WASHINGTON - After five months of planning and negotiation, the banking agencies are expected to release their proposed reform of the Community Reinvestment Act this week.
Regulators have agreed on a plan that sets up tough lending, branching, and investment standards - as well as new reporting requirements on consumer and business lending - for big banks. A much less stringent set of requirements would be set up for small banks.
While some details have been refined, the general framework of the proposal has not changed since the plan first leaked out several weeks ago.
FDIC Plans to Meet
The Federal Deposit Insurance Corp. has scheduled a meeting for its board to consider the package on Thursday.
Three of the four regulators working on the new rules - Comptroller of the Currency Eugene Ludwig, FDIC acting chairman Andrew Hove, and Office of Thrift Supervision acting director Jonathan Fiechter - sit on that board and are expected to support the measure.
But before the plan can be published in the Federal Register as an interagency effort, the Federal Reserve must also approve it. The seven-member board is expected to consider the proposal in an open meeting on Friday.
Heated Debated Expected
Debate at that meeting is likely to be hot. The Fed's past stance on community issues, which activists have universally criticized, has led some officials to question whether the Fed will ultimately approve the administration package.
"Of the four regulators, any potential resistance would be from the Fed," said Sheryll Kashin, a White House official who works on community development issues, in a presentation at a conference sponsored by the Enterprise Foundation.
But because Fed Governor Lawrence Lindsey has been a key player in the redrafting of the community reinvestment rules - and because the central bank is trying.to work out disputes with the administration on other banking issues like regulatory consolidation - the Fed is expected to approve the CRA proposal.
|A Compromise Document'
"I know that the board is very interested in getting public comment on it, and that's what next Friday's meeting is all about," Mr. Lindsey said.
"It's a compromise document," he added. "[The banking agencies] have hammered out something that we all think we can live with."
Already bankers and community activists have approached the regulatory agencies with then complaints about the plans. While the industry is pleased that small banks - those with assets of less than $250 million - will get easy treatment under the new laws, they are concerned about the added data collection.
Regulators are expected to propose new requirements for disclosure of some business and consumer lending.
For some larger banks there will be more burden if you measure the volume of paper that has to go out the door." Mr. Lindsey said. He added, though, that this will be offset by greater certainty about what is expected of them.
And activists have protested the easy treatment of small banks. About 80% of the industry is expected to be able to opt out of the tougher rules.
CRA expert Kenneth Thomas calls that a "free-ride proposal." He has already heard from one banker who said he would be willing to keep his institution's asset size below the $250 million cutoff just to avoid the tougher rules.
"Where do you draw the line?" he asked.
Regulators are expected to give the public 60 days to comment on the proposal, before releasing a final rule.