WASHINGTON - Financial institutions will face revised Community Reinvestment Act standards under proposed regulations that the banking agencies put out for public comment on Monday.
The proposed rules make nine major adjustments from a similar plan released last year. The provisions are:
* New Reporting: Requires fewer new reporting mandates, but banks must create a small business register disclosing outstanding loan amounts, location where the money is spent, and whether the business is owned by minorities or women. Banks will have the option of disclosing consumer-lending data.
* Public Disclosure: All institutions must reveal locations of the services they offer and must include previous CRA reports, public comments on CRA performance for the past three years, and a list of branches and ATMs opened and closed during the past two years. Banks with more than $250 million in assets must disclose the amount and geographic location of loans below $1 million to minority- and female-run businesses.
* Rating Determination: Maintains same scores but makes it harder for banks with poor lending records to receive "satisfactory." It accomplishes this by testing an institution's lending, service, and investment activities. Lending is the most important test. The others are used to boost or to lower the lending rating. The plan includes safeguards to prevent banks from using the investment and service tests to inflate the lending score artificially. Finally, institutions who score "needs to improve" three times in a row automatically receive a "substantial noncompliance" score.
* Lending Test: Regulators have eliminated the market-share test, but will look at the geographic distribution of loans and at whether loans went to low- and moderate-income borrowers. Banks can opt to include third-party and affiliate lending in the review.
* Service Test: Equal weight given to branch locations and to actual services provided. Institutions using innovative programs to reach customers also given credit.
* Investment Test: Places emphasis on amount of institution's qualified investments, the uniqueness of the investment program, and its responsiveness to the community's credit needs.
* Small Institution Option: Institutions with total assets of less than $250 million can have CRA ratings based primarily on lending factors, including loan-to-deposit ratios. The new plan eliminates a suggestion that a 60'7c ratio automatically would qualify an institution for a satisfactory rating.
* Strategic Plan Option: Institutions can submit a plan on how to meet CRA obligations that does not incorporate the service- investment-lending test. The plan must include measurable goals for helping to meet a community's credit needs.
* Enforcement: The plan gives regulators authority to employ civil money penalties and cease-and-desist orders to enforce CRA.