WASHINGTON - Federal regulators raised more questions than they answered Wednesday with a much-anticipated proposal on how banks and community groups must report the terms of Community Reinvestment Act agreements.

The 140-page proposal by the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, and Office of Thrift Supervision marks the first step in implementing the so-called CRA "sunshine" requirement in the Gramm-Leach-Bliley Act of 1999.

The controversial provisions were part of a compromise to ensure Senate Banking Committee Chairman Phil Gramm's support of the financial reform law enacted in November. They require banks and community groups to publicly disclose the terms of certain CRA-related agreements. Also, banks have to file annual reports on these agreements, and community groups must detail each year how they used the funds.

Regulators are now seeking public comment on how they should write the prescription detailing exactly what banks and community groups must do to comply with the new law, which covers written contracts for cash payments or grants exceeding $10,000 a year and loans valued at more than $50,000 a year.

"We've raised a number of issues for discussion in the proposed rule, looking for input to help us understand the various implications of the [statute]," said Ralph E. Sharpe, the OCC's deputy comptroller of community and consumer policy. "The proposed rule may evolve."

Sen. Gramm, who has threatened regulators for months not to water down the requirements, responded tentatively on Wednesday. "The Banking Committee staff is still examining the proposed regulations," his spokeswoman said. "We expect that the chairman will be satisfied if the regulations insure that meaningful information gets to the community."

Regulators predicted thousands of comments by the deadline in late July.

The agencies also asked for comment on how to define which loans or payments are CRA-related and thus trigger disclosure.

The regulators also asked if the rule should require that only CRA-related "contacts" that occur within a specified period, such as one year, before the parties entered into the covered agreement be subject to the reporting requirements.

Under the proposed rule, annual reports, which must be filed with the institution's supervisory agency each fiscal year, must include: the aggregate amount of payments, fees, and loans made or received during the fiscal year, a description of the terms and conditions of the funds provided or received, and the aggregate number of loans provided.

Banker trade groups as well as community groups expressed most concern about lack of detail in both the law and the proposed rules regarding compliance obligations.

The proposal said that community development agreements will be cancelled if a non-governmental entity, such as a community group, fails to comply with disclosure and reporting obligations. It did not say what happens if banks fail to comply.

"There are too many gray areas in the statute," said Paul A. Smith, senior counsel at the American Bankers Association. "The main thing we want to be sure of is that banks can clearly know what their reporting obligations are so they can meet the compliance obligation. I think banks are going to tend to want to over-report, but we want to make sure over-reporting itself won't be a violation. We want to be sure the final rule doesn't penalize banks for over-reporting."

"The legislation was designed to prevent secret agreements [between banks and community groups], not create more paperwork," said Robert Rowe, regulatory counsel for Independent Community Bankers. "There's a possibility that this could be very onerous."

Bankers and community groups shared concern over the proposed requirement that each party to a covered agreement make a complete copy of the agreement public upon request.

Fed Governor Edward M. Gramlich asked at the central bank's board meeting Wednesday how any confidential business information contained in CRA disclosures would be protected, if the reports are available to the public on demand.

Fed senior counsel Kieran Fallon explained that if an institution is asked to produce an agreement that contains confidential information, it will be able to submit the document to its primary regulator for a ruling on what information it can protect.

Rob Garver contributed to this article.

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