New Community Reinvestment Act (CRA) Rule will leave 90% of OCC-regulated institutions without important Performance Context information

If you are an OCC-regulated institution and are not classified as a large bank under the new Community Reinvestment Act (CRA) regulations you may be breathing a sigh of relief. But don't be too relieved because the provisions in the new rule have very important and very bad implications for you too.

We know that as of March 31, 2020 there were 1,125 institutions regulated by the OCC. We also know that under the new definition (assets greater than $2.5 billion) of a "large bank" only 117 of those lenders are subject to the new CRA tests and reporting. The remaining 1,008 (90%) of you may think you just dodged a bullet. But there is a particular very important negative consequence for the remaining 90% (aside from the geocoding of your domestic deposits and the new Assessment Area rules).

CRA performance is driven by "performance context" and one of the benchmarks used to measure and rate your performance is based on the performance of other lenders active in your market. If you extend 20% of your small business loans in your Assessment Area LMI tracts examiners will match that against the average LMI tract "penetration" rate exhibited by all reporting lenders in your market. But only 10% of OCC-regulated banks will be reporting and the data will not be compatible with the data that will be applied to your performance.

Under the new Rule you will be tested using current tests which are very different from the new tests imposed on "Large Banks" under the new Rule. This means the potential loss of important CRA "performance context" data that helped you (and examiners) evaluate your performance. The only data that will be compatible with your exam standards will be the data that is reported by the lenders regulated by the FDIC and the Fed.

The result will be more ambiguity regarding your performance. This is just the opposite of the expressed goals of the new Rule.