FDIC's McWilliams 'inclined' to join OCC on CRA but still has concerns

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WASHINGTON — Federal Deposit Insurance Corp. Chair Jelena McWilliams said she is "inclined" to back a forthcoming proposal to revamp the Community Reinvestment Act, but added she still has some concerns about how the plan will affect CRA assessment areas and compliance metrics.

The Office of the Comptroller of the Currency will reportedly move ahead with a proposal to reform the 40-year-old law that grades banks on their loans to the communities they serve. The OCC collected public feedback last year on possible changes to CRA, but since then it has been unclear if the agencies would move together or separately on a proposal.

But McWilliams said at a Women in Housing and Finance event Tuesday that she does want to work with Comptroller Joseph Otting and broadly agrees with his ideas.

“Ultimately, the end goal is to provide more dollars into the communities, and so if we can come to a point where banks benefit from having more certainty, we can address the digital channels … and the footprints that are changing, and provide more dollars into the communities, I think we can have a win-win,” she said.

Still, McWilliams has conditions, she said. For example, she said she would not sign off on a proposal that would measure CRA performance with a single metric.

“A metric in a market would be one of the components we could consider, and we would have to go into the intricacies of the individual markets to understand exactly, so there can’t just be one number that ascertains where we are and how the bank is doing,” she said. “It has to be a more nuanced approach, and again, it’s going to require more calculations and analysis on the part of the regulated entities.”

McWilliams also hinted at challenges in determining a bank’s assessment area, and said she believed an assessment area should be determined based on where the customer lives. However, that data is not available to the FDIC, and she said collecting it could raise privacy issues.

“I think that the new assessment areas of the future are going to be more so based on where the customers live, because you could have a customer that does all online banking … and so as we look at that, here’s the fork in the road where we’re at,” she said. “How much more of an effort is it going to be for the banks … to get the consumer’s address for the purpose of assessing what the assessment area is versus allocating all of that to the branch?”

McWilliams also elaborated on other topics including brokered deposits —she hopes to have a proposal on the subject out by the end of the year—and industrial loan company charters, or ILCs.

While she wouldn’t comment on any of the pending ILC applications, McWilliams emphasized that the bottom line is that she has to follow the law.

“The way I look at it is if we get an application that satisfies the regulatory requirements, we can’t deny it,” she said.

But McWilliams did hint at some issues with companies applying for the charter, including that some applicants do not understand that ILCs are regulated like banks.

“If a company wants to come in and explore the ILC charter… go for it,” she said. “But don’t come thinking that you’re going to get an easier touch from the regulators.”

“And by the way,” she added, “I love you, Silicon Valley, but equity is not capital. … So that’s one of the biggest obstacles that some of these technologies have.”

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CRA Regulatory reform ILCs Fintech Jelena McWilliams Joseph Otting FDIC OCC
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