Pub. 13 2018-2019 Issue 3

NEBRASKA BANKERS ASSOCIATION 15 For more information, contact Jeff Makovicka at Kutak Rock LLP: (402) 346-6000 or jeff.makovicka@kutakrock. com. Mr. Makovicka is a member of Kutak Rock LLP’s banking practice group where he concentrates on bank matters. (5) Recordkeeping and Reporting The ANPR indicates that a modernized CRA regulatory framework could facilitate better tracking and monitoring by banks of their CRA performance and allowing for greater com - parison to peer banks. The OCC recognized in the ANPR that the current regulatory approach “does not facilitate regular tracking, monitoring, and comparisons of levels of CRA per - formance by banks and other stakeholders.” The ANPR invites comments on the extent to which recordkeeping and reporting standards should bemodified and whether the economic impact and cost-benefit analysis of any potential changes would justify implementation. The answers that bankers, consumer groups and others pro- vide in response to the ANPR could ultimately assist regulators in revamping CRA policy. Stakeholders seemingly agree that the 40 year-old law, meant to encourage banks to lend in LMI communities and prevent discrimination, needs modernization. While both Federal Reserve Vice Chairman for Supervision Randal Quarles 7 and FDIC Chairman Jelena McWilliams 8 have signaled their support for CRA reform, the fact that the Federal Reserve and FDIC did not join the OCC in issuing the ANPR possibly hints these regulators may not fully agree with the OCC’s approach to CRA reform. Some in the industry believe this “go at it alone” ANPR significantly deviates from standard interagency “group think”, “consistency” and “conformity” for all regulated banks regardless of charter type. 9 However, “[i]t’s not unprecedented for agencies to issue ANPRs independently and move forward with actual rule proposals on an interagency basis later.” 10 The OCC’s current actions regarding the ANPR are consistent with its choice to act alone and solicit public comment on certain aspects of the Volcker Rule in August 2017, with the other relevant agencies following suit nine months later. 11 It is possible, therefore, that an interagency Notice of Proposed Rulemaking (“NPR”) will be forthcoming and the content and scope of any future NPR may deviate to some degree from the ANPR. 2018 will continue to be an impactful year for the CRA. As expected, there is considerable overlap between the themes in Treasury’s recommendations and the ANPR, although the ANPR does not set forth a comprehensive approach to revis - ing the CRA framework. There are a number of potential other reforms to the existing CRA framework, some of which were proposed by Treasury (which banking regulators may consider as the rulemaking process continues). Whether regulators affect a significant overhaul or just a touch up remains to be seen. What is certain, though, is that some sort of change is coming. Banks should join the party and submit comments to the ANPR no later than 75 days after the date it is published in the Federal Register. Comments unre - lated to the specific asks in the ANPR are welcome too, as the OCC invites “other ideas and options for modernizing the CRA regulatory framework not identified in this ANPR.”  1 OCC Policies and Procedures Manual Issuance 5000-43 (October 12, 2017) (“PPM 5000-43”). PPM 5000-43 clarifies the relationship between evidence of illegal credit practices and an institution’s CRA rating. 2 OCC BULLETIN 2018-17, Supervisory Policy and Processes for Community Reinvestment Act Performance Evaluations (June 15, 2018). 3 OCC BULLETIN 2018-23, Revisions to Impact of Evidence of Discriminatory or Other Illegal Credit Practices on Community Reinvestment Act Ratings (August 15, 2018). OCC updated its CRA manual to reflect that banks can see their rating downgraded two levels for “particularly egregious” practices. It remains to be seen how the OCC will define “particularly egregious” practices. This update in effect reverses a 2017 (PPM 5000-43) change to the manual stating that the OCCwill no longer lower a bank’s CRA rating by more than one level. 4 See Memorandum from the U.S. Department of the Treasury to the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (April 3, 2018). 5 Treasury has released a statement by Secretary Mnuchin commending the ANPR to modernize the regulations that implement the CRA. Treasury Secretary Mnuchin Statement on OCC Proposed Rulemaking to Modernize CRA Regulations (August 28, 2018). 6 There are four statutory rating categories: outstanding, satisfactory, needs to improve, and substantial non-compliance. 12 U.S.C. 2906(b)(2). 7 See CRA needs to come off ‘autopilot,’ Fed’s Quarles says, American Banker (April 17, 2018). 8 See New FDIC Leader Joins Push to Re-Evaluate Banking Rulebook, Wall Street Journal (August 6, 2018). 9 See Is the OCC becoming a ‘lone wolf” on bank policy, American Banker (August 31, 2018). 10 See There’s no harm in OCC’s single-agency approach on CRA — for now, American Banker (August 27, 2018). 11 Id.