FDIC Board to consider proposed CRA rule revisions at Dec. 12 meeting

Proposal on brokered deposits restrictions also on agenda

Revising anti-redlining regulations will be on the agenda for the board of the federal insurer of bank deposits when it meets Thursday, along with a proposal on brokered deposits restrictions, the agency said Friday.

The Federal Deposit Insurance Corp. (FDIC) Board will consider the proposed rulemaking for revisions to its rules implementing the Community Reinvestment Act (CRA). The proposal comes in close concert with a proposal also expected next week from the Office of the Comptroller of the Currency (OCC), which is also expected to propose new CRA rules next week.

Revisions to CRA regulations were a major topic during testimony by federal regulators – including FDIC Chairman Jelena McWilliams – Dec. 4 and 5 before the House Financial Services and Senate Banking Committees, respectively. Comptroller of the Currency Joseph Otting appeared at neither hearing.

At the Senate hearing, McWilliams told senators that the FDIC’s intention in proposing CRA revisions is not to undermine the purpose of law and what Congress intended in passing it. (CRA was originally adopted by Congress in the 1970s to combat redlining by banks, which were charged with taking deposits from communities but then not returning those deposits as loans to borrowers in the same communities.)

Rather, McWilliams said, the agency wants to update its rules to reflect changes in current practices in bank operation, including through use of the Internet and other digital uses. McWilliams also repeatedly noted, at both hearings, that the FDIC has not revised its CRA rules since the mid-1990s.

While the FDIC and OCC both seem poised to proposed CRA revisions, the Federal Reserve (so far) has not joined in the effort. Fed Board Vice Chair for Supervision Randal Quarles, also testifying before the committees, suggested that lawmakers not make too much of the Fed’s reticence.

Quarles indicated that CRA reform “is a continuing effort” and that there is agreement among all of the agencies that implementation of CRA can be improved. He said the Fed is committed to that and has been working with other agencies.

The Fed vice chair said that the agency will ultimately be involved in proposing revisions to CRA, including perhaps by joining with the other agencies in a proposal. However, he said, if those efforts happen at different speeds. “I wouldn’t take too much of an inference from that.”

In other action, the FDIC Board on Thursday will consider a proposal on brokered deposits restrictions. In February, the agency issued an advance notice of proposed rulemaking (ANPR) on the issue, addressing limits applicable to banks that are less than well-capitalized.

The ANPR sought input on all aspects of its brokered deposits regulation and interest rate restrictions, especially about ways the FDIC could improve its implementation of Section 29 of the Federal Deposit Insurance (FDI) Act while continuing to protect the safety and soundness of the banking system. Section 29 sets brokered deposits restrictions.

In addition to those two proposals, the FDIC Board will consider its 2020 operating budget at the hearing (including the Bank Insurance Fund’s (BIF) designated reserve ratio for next year).

FDIC Board meeting, Dec. 12 (2 p.m. ET) agenda