Magazine article American Banker

Activists Seek Tougher Grading of Banks' CRA Performance

Magazine article American Banker

Activists Seek Tougher Grading of Banks' CRA Performance

Article excerpt

WASHINGTON -- The Greenlining Coalition this week demanded that the banking agencies drastically overhaul the Community Reinvestment Act's rating system.

The San Francisco-based consumer advocacy group is promoting legislation that would replace the current four grades with a sixtier rating system.

Banks would be evaluated on a curve with just 45% of the industry allowed to score an average or above rating.

The breakdown would be: exceptional, limited to no more than 5% of banks; outstanding, limited to 10%; high satisfactory, limited to 30%; satisfactory; needs to improve; and noncomplaince.

The Greenlining Coalition made its pitch in a letter to the banking agencies on Wednesday. The group, which represents community activists and minority advocates, said inflated CRA grades are taking the teeth out of the reinvestment law.

"Your government stamp of approval on mediocrity debases the entire grading system," the letter states.

The Greenlining Coalition cited a study by CRA/HMDA Update, a Bethesda, Md., newsletter, that found 94% of banks examined in 1994 scored either an outstanding or satisfactory rating. In the second half of last year, it said, only five of 2,262 banks got failing grades, boosting the success rate to 99.8%.

"Imagine a university with no admission standards that routinely graduates 99.8% of its freshman class," wrote George Dean, chief executive of the Phoenix Urban League, a member of the coalition.

Sent to the Comptroller of the Currency's office, the Federal Deposit Insurance Corp. …

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