Bankers, regulators, and nonprofit groups are on tenterhooks waiting for federal officials to issue rules for the so-called sunshine provision of the financial reform bill.
A committee of federal bank regulators, led by representatives of the Office of Thrift Supervision, is not expected to release rules on the sunshine section before March 14. This provision requires banks and community groups to disclose detailed information about agreements related to the Community Redevelopment Act.
A committee member had said the panel would issue the rules last month.
"The longer we don't have the regs, the worse it gets," said Janet W. Thompson, corporate CRA director at Citigroup's Citibank. "It's like a smoke-filled room. The smoke just gets thicker."
The sunshine provision would apply if, as a result of CRA-related testimony or discussion, a community group makes a deal with a bank to receive or distribute loans of at least $50,000 or grants of at least $10,000. Banks and nonprofits that make such agreements must publish those pacts and explain how the money is being spent.
Those affected by the clause are particularly concerned about the administrative burden it will create and by the provision's language, which seems intended to discourage community groups from objecting to bank mergers on CRA grounds.
In addition, the sunshine clause puts federal and state banking regulators in the odd position of having to police the activities of nonprofit groups.
"Sunshine may create enormous burdens for both banks and community groups," said Warren Traiger, a principal in financial institutions law at the New York firm of Moon & Ikeda. "Every time you deal with a bank in a CRA context, sunshine may kick in."
Ms. Thompson and Mr. Traiger spoke Wednesday as part of a panel discussion on the financial modernization bill's impact on CRA, sponsored by the Lawyers Alliance for New York. The panel also included representatives of the Federal Reserve, the New York State Department of Banking, Chase Manhattan Corp., and Bank of New York.