The New York State Banking Department will continue to press for an overhaul of the state's Community Reinvestment Act, according to Derrick Cephas, who resigned as superintendent of banking two weeks ago.
In an interview in his new office at the Wall Street law firm Cadwalader, Wickersham & Taft, where he is now a partner, Mr. Cephas said he believed that CRA reform at the federal level would come "within the next two sessions of Congress."
"There will be a significant CRA reform; it's so clearly necessary," he said.
Despite that, Mr. Cephas said, he believes New York will continue to press its own proposal. The state put its efforts on hold last year, while federal regulators worked on their CRA reform proposal. But broad-based industry criticism has stalled the process at the both levels.
Now, federal regulators say they may test their proposals to see how they would affect the CRA ratings of some real banks, before a new plan is made final. Going through this "dry run" would delay new rules.
Mr. Cephas' resignation may have been perceived as a setback to CRA reform at the state level, since he was its most visible proponent. But a Banking Department spokeswoman said that Mr. Cephas' temporary replacement, Carmine Tenga, would review the proposal and press forward with it.
The state could revisit its proposal by late summer, the spokeswoman said.
Chemical Banking Corp. is not happy with the state proposal, which would replace subjective measures with a formula that compares the dollar amount of CRA-related loans to total deposits. "That's not a fair measurement," said Chemical president Edward D. Miller. "The process must be simplified."
Although Chemical managing director Carol Parry cited Mr. Cephas' key role in pushing for New York's CRA reform, she said his resignation would not hold it up altogether.
Mr. Cephas, who will be paid a six-figure salary in his new private-sector job, compared with the $87,338 he earned annually as banking superintendent, said he believes the states have an important role to play in regulation. "The regulatory process is so cumbersome; it always needs someone to act as a catalyst."
Mr. Cephas said he chose his new law firm because of its extensive banking practice, and because three colleagues from Breed Abbott - the law firm where he practiced before he became superintendent - had moved there.