Reg Y and the CRA Wars
In response to the Federal Reserve Board's proposal to streamline the application process for certain bank applications, the National Community Reinvestment Coalition ("NCRC") has raised strident concerns. The proposal would streamline the application process for between 50% to 85% of applications. NCRC argues that this would seriously undermine CRA because the "key time period for CRA enforcement occurs when the Federal Reserve System is considering a bank application for a merger or service change.
The NCRC's comments are based on the assumption that CRA enforcement only occurs or is only effective during a protested application.
In addition, the NCRC argues that the FRB should not rely on CRA examination ratings of Satisfactory or Outstanding to determine whether the applicant is eligible for a streamlined application process. The reliability of CRA ratings, they argue, is very much in doubt. Examination ratings can be one to two years old and therefore not indicative of how the bank is performing at the time of application. They also question examiner skills for CRA exams.
Finally, by limiting the time available to submit comments, the FRB would be "depriving itself of complete information on the majority of bank applications." Community groups would not be able to prepare and submit comments in such a brief period of time. Without this input, their "unique perspectives" would be lost.
NCRC supports the need for the ability to submit comments or a protest during the application process because it is during that time that "the bargaining process changes the community-banker relationship from an adversarial to a collaborative relationship by increasing contact among the parties and making them accustomed to working on mutually beneficial CRA programs."
The bottom line: if banks want a streamlined application process, they should submit comments in support of the proposal and include examples of working constructively with community groups prior to filing applications.
Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 16, 10/96
First published on 10/01/1996