Comment: Strategic Plan as Close as It Gets To Having 'Safe Harbor' on

Bankers have an alternative to the uncertainty that will surround Community Reinvestment Act compliance over the next several years as the industry and its examiners implement new rules.

The strategic-plan option permits any institution to design its own program, based on the specific needs of its community and its business strategy.

While strategic-plan development requires significant initial effort, a plan allows greater flexibility in CRA compliance design and greater confidence in examination result.

In fact, the new examination procedures state that a strategic plan "presents an opportunity for a very straightforward examination."

Moreover, the strategic-plan option is the closest thing to a CRA safe harbor the industry is likely to get. That's because a plan requires prior regulatory approval - and because an institution that meets its strategic- plan goals will receive at least a satisfactory rating.

Under the government's new CRA rules, as of Jan. 1, banks could choose to be evaluated under the strategic-plan option.

Many bankers approach the strategic-plan concept with trepidation.

The new rule does require a bank to informally seek suggestions from the public prior to drafting its strategic plan.

Strategic planning in the sunshine runs against the grain for most business people, and bankers may be particularly uncomfortable developing strategies with community groups.

Yet a closer look at the strategic plan's public input process hints that it may not be that onerous. The new rule requires a bank to "informally seek suggestions from members of the public" while developing a plan, but the means of seeking such suggestions are left to the bank. There are no standards regarding the number or sorts of community representatives who must be contacted. Nor is there a requirement that any particular suggestion be heeded.

In fact, because a formal public comment period follows the drafting of the plan, a bank has a great deal of discretion in choosing which government officials, business groups, or community organizations it deals with at the outset. Assuming a reasonable level of existing community outreach, relationships already in place to satisfy the needs assessment mandate of old CRA should be easily adaptable for use in the initial phase of strategic-plan development.

And whatever shape the informal public suggestion process takes, the strategic plan itself is prepared and written by the bank. The bank establishes the plan's focus and matches its business strategy and institutional capabilities to community needs. The bank determines the plan's goals; its length up to five years; whether to seek a satisfactory or outstanding rating; and whether to draft a plan for some or all of its assessment areas.

The plan is then subject to public review and comment before it is submitted to the regulator, but there is no requirement that a plan be amended as a result of groundless criticism or unworkable suggestions. The regulator will only consider a bank's response to public comment and whether that response is reasoned and appropriate.

The new rule further provides a mechanism to protect confidential information, allowing a bank to advise its regulator - but not its competitors or the public - of such CRA-pertinent information as potential new product offerings, marketing strategies, expansion plans, and potential mergers or acquisitions.

The new rule also offers a "fail-safe" provision for those institutions concerned about navigating the uncharted waters of a strategic plan. At the time a bank submits its plan, it may request to be evaluated under the standard evaluation tests in the event it fails to attain the satisfactory strategic-plan goals.

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