OTS Proposal Would Add Needed Flexibility to CRA Requirements

The Office of Thrift Supervision has issued a proposal that would give large savings associations added flexibility in serving the credit needs of their communities. The proposal, which America's Community Bankers strongly supports, would provide "real regulatory relief" and important cost savings,

The proposal "provides a good alternative to the current rigid three-pronged test," ACB said. The lending test would continue to be counted for at least 50 percent of the Community Reinvestment Act requirement, but associations would have the flexibility to set the weightings of the investment and service tests.

"Providing the flexibility to determine how much weight should be assigned to the lending, investment and service tests will permit large savings associations to make choices involving the community that are based on what it needs," ACBs comment letter said. "In fact, we believe that communities will be served better because associations will tailor products and services to the particular community."

ACB supports CRAs goals, but has longstanding concerns "about the burden that is imposed by a regulatory structure that is rigid and inflexible and does not take the differences in communities into account," ACB said.

ACB also supported the proposed revision of "community development" as a way to provide greater flexibility in granting CRA credit to activities in rural communities. OTS and the other regulators were also urged to develop a nonexclusive list of activities and investments that would satisfy the community development criteria. Examples could include Habitat for Humanity projects and Federal Home Loan Bank Affordable Housing Program investments.