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http://www.clev.frb.org/ccca/crarules.htm Last modified 6/28/96
Flexibility, common sense and, above all, an emphasis on performance over process are the
hallmarks of the new Community Reinvestment Act (CRA) regulation.
That was the message Robert Frierson, assistant general counsel of the Federal Reserve System's Board of Governors, and Malloy Harris, national bank examiner in the office of the Comptroller of the Currency (OCC), delivered to participants at the Federal Reserve Bank of Cleveland's Annual Community Reinvestment Forum.
The new CRA rules, announced last year, attempt to strike a balance between two seemingly contradictory goals. According to Frierson and Harris, these are "the necessity of making CRA evaluations more objective, consistent, and understandable to all interested parties, versus the goal of reducing the reporting and paperwork burden on the institution."
In his presentation, Frierson summarized the significant changes to the Community Reinvestment Act. Among these is the concept that "one size does not fit all" when it comes to assessing an institution's performance. "Institutions are no longer evaluated on the basis of a single test, but are subject to different methods of analysis depending on their size and operating characteristics," Frierson explained.
Another change is allowing institutions to adopt, and be evaluated on, a strategic plan for community reinvestment. This development has been welcomed by many institutions, noted Harris, since "it permits them to know in advance what it takes to get a satisfactory or an outstanding CRA rating."
The strategic plan allows for another important change to the regulation: public input. "The strategic plan option attempts to put everyone into the same room and present all the issues to the regulator before committing to a plan of action," Frierson said.
Regarding examination procedures, Harris emphasized that new rules give examiners much more leeway to exercise judgment in evaluating an institution's CRA performance. "One of the fundamental instructions examiners are given is to use common sense. The changes to CRA assume that examiner judgment is a good thing."
All four regulatory agencies participated in intensive training last fall. Reducing the paperwork burden, particularly for smaller institutions, was stressed as an important benefit of the new examination procedures. "Wherever possible, we seek to minimize the amount of paperwork involved for institutions, and to lessen the disruption to their real work of getting loans to the people who need them," he said.
For a more complete description of the new CRA regulation, see the Summer 1995 issue of CR Forum.
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