I have been thoroughly reviewing the OCC and FDIC NPR and preparing for webinars we will be broadcasting next week about the NPR. Here are a few observations (and there are many, many more I will expound upon next week)
1) One of the dramatic aspects of the proposal that has not received much if any comment so far is that the regulation would require banks to annually self-assess and rate their own performance and the regulators will validate the performance ratings reported by banks. Banks annually would self report their performance evaluations using the values and formulae published in the regulation. This transfers the CRA evaluation to banks and increases the frequency of reported performance ratings from every 3-5 years to an annual practice subject to periodic on-site evaluation. Putting aside the complex formulae developed for the various CRA tests to be applied, self-assessing performance should appeal to banks all other things being equal.
2) Another very different requirement is that loans outstanding (only loan balances, not loan count) will be evaluated rather than the value of loans originated during any given year. This would apply to the "CRA Evaluation Measure" (At the same time, however, under the so-called "distribution tests, only the count of loans originated or purchased will be evaluated). This is a very dramatic departure from the current practice. The rationale is that measuring loan balances (rather than loan dollars originated) will provide a much longer perspective whereas the current practice of looking at activity within a short period of time (1 year) can distort the true picture because of the compressed time period. This is an interesting idea, although it does introduce more complexity to the measurement of CRA performance.
CRA Exam Preparation, CRA Performance Evaluations, Key Performance Benchmarks, & maps