The impact of the "new and improved" Community Reinvestment Act won't be felt right away. in fact, the jury may be out longer than the one in judge Ito's courtroom.
As issued by the banking regulators in late April, the new CRA won't become effective until Jan. 1, 1996 - and even then, only for "small" institutions and those electing to be evaluated by a strategic community reinvestment plan (one of the examination options). It's an optional date for wholesale and limited-purpose banks. And for "large retail financial institutions" - a NationsBank Corp. or BankAmerica Corp., say - the implementation date won't be until July 1, 1997, unless they have collected the appropriate data and "elect" to be examined before then.
As most bankers who follow CRA know by now, the latest rules - amended significantly from the widely-disparaged December 1993 draft - omit a previously stipulated requirement for collection of race and gender data for small businesses and small farm loan customers. They also permit banks with less than $250 million in assets to choose the "small bank option" for streamlined exams, provided the bank isn't part of a holding company with more than $1 billion in assets.
In this option, a bank will get a satisfactory rating if it meets five basic tests, among them having a reasonable loan-to-deposit ratio, making most of its loans in its deposit area and having a reasonable geographic and socio-economic loan distribution.
Wholesale and special-purpose banks may gravitate toward the strategic plan option, in which they could establish goals in conjunction with local community groups. Canadian Imperial Bank of Commerce, a wholesale bank that has garnered outstanding ratings in recent years from the FDIC, says it is looking at this option. "We think the changes (to CRA) offer us an opportunity to be acknowledged as different, and assessed and measured differently, and we think we can do well," says Fritz Kopeinig, vice president, USA/community relations.
The new law triggered almost 14,000 comment letters to the agencies, a record for any regulation. Its basic three-part exam - consisting of a lending test, investment test and service test-will need rigorous field-testing, and its use of vague measurement terms like "significant" and "adequate" is making bankers uneasy. "The regulation will continue to permit the use of market share analysis by examiners, which is highly problematic," says Joe Belew, president of the Consumer Bankers Association.
The regulators did not bend to bank trade groups' importuning for a "safe harbor" - a waiver from challenges by community groups and an expedited approval process for applications by institutions with consecutive "outstanding" ratings. And if recent bank merger applications are any guide, community groups are as vocal as ever about forcing acquiring banks to prove they have solid lending records.
SELDOM IS HE HEARD
Haven't read much about Rep. Henry Gonzalez lately, have you? The erstwhile House Banking Committee chairman, who became the ranking minority member with the start of the new Congress in January, isn't making much news these days.
That's a far cry from the years the San Antonio Democrat spent holding hearings about banks' community investment records and service offerings for the poor, and berating the Federal Reserve Board, a favorite target in diatribes dating back to the '60s. Rep. Jim Leach and the Republican agenda hold sway now, but Congressional observers say Gonzalez' lack of visibility also stems from his wife's serious illness, and that he's been traveling back to his native Texas repeatedly to see her.
One lobbyist, however, insists that Gonzalez is simply "in a funk because of the election and the situation that he finds himself in. It's odd, in a way, because I always thought of him as being comfortable as an underdog." Says another long-time Congress watcher: "I've heard several people say he simply doesn't know how to function in the minority."
That wouldn't seem unreasonable: Until this year, "Henry B.," as he's known in Texas, has been in the House majority his entire career, which began in 1962. It's hard for the leopard to change his spots.