Proposed new CRA rule offers incentives for bank investments in MDIs, CDFIs, Hsu tells group

The proposed, new rules implementing anti-redlining laws offer banks incentives to invest in and support minority depository institutions (MDIs) and community development financial institutions (CDFIs), the leader of the national regulator of banks said Thursday.

Acting Comptroller of the Currency Michael Hsu, in remarks to the Community Development Bankers Association Peer Forum – a group representing MDIs and CDFIs, said the notice of proposed rulemaking on rules implementing the Community Reinvestment Act (CRA) proposes that all activities with Treasury Department-certified CDFIs would automatically be eligible CRA activities.

“Specifically, lending, investment, and service activities by any bank undertaken in connection with such a CDFI, at the time of the activity, would be presumed to qualify for CRA credit, thus doing away with documentation requirements,” Hsu said. “In addition, such loans, investments, and services would be given positive consideration in the ‘impact review’ of banks’ community development activities.”

Another provision of the proposal, Hsu said, notes that investments, loan participations, and other ventures undertaken by any bank, including by MDIs, in cooperation with other MDIs will receive consideration for CRA credit.

He also noted that the Office of the Comptroller of the Currency (OCC), Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) are also seeking feedback on whether activities undertaken by an MDI itself to promote its own sustainability and profitability should qualify for consideration.

“As the NPR notes, allowing these activities to qualify could encourage new investments to bolster the financial positions of MDIs, allowing them to deploy additional resources to help meet the credit needs of their communities,” he said.

Comments are due on the proposal Aug. 5.

In other comments, Hsu focused on the role of MDIs and CDFIs, and the support of his agency for both. He said the OCC will renew the charter for the Minority Depository Institutions Advisory Committee (MDIAC), which he said advises the agency on issues and opportunities facing minority depository institutions.

“We have an opportunity to make the banking system work for all communities and people, in a way that it hasn’t for generations,” Hsu said. “If we can accomplish this, underserved communities and their local economies will be more resilient and more assured that the banking system and government are working for them, rather than against them.”

Acting Comptroller Discusses Importance of CDFIs, MDIs