On May 20, 2020, the Office of the Comptroller of the Currency (OCC) issued a final rule (the "Final Rule") overhauling its Community Reinvestment Act (CRA) regulations. The Final Rule follows a joint notice of proposed rulemaking (NPR) issued by the OCC together with the Federal Deposit Insurance Corporation (FDIC) late last year (the "Proposed Rule"). The Board of Governors of the Federal Reserve System (FRB) declined to participate in either issuance. Since the Final Rule was issued by the OCC alone, it applies only to national banks, federal savings associations, insured federal branches and certain uninsured federal branches. The rule is effective October 1, 2020, and compliance is generally required by January 1, 2023.
By the relatively staid standards of bank regulation, the OCC's solo effort is shocking. As we wrote last year, the CRA regulations have not been updated for more than 25 years, and for all that time, OCC-, FDIC-, and FRB-regulated banks have been subject to identical CRA regulations. CRA compliance often entails significant costs, and if the OCC's Final Rule proves more bank-friendly, CRA could be a consideration for state banks contemplating conversion to a national bank. By acting alone, the OCC has shown it's willing to upset the balance among the federal banking regulators.
After not joining in the Final Rule, FDIC Chairman Jelena McWilliams said that "[w]hile the FDIC strongly supports the efforts to make the CRA rules clearer, more transparent, and less subjective, the agency is not prepared to finalize the CRA proposal at this time." Meanwhile, the OCC defends its actions by stating that the majority of CRA activities are performed by banks subject to the Final Rule. In fact, while as of June 30, 2019, OCC-chartered banks held more than 60% of total deposits, the OCC regulates only approximately 1,200 out of 5,100 insured depository institutions, leaving over 75% of all insured depository institutions subject to a different set of CRA rules.
Though compliance for OCC-chartered banks is required by January 1, 2024, the future of the Final Rule is unclear. It's possible that the unusual circumstances surrounding the rulemaking will make the Final Rule more susceptible challenges in court. Furthermore, a joint resolution to rescind the Final Rule pursuant to the Congressional Review Act was introduced on June 11, 2020. While largely symbolic now (it appears unlikely to pass in both chambers), depending on the Congressional calendar (there are timelines based on legislative days) and the outcome of the upcoming elections, the Final Rule could be nullified by the next Congress.
For a comprehensive analysis of the Final Rule, please see the attached PDF.