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Financial Services Law Insights and Observations

NYDFS strongly opposes OCC’s proposed CRA rulemaking

State Issues State Regulator NYDFS CRA OCC Federal Reserve

State Issues

On April 8, NYDFS Superintendent Linda Lacewell sent a letter to OCC Comptroller Joseph Otting expressing her “strong opposition” to the OCC’s notice of proposed rulemaking (NPR) issued last December to modernize the Community Reinvestment Act (CRA). (See Buckley Special Alert discussing the NPR). Lacewell urged the OCC to revise substantially or abandon the NPR, referring to the Department’s “extensive experience with the CRA” through its oversight of state-chartered banks’ compliance with the New York Community Reinvestment Act, which, according to Lacewell “largely mirrors the current federal CRA.”

Lacewell addressed several concerns, including that the NPR’s proposed evaluation framework would “reduce CRA evaluations to a single, dollar value comparison of banks’ CRA-qualifying activities to deposits.” This single-metric CRA ratio, Lacewell, stated, would eliminate important qualitative aspects of CRA evaluations and “incentivize banks to focus on large-dollar CRA activities to the detriment of complex and innovative small-dollar projects.” Lacewell also expressed concerns with deposit data limitations, and cited the OCC’s separate request for bank-specific data (covered by InfoBytes here) as an indicator that the data to be relied upon for the CRA ratio may be questionable. Lacewell also asserted that the NPR detrimentally redefines CRA-qualifying activities that may not positively impact low- and moderate-income communities, and fails to evaluate properly assessment area changes. Furthermore, Lacewell argued that the NPR reduces the importance of bank branches in CRA evaluations, and imposes new burdens that disproportionately impact intermediate-small banks.

Lacewell expressed support for an alternative approach suggested by Federal Reserve Governor Lael Brainard in January (covered by InfoBytes here), whose proposal would include, among other things, a set of thresholds calibrated for local conditions and two tests—a retail test and a community development test—that would tailor performance metrics for banks of different sizes and business models.

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