Pub. 14 2019-2020 Issue 5

WWW.NEBANKERS.ORG 28 to update the CRA’s data collection and reporting. Despite only two agencies participating, the FDIC and OCC are heavy-hitters inCRA, with an estimated 70%of CRA activities being conducted by banks overseen by OCC, and another 15% of CRA-driven institutions overseen by the FDIC. To simplify, the NPR can be broken down into three key areas: • Assessment Areas; • Updating CRA-eligible activities; and • Performance Measurements. Assessment Areas First is a proposed update to the definition of assessment area. Currently, areas are determined based on the physical presence (branches and ATMs) of a bank in a geographic zone. Forcing banks to rely on physical branches runs counter to current prac- tices, so the proposal expands this definition to include areas where banks conduct a substantial amount of their retail lending and deposit gathering, going beyond physical locations. With the “50%-5%” rule, banks that receive 50% or more of their deposits from outside their current assessment areas would be required to make any area that contributes at least 5% of deposits a new assessment area. Banks would potentially receive credit for quali- fying activities outside of their assessment areas, allowing banks to claim credit for investing in areas which have limited access to physical banking locations (i.e., tribal lands and underdeveloped rural areas). OCC officials have noted, however, that few banks would see their assessment areas significantly altered. Updating CRA-eligible activities All banks suffer from a lack of clarity surrounding how dif- ferent loans qualify for CRA. This change would clarify the type of activities that qualify for credit, with most of them echoing what has been historically encouraged by CRA. Regulators would have to regularly publish an illustrative list of approved CRA activities, both from lending and investments. Addition- ally, regulators would have to create a process whereby banks could have projects approved for credit prior to underwriting. Some noteworthy examples in the NPR regarding approved CRA activities include: • Investment inmortgage-backed security (MBS) that are primarily secured by loans to LMI borrowers; • Investment in an SBAGuaranteed Loan Pool Certificate; • Purchase of a local municipal bond, where the proceeds will be used to construct a newschool for students fromall income levels, including students fromLMI families; and • Bank certificate of deposit in a minority depository institution. The proposal would also address how CRA investment is scored over time. The current framework provides too much credit to some activities regardless of how long they have been The current framework provides too much credit to some activities regardless of how long they have been on the bank’s balance sheet, or even when they do not result in a new qualifying activity. OldDogNewTricks — continued from page 27