Breaking Down CRA Exams
Jan 22, 2015
Breaking Down CRA Exams
Breaking Down the CRA ExamJosh Silver, Vice President of Research and Policy, NCRCApril 20, 2012
Breaking Down the CRA Exam
• Federal Reserve Board http://www.federalreserve.gov
• Federal Deposit Insurance Corporation http://www.fdic.gov
• Office of Thrift Supervision (ceased operations but still has exams on wepbage) http://www.ots.treas.gov
• Office of the Comptroller of the Currency http://occ.gov
• Federal Financial Institutions Examination Council http://www.ffiec.gov
Federal Agencies Conducting CRA Exams
Breaking Down the CRA Exam
• CRA exams scrutinize banks about once every two years for banks or thrifts with assets > $250 million. Once every four or five years for small banks with assets < $250 million
• Banks and thrifts receive one of four grades: Outstanding, Satisfactory, Needs-to-Improve, and Substantial Non-Compliance
• Possible Low- and High-Satisfactory Ratings for component tests and geographical areas
CRA Exams: Frequency & Ratings
Breaking Down the CRA Exam
• Every 3 months, the federal agencies publish a schedule of CRA exams. • Obtain the schedule from the federal agency websites or from NCRC.
• Locate regional office of agency conducting CRA exam – NCRC can help
How to Find Out About CRA Exams
Breaking Down the CRA Exam
• Less than $250 million
• Lending test only • Five factors including responses to public complaints
• No reporting of CRA data on small business or community development lending
Small Banks
Breaking Down the CRA Exam
• Banks and thrifts with assets between $250 million and $1 billion.
• Lending and community development (CD) test.
• Not required to report CRA data on small business or farm lending
Intermediate Small Banks
Breaking Down the CRA Exam
• Large bank exam – banks with assets above $1 billion
• Lending, investment, and service test.
• Large banks must report CRA small business, farm and CD loan data.
Large Bank CRA Exams
Breaking Down the CRA Exam
• Community Development Test
• Strategic Plan – in lieu of regular exam, mostly used by non-retail banks
Exams for Wholesale and Limited Purpose Banks
Breaking Down the CRA Exam
• Assessment Areas – Make sure do not exclude LMI areas
• Affiliates – Bank can choose to include/exclude affiliates
• Performance context – make sure examiners adequately asses needs; don’t excuse poor performance on poverty rates, or lack of investment opportunities
Parameters for CRA Exams
Breaking Down the CRA Exam
• Do the measures fairly and rigorously measure performance?
• Lending Test – Bank’s percent of loans to LMI compared to all lenders, as a group. Consistently above or below? OCC – Market share analysis – Bank’s share of loans in LMI market compared to bank’s overall market share
• Investment Test – investments to Tier 1 capital or assets; in addition to quantitative measures, are investments innovative or responsive
• Service Test – any quantitative information on number of bank accounts; percent of branches in LMI neighborhoods compared to peers or demographics?
Performance Measures
Breaking Down the CRA Exam
• Excellent - corresponds to Outstanding
• Good – corresponds to High Satisfactory
• Adequate – corresponds Low Satisfactory
• Poor – corresponds to Needs to Improve
• Very poor – corresponds to Substantial Noncompliance
Words Used by Examiners
Breaking Down the CRA Exam
• CRA has leveraged trillions of dollars in loans, investments, and services since 1977; studies have demonstrated positive impact in increasing safe and sound loans and investments: Federal Reserve, Harvard University, NCRC
• Comments on CRA exams can influence ratings overall or in one or more geographical areas or component tests; lower ratings on any of the exam components are motivation for banks to improve
• Merger application process – more likely bank will make reforms or make a specific pledge if members of public comment; $180 billion Capital One pledge, for example.
• On-going discussions with bank CRA officials in your community
Why Being Active on CRA Exams is Important
THANK YOU!
To follow up with the speaker:
Josh Silver, Vice President of Research and PolicyNational Community Reinvestment Coalition202-464-2708 or [email protected]
Presentations will be available at www.ncrc.org/conference by April 30, 2012