Fed to pitch CRA revamp of its own as regulators chart different paths

WASHINGTON — The Federal Reserve will meet Monday to discuss plans to revamp the Community Reinvestment Act, months after the Office of the Comptroller of the Currency finalized its own proposal to overhaul the 1977 law without the support of the other banking regulators.

The meeting agenda says the Fed board will discuss an "advance notice of proposed rulemaking," which signals an upcoming regulation. Fed Gov. Lael Brainard, who is leading the central bank’s efforts to modernize CRA, will also speak and take questions about the Fed’s plan at an Urban Institute event Monday.

Brainard came out against the OCC’s proposal in January. She objected to the national bank regulator's plan to combine several aspects of CRA evaluation into a single, final score based in part on the dollar value of CRA projects.

The OCC's final rule watered down its proposed numbers-based measurements for CRA activity that community groups had blasted, returning some discretion to examiners to judge a bank's overall compliance. But the final revamp was still criticized over claims that the OCC rushed it through amid the coronavirus pandemic, and created a separate CRA regime from the rest of the regulators.

Several banking organizations expressed concern that the rule’s data and recordkeeping requirements would cost the industry billions of dollars in compliance costs in the coming years. They also warned that the plan could result in regulatory arbitrage without the support of the other banking agencies.

The Federal Deposit Insurance Corp. initially signed on to the OCC’s proposal in December, but it did not join the agency in finalizing the rule in May.