WASHINGTON - Bankers and their longtime Senate ally remain at loggerheads over the logistics of disclosing Community Reinvestment Act pledges.
In comment letters to federal banking regulators on a proposal to enforce the new financial reform law's so-called CRA sunshine provisions, industry representatives griped that regulators have gone overboard, interpreting the statute too strictly. Senate Banking Committee Chairman Phil Gramm, the father of the provision, reiterated his complaint that the proposal is lax, riddled with loopholes, and contrary to the intent of the law.
The sunshine provisions, part of a compromise to ensure Sen. Gramm's support of the Gramm-Leach-Bliley Act of 1999, require banks and community groups to disclose the terms of CRA-related agreements for loans of more than $50,000 or grants of at least $10,000. Banks must file annual reports on these agreements, and each year community groups must detail how they spent the money.
The proposal has "the potential for interpretation and/or enforcement in an overly broad manner," wrote Mary Laraia, the senior vice president for CRA at Bank One Corp. She requested "a simplified reporting format to alleviate undue and unnecessary burdens on those required to report under the rule."
Bankers and Sen. Gramm also disagreed about whether all meetings and other contacts between banks and community groups trigger the reporting requirements. In his comment letter, the Texas Republican said disclosures should be made whenever there is a contact. Any limitation "paves the way for CRA groups to engage in many types of CRA contacts without ever becoming subject to the law's reporting requirements," he wrote.
Some bankers said such a broad trigger covers too many situations.
"I fear that if this is not better defined and honed, all customer and community calls that a bank's CRA officer would make would literally be reportable," wrote John E. Kubinsky, vice president and CRA-compliance officer at $1.3 billion-asset U.S. Bank of Johnston, Pa. Unlike Sen. Gramm, bankers agreed with the regulators' proposal to require reports only on meetings within a specified time frame before parties enter a covered CRA agreement. American Bankers Association senior counsel Paul A. Smith wrote that the group "believes that a CRA contact should be within no more than one year prior to the making of the agreement."
Sen. Gramm and the industry also are at odds over limiting filing requirements to signed contracts between banks and community groups. He insisted that disclosure agreements be filed whenever banks pledge to make community development grants, even if there is not a signed contract. Without such a broad definition, he wrote, "it would be a blueprint for CRA participants to replace a signed agreement with a written pledge sealed with a knowing wink." Bankers were equally adamant that only legal contracts should be reported.
"If an agreement does not have to legally binding to be covered, it will create a substantial gray area," wrote Thomas J. Sheehan, president of the Independent Community Bankers of America. "It will be simpler and cleaner if the final rule provides that an agreement must be legally binding in order to be covered by the CRA sunshine provisions."