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OCC updates statement on MDIs
On July 27, the OCC announced the revision of its 2013 policy statement for minority depository institutions (MDI) to update and streamline descriptions of its policies, procedures, and programs. According to the announcement, the OCC observed an increase in interest from banks and other stakeholders in working with MDIs and the MDI designation process after Project REACh was formed in 2020, and after the Emergency Capital Investment Program was established by Congress for Covid-19 relief. These events prompted the OCC to review its 2013 policy statement on MDIs, and the revised policy statement is a result of that review. The OCC also released a Fact Sheet regarding the agency’s support for MDIs.
CDFI Fund seeks comment on criteria for MDIs
On July 28, the Community Development Financial Institutions (CDFI) Fund published a notice in the Federal Register soliciting public comment to refine the criteria it should use to designate “minority lending institutions” (MDIs) as a subset of CDFIs. According to the notice, CDFI Fund “seeks to implement the designation for those CDFIs that wish to be recognized for their high levels of service and accountability to Minority populations, as well as to identify barriers such CDFIs experience in providing access to capital.” Among other things, the CDFI Fund is soliciting information on topics that include: (i) majority-minority Census tracts and the time period used to assess service in these tracts; (ii) CDFI status; (iii) financial products delivered to non-minority-owned customers that serve individuals from racial and ethnic minorities; (iv) methods MLIs may use to demonstrate accountability to minority populations; and (v) standards for accountability to minority populations, as determined by the CDFI Fund. Comments are due by November 25.
Acting FDIC Chairman Gruenberg outlines CRA NPRM
On June 13, acting FDIC Chairman Martin J. Gruenberg provided remarks before the National Community Reinvestment Coalition (NCRC) regarding the Community Reinvestment Act (CRA). In his remarks, Gruenberg discussed “ten important provisions” in the rule proposed by the Federal Reserve Board, FDIC, and OCC in May. As previously covered by InfoBtytes, the notice of proposed rulemaking (NPRM) updates how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated. Calling the CRA “the foundation of responsible finance for low- and moderate-income communities in the United States,” Gruenberg noted that the “NPRM would significantly expand the scope and rigor of CRA and assure its continued relevance for the next generation.” To expand the scope of the CRA, he explained that the NPRM would “establish new retail lending assessment areas to allow for CRA evaluation in communities where a bank may be engaging in significant lending activity but where the bank does not have a branch.” He also noted that the NPRM would “raise the bar for CRA performance on the retail lending test in order for a bank to earn an outstanding or high satisfactory rating.” With respect to greater clarity for CRA evaluations, Gruenberg said that the NPRM would “clearly define community development activities by establishing eleven proposed categories of community development.” Regarding minority depository institutions, Gruenberg said that the NPRM “creates a specific community development definition for eligible activities, such as investments, loan participations, and other ventures conducted by all banks with these institutions.” Additionally, he noted that the NPRM would address credit or banking deserts, including rural areas, native lands, and areas of persistent poverty, and would encourage the retention or establishment of branches in low-to-moderate-income communities and low-cost transaction accounts.
Hsu highlights importance of MDIs, CDFIs
On June 9, acting Comptroller of the Currency Michael J. Hsu spoke before the 2022 Community Development Bankers Association Peer Forum to discuss agency efforts to support underserved communities, as well as initiatives for revitalizing Minority Depository Institutions (MDIs) and increasing investments in Community Development Financial Institutions (CDFIs). Emphasizing the important role MDIs and CDFIs play in providing mortgage credit, small business lending, and other banking services to minority and low-to-moderate-income (LMI) communities, Hsu discussed ongoing challenges facing MDIs in terms of accessing capital and meeting customer needs. He noted that these challenges have caused many MDIs to close, fail, or be acquired by larger banks. Ensuring the survival of the remaining MDIs is important, Hsu said, since these are often the only financial institutions fulfilling minority communities’ financial needs. He further explained that the OCC is “doubling down” on Project REACh, which brings together leaders from the banking industry, national civil rights organizations, and various businesses and technology organizations to identify and reduce barriers to accessing capital and credit (covered by InfoBytes here), and stated that Project REACh has “challenged large and midsize banks to sign a pledge to revitalize MDIs with capital investments, technical assistance, business opportunities, executive training, and other resources.” Hsu also discussed recently proposed interagency rules to modernize enforcement of the Community Reinvestment Act (CRA), which will also benefit MDIs and CDFIs. As previously covered by InfoBytes, the Federal Reserve Board, FDIC, and OCC issued a joint notice of proposed rulemaking (NPRM) in May 2022 to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.
OCC says bank partnerships crucial in community reinvestment and resilience
On April 7, the OCC highlighted measures that banks can take to collaborate with community development financial institutions (CDFIs), minority depository institutions (MDIs), and other community-based groups to assist communities recovering from the Covid-19 pandemic and natural disasters. In the agency’s latest edition of its Community Developments Investments newsletter, “Partners in Recovery: Community Reinvestment and Resilience,” the OCC discussed ways banks have partnered with CDFIs and MDIs to originate small business loans, and highlighted federal emergency programs created to provide resources to low- and moderate-income and minority communities and businesses recovering from the disproportionate effects of the pandemic. The newsletter also provided examples of bank-community partnerships and addressed the role that these partnerships play in both rebuilding communities following disasters and the pandemic and preparing for future crises through climate resilience planning and investment.