Even if you don't use the strategic plan option or are examined by FDIC or FRB you should read this
At first glance most bankers would think that the OCC’s proposed simplified CRA strategic plan process would not be of interest because either they are banks not regulated by the OCC or they have no intention of using the strategic plan alternative for their CRA responsibilities. That would be a mistake because the proposal contains 67 specific quantitative performance measurements for community development lending, investing and servicing for community banks. These proposed community development tests, standards and equivalent performance ratings are the only specific quantitative performance ratings ever published by the prudential bank regulators and therefore provide valuable insights for CRA professionals as they self-evaluate their institution’s CRA performance and/or set CRA performance goals.
The proposed performance ratings are called “elective goals” in the proposal. The 67 different goals and their calculations are based mostly on a ratio to Tier 1 capital or a percentage of bank assets. The proposal suggests different goals based on the size of the institution with higher expectations for larger, more sophisticated banks.
A good example may be found in the community development investment test for which the agency suggests 0.25% of Tier 1 capital per year for smaller banks that rely more on “high impact” investments such as donations. This compares to a goal of 3% of Tier 1 capital per year for larger, more complex community banks.
Another example can be seen in the services test for which the agency suggests 2 hours of CD services volunteer time per full-time employee per year for a satisfactory rating and 4 hours of such time for an outstanding performance rating.
Clear and specific goals for community development activities such as the foregoing have never been published let alone proposed by the prudential bank regulators and that’s why every CRA professional should read the OCC’s proposal even if they don’t report to the OCC and even if they don’t intend to adopt a CRA strategic plan.
To be sure, the agency does state that the elective goals are deigned for use in the simplified strategic plan process for community banks only and that the elective goals should not be considered as benchmarks for “Satisfactory” or “Outstanding” CRA performance outside the simplified strategic plan process. But at the same time, the agency states, “the OCC is proposing elective goals that are consistent with the performance measures and performance levels that the agency historically has expected of community banks with ‘Satisfactory’ or ‘Outstanding’ ratings”.
I know this, as we advise our clients about their CRA performance we intend to reference the OCC’s proposed measures and performance levels for “Satisfactory” and “Outstanding” community development performance ratings. This is particularly true in light of the agency’s admission that the proposed standards and ratings reflect their historical experience.
As the old saying goes, “Something is better than nothing.” And with no other official community development performance references the OCC’s proposal is as good as it gets. Wise CRA officers will take advantage of this golden opportunity and the insights it provides.
