresholds pending the issuance of an interagency rule.

Permit banks operating under a strategic plan approved under the 2020 Rule to continue to utilize the qualifying activities definitions under the 2020 Rule during the entire term of the strategic plan.  

The 2020 Rule also revised the requirements for requesting approval of a CRA strategic plan. The OCC proposes to maintain any strategic plans approved by the agency pursuant to the 2020 Rule and would not require institutions to amend those strategic plans. We support this approach; however, it is unclear whether institutions would be permitted to use the 2020 Rule’s qualifying activities criteria to meet their strategic plan goals. Because the scope of qualifying activities under the 1995 Rule is narrower than activities recognized under the 2020 Rule, reverting to the 1995 Rule may make it difficult for some institutions to meet strategic plan goals that the OCC approved pursuant to the 2020 Rule. 

Failure to meet these goals could negatively impact a bank in multiple ways, such as a lower CRA rating and harm to the bank’s reputation. The potential for reputational harm is especially significant given that CRA strategic plans are developed in consultation with the community and published for public comment. Failure to meet the strategic plan goals could also negatively impact the institution’s merger and acquisition strategy. While an institution could pursue an amendment to its strategic plan, doing so would take considerable time—perhaps six to nine months—given the need to develop new goals, consult with the community, request public comment, and secure regulatory approval. Therefore, there is a significant likelihood that the interagency rulemaking process would be well underway by the time the OCC were to approve an amendment to a bank’s strategic plan goals. For these reasons, we recommend that the OCC permit banks operating under a strategic plan approved under the 2020 Rule to continue to utilize the qualifying activities definitions under the 2020 Rule during the entire term of the strategic plan.  

Conclusion.

Thank you for the opportunity to provide additional feedback on these matters.  ABA appreciates the OCC’s leadership in modernizing the CRA regulations and its continued work to develop updated and consistent regulations across the banking industry. Communities, consumers, banks, and regulators alike will benefit from this effort. In the interim, we re-emphasize the importance of minimizing the number of regulatory transitions to which banks would be subject while the agencies work to develop an interagency rule. We also reiterate our request that the OCC provide banks with ample flexibility as they manage their CRA programs during this period of ongoing regulatory change and uncertainty.  

Sincerely,

Krista Shonk
Vice President & Senior Counsel
Fair & Responsible Banking
Regulatory Compliance and Policy