OCC Issues Guidance on the Effect of CRA Ratings on Licensing Applications

The Office of the Comptroller of the Currency (OCC) recently issued new guidance on how less-than-satisfactory ratings under the Community Reinvestment Act (CRA) will affect certain bank licensing applications.

The CRA is a federal statute which is designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.  The OCC’s regulations require that it consider a bank’s CRA rating when evaluating an application for branch establishment, branch relocation, main or home office relocation, certain filings under the Bank Merger Act, conversion from state to federal charters, and conversion between federal charters.  Performance under the CRA is one factor which affects whether the OCC will grant or deny an application.

The new guidance provides that where a bank has an overall satisfactory or better CRA rating, but a less-than-satisfactory CRA rating in one or more geographic rating areas, the general presumption is that the CRA consideration is consistent with approval of the covered application, although the specific facts of a particular transaction can affect the analysis.

The guidance further provides that where a bank has an overall less-than-satisfactory CRA rating, the application will be subject to enhanced scrutiny.  Among other things, the bank will need to provide information on how it intends to meet its CRA objectives in connection with the proposed application and must explain how approval of the application will allow the bank to improve its CRA performance.  The OCC will generally find that CRA consideration is consistent with approval of an application if the bank demonstrates that approval, subject to conditions or otherwise, would help the bank to achieve its CRA objectives and would further the public policy goals of the CRA.  The OCC will also consider issues such as the specific facts and circumstances which led to the rating, prior progress in improving its CRA rating, and how approval of the application will affect the communities served by the bank.