Brainard, in speech, stresses need for regulatory consistency under CRA, stakeholder support

The Fed Board’s point person on the agency’s most recent effort to garner input on how best to improve rules under the anti-redlining Community Reinvestment Act (CRA) on Thursday underscored the importance of consistency among the regulators and broad stakeholder support.

Fed Gov. Lael Brainard, speaking to a community banking trade’s fall leadership meeting, said one of the Fed’s major goals in last month’s issuance of a CRA advance notice of proposed rulemaking (ANPR) “is to provide a foundation for the agencies to converge on a consistent approach that has broad support among stakeholders.”

“By reflecting stakeholder views and providing an appropriately long period for public comment,” she said, “we hope the ANPR advances the goal of building a foundation for the banking agencies to converge on a consistent approach that has the broad support of stakeholders.”

The Fed governor recapped the Fed’s goals in issuing the ANPR. Briefly, she said those are to strengthen the regulations in alignment with the CRA statute; provide greater certainty, tailor regulations, and minimize burden; provide incentives for banks in rural areas to participate in beneficial civic and other nonprofit activities that may not have a primary purpose of community development; and, as noted above, provide a foundation for the agencies to converge on a consistent approach that has broad support among stakeholders.

Brainard drilled down a bit into the ANPR’s potential impact on community banks in particular. For example, she said that small retail banks could continue to have their retail lending activities evaluated under the current framework, or they could elect to be evaluated under the proposed retail lending metric. “Small banks that opt for the retail lending metric can also elect to have other activities considered,” she said. “Additionally, the ANPR minimizes data collection and reporting burden by relying on existing data as much as possible, as well as exempting small banks from deposit and certain other data collection requirements.”

The Fed’s ANPR comes just about three months after the Office of the Comptroller of the Currency (OCC) issued a final reform rule without the participation of the Fed or the Federal Deposit Insurance Corp. (FDIC). Banking trades have given a tepid response to that rule, which isn’t set to go fully into effect until 2023. The Independent Community Bankers of America (ICBA), the audience for Brainard’s remarks Thursday, supported some of the final rule’s provisions in May but aired concerns about the rule’s complexity and data collection requirements.

The Fed’s ANPR awaits publication in the Federal Register and will be out for a 120-day public comment period after that, putting the comment deadline sometime after January.

Modernizing and Strengthening CRA Regulations: Hearing from Community Banks” – speech by Fed Gov. Lael Brainard to the Independent Community Bankers of America Fall Leadership Meeting (via webcast)