Assessing the new CRA
As we enter 1996, we enter a new era for CRA. First, we passed through implementing the new law. It was an almost experimental period as both banks and regulatory agencies tried to learn what CRA was and how to make it work. Then came the second phase of emphasis on process and program. If there was no program, results were presumed to be coincidental and counted for less. Now we enter this new cycle, actually the third phase of CRA, with emphasis on results.
Each cycle means change, but this should be change for the better. Perhaps the most important development in the new CRA regulation is its de-emphasis on technical requirements. Gone are the requirements to delineate your community, document everyone's outreach contacts, and maintain detailed board minutes.
But before you celebrate, consider that this improvement should come with a warning:
"Dropping all elements of your technical CRA program may prove hazardous to your institution's rating."
The old regulation with its twelve assessment factors identified essential elements to a CRA program. The assessment factors actually described an affirmative action plan. They were a blueprint for getting the job done.
Removing the technical requirements offers some freedom. But this step also transfers a responsibility to the bank for deciding the elements of its own CRA program. This may make your job harder in some ways. For purposes of maintaining a CRA program, the bank is now its own regulator. Without specific requirements, the bank has leeway to design its own CRA program - or to think that no action is necessary. As the compliance manager, you may have to persuade the bank to take steps to maintain an effective program.
The upbeat aspect of this is that under the new regulation, each bank has the room to structure a program in the way that works best for the bank. For example, clearly your directors must be actively involved in your CRA program, but when and how is up to the bank. Clearly outreach must continue to be the basis of your CRA program, but how it is structured and conducted is your choice. It is now possible to structure your program to fill or fit into a niche which your bank can support.
Clearly, there is opportunity here. There is also new responsibility. And there should be some file cabinet space freed up, too!
Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 2, 1/96
First published on 01/01/1996