Magazine article American Banker

Draft CRA Exam Guides Seen Failing to Cut Red Tape

Magazine article American Banker

Draft CRA Exam Guides Seen Failing to Cut Red Tape

Article excerpt

Draft guidelines for examiners fall far short of delivering the relief from paperwork that bankers had expected under new Community Reinvestment Act rules.

Bankers who have seen the draft - the regulators have not publicly released it - said it appears that all the agencies have done is incorporate the existing 12 assessment factors into tests for lending, service, and investment.

"Nothing has changed," one banker said. "We are not out of the 'needs assessment' business."

But Steve Steinbrink, a top official at the Office of the Comptroller of the Currency, said the draft exams will be improved.

"Just like all procedures, we tested them, found some flaws, and we're correcting them," said Mr. Steinbrink, who is a senior deputy comptroller. "It is our intention and goal to reduce the burden on banks during a CRA exam and we expect to achieve that goal."

The regulators did deliver on several promises. The draft rules are brief - only 30 pages, including attachments. They also are clear and easy to read.

However, bankers are worried about how examiners will use new grids with ratings across the top and performance factors down the sides designed to measure performance under the lending, service, and investment tests.

For example, in the lending grid examiners must grade a bank's responsiveness to the credit needs of the community. These bankers, who requested anonymity, said the grid doesn't measure actual lending. Rather, they said, it rewards banks that create reams of paperwork showing what they have done to respond to the community's needs.

The draft examination procedures, obtained by American Banker last week, still must be approved by the four banking and thrift agencies.

The regulators spent nearly two years rewriting the CRA rules, which require financial institutions to serve their entire communities. …

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