Bankers Assess the New CRA Rules

More than two years when President Clinton ordered regulators to revamp Community Reinvestment Act regulations, it was hard to fault intent. President wanted regulators to stress not paperwork. when regulators completed their first proposed revamp of rules in late 1993, echoes of initial applause had long died. Bankers regarded agencies' first shot as virtual credit allocation. When regulators went back to work and issued another revision, reaction wasn't much friendlier. Some bankers even suggested that Washington abandon effort and leave things as they had been. So regulators returned to their desks again, and in April issued their final rewrite as final regulation. This time, an ABA Banking Journal roundup of banker opinion indicates, Washington came up with something that, in general, bankers say they can live Improvement? A definite maybe Richard P. Morthland speaks for many of his fellow bankers when he makes this assessment of final rule: It's a lot better deal than we could have been stuck with. While some bankers are even a bit more enthusiastic, most interviewed fall in line with Morthland, who is president CEO of $300 million-assets Peoples Bank & Trust Co., Selma, Ala. On other hand, not everyone is so sanguine. Saying 'It could have been worse' doesn't mean it's necessarily better, says Jeanine Catalano, a Secura Group partner based in San Francisco. The new CRA is better than old one, but it's not simple and it's not objective, observes Jo Ann S. Barefoot, contributing editor to this magazine and president, Barefoot, Marrinan & Associates, Inc., Columbus, Ohio. Indeed, among bankers, there are notes of disappointment here and there. We had hoped there would be a safe harbor for 'Outstanding' banks, says Don Mullane, executive vice-president, Bank of America. Overall, new CRA isn't going to save us a lot, says Stephen A. Kase, general counsel and compliance officer at $285 million-assets Baylake Bank, Sturgeon Bay, Wis. Kase, much like other bankers surveyed, explains that much of minutiae eliminated from CRA process by new regulations entails steps bank would be taking in administering its CRA efforts anyway. We also see some added burdens, due to increased reporting requirements, says Kase. Fresh from a speech about new regulations, community banker Kate S. Barr, chair of ABA's Compliance Committee, reports an audience very much divided by degree of compliance demanded. Small-town banks were very much looking to get out from under documentation entirely, says Barr, who is senior vice-president at $150 million-assets Riverside Bank, Minneapolis, Minn. However, those banks that are closer to $250 million in size or from large communities are going to have a hard time letting go of all systems they've built up. Here and there, some bankers are looking on optimistic side of things. Take NBD Bancorp's Chris Snow, CRA/compliance officer: It's true we have new paperwork requirements in form of reports on small business and small farm lending, but that's all automated, versus collecting memos and figures from meetings outside bank. I've got eight file drawers filled with stuff I won't be sorry to see go. Others see increased focus on small business loans as a positive. It will reduce CRA dominance of housing credit, says consultant Jo Ann S. Barefoot. Generally, there's been positive feeling about rule, says consultant Lucy H. Griffin of Compliance Management Services, Falls Church, Va. But three years from now, that will be real test. Some specific concerns As in many other compliance changes, bankers are looking for the devil in details and some think they have found it. Here is a small sampling of questions and concerns that bankers and consultants are speaking about: Performance context--An institution's performance under tests and standards in rule is judged in context of information about institution, its community, its competitors, and its peers, states a preamble to new regulations. …