Regulators are considering requiring lenders to develop and publicize detailed community lending plans, which examiners would use as the primary measure of performance under the Community Reinvestment Act.

Under the proposal, lenders would be required to set specific targets for a variety of lending to low-income and minority residents, such as home mortgage, consumer, and small business loans. And they would be required to work with community groups in developing their plans.

Examiners would rate lenders' performance based on both the quality of the original proposal and their ability to live up to commitments.

Regulators Warming to Idea

"I personally find this kind of strategic plan attractive, at least for larger institutions," said Jonathan Fiechter, acting director of the Office of Thrift Supervision, at a hearing in New York Friday on CRA reform.

As they have toured the country holding hearings on community reinvestment during the last few weeks, regulators have grown increasingly interested in this "strategic plan" approach. It is one of several models they are considering in reforming community reinvestment laws.

On Friday, many lenders and activists expressed support for the strategic plan approach. Proponents included Allen J. Fishbein, general counsel for the Center for Community Change, Thomas M. O'Brien of the Community Bankers Association of New York State, and Anne Diedrick, community reinvestment officer at Chemical Bank.

|A Valid Measurement'

"Annual CRA strategic plans make sense as a valid measurement against which banks and examiners should evaluate performance," she said.

"In fact, it would be helpful to have such plans reviewed and approved by each bank's regulator in advance of their implementation."

Regulators are still considering less drastic reform, Under one scenario, they would merely refocus or rewrite the existing assessment factors, focusing on those gauging actual lending.

Another approach would be-providing a list of "acceptable" activities banks could use in designing community strategies. Models of outstanding performance for different types of institutions could be provided.

Still others have put forth a two-tiered approach. If banks met a list of basic criteria: size. location, and low-income lending levels, for example, they would automatically be assured satisfactory ratings, and could be exempted from further scrutiny and documentation burden.

On Friday, Comptroller of the Currency Eugene Ludwig stressed that in their search for a better Community Reinvestment Act, the regulators want to encourage good behavior.

|Safe Harbor' Unlikely

"One incentive might be to allow banks to offer insurance products from their branches in the inner city," he said.

But the one incentive banks really want appears to be off the table. Bankers have lobbied for a "safe harbor," exempting them from community, protests if they have outstanding ratings.

But regulators have sided with community groups, who have told them that no reform will be credible if this special exemption is a part of the final plan.

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