Details, details, details.
They appear to be the key to convincing the banking agencies to accept customized Community Reinvestment Act plans.
The Federal Deposit Insurance Corp. and the Federal Reserve Board approved the first two plans just before Christmas. Both require precise lending and investment goals.
"We are looking for specificity in terms of how many loans, and the dollar value," said Douglas J. Kasl, vice president in charge of compliance at the Federal Reserve Bank of Chicago. "There has to be something that is measurable."
When the agencies revised the CRA rules in April 1995, they included a provision allowing banks to design their own CRA requirements, provided they solicit comment from the public. Regulators then judge a bank on how close it comes to meeting its goals. The new rules took effect Jan. 1 for small banks and apply to large banks on July 1, 1997.
The Fed approved the first of these so-called strategic plans on Dec. 19, giving its nod to a four-year plan by The Northern Trust Co. The Chicago-based bank agreed to a series of lending goals for mortgages, small business loans, and community development projects. For example, it pledged to make 250 affordable mortgages in 1997, worth $20.2 million.
Northern Trust must meet at least 90% of this goal to get a satisfactory rating.
"We chose the strategic plan option because it allows us to establish and be measured by objective goals that, through the comment process, have gained the support of the community," Northern Trust president Barry G. Hastings said. "It also allows us to plan for a longer term and put our resources behind our particular strengths."
The FDIC gave Swiss Avenue State Bank of Dallas permission on Dec. 23 to use a strategic plan that focuses almost exclusively on small-business lending.
Swiss Avenue set goals for small-business lending in two low-income areas near branches, and in one area with a broad spectrum of income levels. For the first area, it must make 40 to 53 loans worth a total of $1.4 million to $1.88 million to get a satisfactory rating. If it makes more than 53 loans with a combined value of more than $1.88 million, it will get an outstanding rating. The other two areas have similar requirements. The bank also set goals for residential and consumer lending, charitable giving, and special small-business checking accounts.
"What they have done is gone through and, based on the past couple of years of performance, come up with a range of goals," said Bobbie Jean Norris, the FDIC's national coordinator for community affairs. "Within those, they gave ranges for what they expect to do in low-moderate income areas."
Legal experts said they expect banks will flood the agencies with strategic plans now that they have a few models to work from.
"A number of institutions were waiting to see exactly what an approved strategic plan would look like," said Warren Traiger, a New York lawyer. "Now that there are some models out there, you should see some other banks following suit."
"Everyone is looking for a prototype," said Francis X. Grady, a partner at the Cleveland law firm of Grady & Associates. "Nobody wants to sit down and invent the wheel for the first time."
More prototypes are due. A spokeswoman said the Office of the Comptroller of the Currency will approve two plans in early January and another four in the first quarter.