24 Nov OCC – OCC Proposes Rule Regarding the CRA General Performance Standards
November 24, 2020
Setting Benchmarks, Thresholds, and Minimums
Proposed to establish benchmarks, thresholds, and minimums corresponding to the proportion of banks that would have received a hypothetical outstanding, satisfactory CRA rating that is no greater than the historical proportion of banks that have received these ratings. Evaluation measures and CD minimum calculations for each bank’s assessment areas would be calculated, as well as a bank-level calculation of these areas for each bank. For each major retail lending product line, a numerator used in determining each bank’s retail lending distribution test ratios for each bank’s assessment area to be calculated. Data from Census and Dun and Bradstreet files of businesses would then be combined.
Demographic comparator under the borrower, geographic distribution tests calculated. Information collected from all banks subject to the general performance standards to calculate peer comparator of the borrower, geographic distribution tests would be used. Bank’s numerators under borrower, geographic distribution tests divided by applicable demographic and peer comparators to calculate retail lending distribution test ratios. Calculations result in bank-level CRA evaluation measure and CD minimum calculation, as well as assessment area-level distributions of the CRA evaluation measure, CD minimum calculation, as well as the borrower and geographic distribution test ratios.
OCC Use of Calculations
Possible combinations of benchmark, threshold, and minimum values would be examined. For each set, OCC would iteratively calculate the proportion of assessment areas that pass. The proportion that would meet or exceed benchmarks would be subsequently determined. Results would further be compared to the historical proportion of outstanding ratings. More criteria considered if multiple combinations result in a similar proportion that passes. To maintain flexibility, OCC would not require any values to be similar to each other.
Treating CRA Performance Declines
Proposed to amend 12 CFR 25.16 of 2020 final rule related to performance context. Banks, whose performance precipitously decreases by 10% or more without an adequate explanation, risk having their assigned ratings adversely impacted. Applicable to banks without adequate explanation underperformance context criteria. NPR contained various technical, clarifying, conforming amendments under 12 CFR 25.
Comments must be submitted in 60 days from pending publication in Federal Register.
For more information, visit www.occ.treas.gov.