Chemical Gets Top Score Under CRA, Aiding Merger
Chemical Banking Corp. said Wednesday that its lead bank got the best rating possible for community investment activities.
The high score is a regulatory boon for Chemical and its merger partner, Manufacturers Hanover Corp. Their proposed merger has been questioned by community groups, which alleged discrimination by the companies against minority groups and low-income borrowers.
CRA Failures a Big Obstacle to Merger Approvals
Banking lawyers say that failure to satisfy Community Reinvestment Act requirements is one of the biggest regulatory impediments to approval of mergers.
Indeed, one New York activist group vowed to continue opposing the Chemical-Hanover merger - despite the high CRA rating from the Federal Reserve Bank of New York - until the banks involved pledge more lending in minority communities. "It won't have any impact on our plans," said Jon Kest, New York director of the Association of Community Organizations for Reform Now, or Acorn.
Ken Herz, a Chemical spokesman, said the high rating should help stave off any challenge. "If there is a protest, it would place a high burden of proof on the protester," he said.
Data recently released under the Home Mortgage Disclosure Act showed that Chemical rejects whites and minority group members applying for mortgages more evenly than other lenders in the area.
Chemical turned down black applicants 1.73 times as often as whites, while all local lenders turned down blacks 1.96 times as often.
The New York Fed had already given a similar CRA rating of "outstanding" to Hanover.