Magazine article American Banker

Savy Use of Data Bases Can Supercharge CRA Lending

Magazine article American Banker

Savy Use of Data Bases Can Supercharge CRA Lending

Article excerpt

A marketing war now getting under way for loans in low-income and moderate-income neighborhoods will have major strategic implications for banks with more than $250 million of assets.

A bank's performance in such communities could determine its ability to merge, acquire, or open new branches.

Under the new regulatory guidelines proposed by the Clinton administration, banks whose market share of reported loans in such areas significantly exceed their market share in their general trading areas would receive "outstanding" ratings.

Banks with roughly comparable market shares in poorer areas and overall would be deemed "satisfactory," and those with lower shares in poorer areas would get less than satisfactory ratings.

|LMI Trading Areas'

If the regulations are implemented as proposed, the first area of contention will be defining the battlefield -- that is a bank's "low" and moderate-in-come," or LMI, trading areas.

What happens when the bank's market share in its LMI trading area is significantly below its share in its general trading area.

Under the current interpretation of Community Reinvestment Act guidelines, banks need only show best efforts to attract business. But under the new guidelines, only results will count; the pressure on banks either to maintain or increase market shares in poorer areas will become intense.

As in any battle, the army that has superior technology in weaponry has the better odds of winning. New technology will play a key role in CRA lending efforts and the monitoring of the results. …

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