Bulletin outlines OCC’s policy for determining CRA rating

Policy and framework for determining the effect of evidence of discriminatory or other illegal credit practices on a bank’s Community Reinvestment Act (CRA) rating has been made public by the regulator of national banks.

In making public its Policies and Procedures Manual (PPM) 5000-43 (which outlines the agency’s policy and provides guidance to examiners), the Office of the Comptroller of the Currency (OCC) outlined two principles for determining how evidence of illegal credit practices in a bank’s CRA lending activities affects its assigned CRA rating(s):

  • There must be a “logical nexus” between the assigned rating(s) and evidence of discriminatory or other illegal credit practices in the bank’s CRA lending activities to ensure alignment between the rating(s) and the bank’s actual CRA performance;
  • Full consideration will be given to the remedial actions taken by the bank.

“Controls, testing or audit procedures that the bank has implemented, and restitution made to customers, may be mitigating considerations,” the PPM states. ‘For example, a lower rating may not be warranted if a bank self-identifies violations and voluntarily takes corrective actions in a timely manner.”

In addition, the agency noted that if a bank’s rating is lowered, examiners must provide a full explanation in the CRA performance evaluation (PE) as to why the discriminatory or other illegal credit practice(s) resulted in a lower rating. “This explanation must include a description of how the policies contained in this PPM were applied. Examiners should also include a comment on the ‘CRA Rating Summary’ page of the PE noting that discriminatory or other illegal credit practice(s) were identified and whether those practices resulted in a lower rating.”

The OCC stated that in passing CRA, Congress sought to encourage certain financial institutions, including most national banks, federal savings associations, and insured federal branches, to help meet the credit needs of local communities where they are chartered.

The PPM affects all institutions examined by the OCC, including national banks, federal savings associations, and federal branches.

Bulletin: Impact of Evidence of Discriminatory or Other Illegal Credit Practices on Community Reinvestment Act Ratings

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