Hoping to encourage community development lending, the Comptroller of the Currency today will propose reducing several restrictions on investments in community development lenders.
The agency would still require that bank investments in community development corporations, or CDCs, benefit low-income and moderate-income communities. But the corporations would have greater leeway in meeting that standard.
Investments would qualify under CRA if they provide affordable housing, create permanent jobs, provide equity to small businesses, stabilize areas slated for revitalization, or provide other needed public services.
The Comptroller's office also would abolish the five-day review period when the agency approved the same plan for another bank. Finally, it no longer would require bankers to structure the deals in a preapproved manner and it would adopt the same definition of community development as found in the revised Community Reinvestment Act rules.
"The proposed changes encourage national banks and community groups to work together by allowing them the flexibility to determine how best to structure their own partnerships in support of community development," Comptroller Eugene A. Ludwig said.
Bankers supported the proposed changes, saying they should reduce the cost of these community development initiatives.
"This really embodies how the regulators have been thinking about things," said Catherine Bessant, a senior vice president at NationsBank Corp. "That certainty is helpful to all of us."
She said bankers are realizing as they get more experience with these loans that a "very wide variety" of initiatives can best meet a community's needs.
The proposed changes would permit bankers to search for even more innovative solutions, she said.
The public has until Feb. 25 to comment.
The Comptroller's office also expected today to approve a change to another section of the community development regulation, declaring that banks no longer must reinvest profits from these investments into similar projects. Instead, the agency is encouraging bankers to reinvest.
"We are very pleased with that," said James McLaughlin, director of agency relations at the American Bankers Association. "It will encourage banks to invest in community development corporations knowing that they do not have to then reinvest the profits in future community develop corporations."