CRA Is Moving Again — What's Actually in the Proposal
The FDIC and OCC have a CRA proposal out. The Federal Reserve hasn't signed on. Shaun Harms joins the show to separate what's in the text from what's circulating on LinkedIn. Harms is a principal and regional sector leader over the consulting practice at Forvis Mazars, concentrated in compliance and BSA. He's about 20 years out of the graduate school and now sits on the Barret banking faculty. He also runs the quarterly compliance roundtable. His read: this is a threshold rewrite, not a rebuild. The deposit-based assessment area that drove most of the angst in the rescinded rule is gone — it's the ordinary assessment area again. What's left is a tiering change. As Harms describes the proposal, banks under $1 billion fall under the small bank test, banks from $1 to $10 billion get an easier test with no reporting, and banks above $10 billion carry on as they do now. The lending test stays the core of it. The piece he expects to cause real work is the community development side. The proposal would cap the share of a CD activity that can go to administrative and overhead costs at 15%, which means banks need documentation to prove they're under it. He calls that the politically charged part of the rule and the one thing he'd flag as genuinely new effort. Everything else on the CD test, he thinks, gets less subjective — more examples, tighter parameters, easier to support a qualification. Two things he pushes back on. First, "majority of your lending" has never meant a 50/50 ratio. He walks through Delta banks running 40% in-area ratios and examining out satisfactory, because the loan demand simply wasn't there and the data showed it. Second, the argument that relief will pull community banks out of their communities. Banks don't sponsor the Little League team for the credit; they take the credit because they were going to sponsor it anyway. Where he's honest about not knowing: what the Fed does. He'd spoken with an FDIC member the day before recording, and the answer there was the same — everyone's waiting. His advice to banks in the meantime is status quo. Nothing has changed yet, and the last time two agencies moved without the third, the industry got an unequal playing field and a do-over.
