Disclosure and Reporting of CRA-Related Agreements by Mary Beth Guard
A joint rule which embodies the "CRA Sunshine" requirements has been finalized by the FDIC, FRB, OCC and OTS. It took effect April 1, 2001. As with other "sunshine" laws, its purpose is to shed light on what would otherwise be secret or confidential dealings. In this instance, the subject matter is agreements between financial institutions and nongovernmental third parties relating to the institutions' obligations under the Community Reinvestment Act.
Under the rule, insured institutions who enter into certain agreements will be required to do two things: l) make the covered agreement available to both the public and the appropriate Federal banking agency; and 2) file an annual report with the appropriate Federal banking agency concerning the disbursement, receipt and use of funds or other resources under the agreement.
The new rule covers written agreements or understandings entered into between an insured depository institution or affiliate of an insured institution and a nongovernmental entity or person in fulfillment of CRA that involve funds or other resources of an insured institution or affiliate with an aggregate value of more than $10,000 in a year, or loans with an aggregate principal value of more than $50,000 in a year. As an example, a community group meets with a bank and asserts that the bank needs to offer new loan programs in the community. Subsequently the group and the bank reach an arrangement or understanding under which the bank agrees to provide additional loans in the group's community and then issues a press release that incorporates the terms of the understanding. Assuming the value test is met, a covered agreement or understanding would exist and it would be subject to the disclosure provisions of the rule.
Agreements or understandings between financial institutions and nongovernmental entities or persons that are not pursuant to a CRA contact would not be covered. As an example, if the person or nongovernmental entity solicits charitable contributions or other funds without regard to CRA, an agreement that relates to the contributions or other funds would not be subject to the CRA sunshine rules.
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