Top U.S. banking regulators on Tuesday said they would work jointly to modernize rules governing how banks lend hundreds of billions of dollars annually in lower-income communities.
At a time when many banking services have moved online, regulators have been trying to forge a consensus for updating rules from a law enacted more than 40 years ago when banking largely took place at physical branches.
The Office of the Comptroller of the Currency, which oversees national banks and the bulk of the activity under the low-income lending rules, said it would propose withdrawing controversial changes it pushed through last year without the support of the Federal Reserve and the Federal Deposit Insurance Corp., two other bank regulators responsible for overseeing the Community Reinvestment Act.
“While the OCC deserves credit for taking action to modernize the CRA through adoption of the 2020 rule, upon review I believe it was a false start,” Acting Comptroller Michael Hsu said in a statement Tuesday.
The CRA is one of the major tools the government uses to encourage banks to lend more to low- and moderate-income communities. The revamp comes at a time when the Biden administration has pledged to do more to address disparities in wealth, incomes and access to financial services among Blacks and other racial groups.
In a separate statement, all three regulators said they plan to jointly modernize the rules in question. A formal joint proposal isn’t expected for several more months, likely not until 2022, people familiar with the matter said.
“Joint agency action will best achieve a consistent, modernized framework across all banks to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods,” the agencies said in the statement. The Wall Street Journal reported earlier Tuesday on the joint approach.
The Consumer Bankers Association, an industry group that has pushed regulators to overhaul CRA, welcomed Tuesday’s joint statement. “Any modernized CRA rule should be transparent, flexible and consistent across regulators to ensure banks are able to optimize support for the communities they serve,” said Richard Hunt, the group’s president and chief executive.
Banks are evaluated on compliance with the CRA based on a complex formula that includes loans to home buyers and small businesses as well as the…