United States

OCC issues bulletin clarifying Community Reinvestment Act


The Office of the Comptroller of the Currency (OCC) has committed to modernizing the Community Reinvestment Act (CRA). While its modernization efforts are ongoing, it issued a bulletin on June 15, 2018, to clarify its supervisory policies and procedures regarding how examiners evaluate and communicate bank performance under CRA in order to promote the consistency and effectiveness of CRA evaluations. The policy clarifications apply to all OCC-supervised banks subject to CRA regardless of bank asset size or CRA evaluation type. Effective June 1, 2018, the OCC rescinded its previous “Large Bank CRA Examiner Guidance” issued on Dec. 29, 2000, and transmitted publically by OCC Bulletin 2000-35.

The OCC communicated the clarifications to its examiners on May 2, 2017, when they became effective. The policy clarifications address:

  • Implementation of full-scope and limited-scope reviews
  • Consideration of activities that promote economic development
  • Use of demographic, aggregate and market share data
  • Evaluation of the borrower distribution of loans outside bank assessment areas (AA)
  • Evaluation frequency and timing
  • CRA performance evaluation period
  • Evaluation of home mortgage loans

Standard processes clarifications related to CRA evaluations addressed:

  • The type of information considered and presented in the written performance evaluation and the process for sharing CRA evaluation data and ratings with OCC-supervised banks
  • Factors considered when evaluating bank performance under small and large bank lending tests
  • Branch distribution when concluding on the availability and effectiveness of bank systems for delivering retail banking services to low- and middle-income (LMI) geographies and residents
  • Internal and external performance context factors
  • Consideration of CRA plans imposed as conditions of approval of corporate applications in the evaluation process


Full-scope and limited-scope reviews

During a CRA evaluation, each bank’s AA is reviewed according to interagency examination procedures under either full-scope or limited-scope procedures. A full-scope procedure requires analysis of both quantitative and qualitative data. A limited-scope procedure focuses primarily on quantitative data with consideration of qualitative data that is generally limited to demographic and competitive comparators.

When a bank has multiple AAs within a single state, at least one AA will be evaluated using full-scope procedures, while the remaining AAs within that state may be reviewed using full-scope or limited-scope procedures. More than one AA may be selected for a full-scope review, when an examiner feels it’s appropriate, but an examiner is not required to select all AAs that meet the selection criteria. An AA may not be subject to a full-scope review for multiple or consecutive evaluations.

Selecting areas for full-scope review

The OCC applies a comprehensive approach to selecting AAs for full-scope review using a variety of factors including whether an AA represents a significant portion of total industry activity relative to deposit or loan market shares.  Under interagency examination procedures, considerations include:

  • The bank’s lending, investment and service activity in each AA, as applicable
  • Lending, investment and service needs and opportunities in each AA, as applicable
  • The number of banks in each AA and the importance of the examined bank to serving each of those AAs, particularly when relatively few financial services providers operate in the AA
  • The existence of any apparent anomalies in reported CRA or Home Mortgage Disclosure Act (HMDA) data for any particular AA
  • The length of time since each AA was reviewed under full-scope procedures
  • The bank’s previous CRA performance in different AAs
  • Examiner’s knowledge of the same or similar AAs
  • Issues raised in CRA evaluations of other banks and prior community contacts in the bank’s AA or similar AAs
  • Public comments about the bank’s performance in specific AAs

Activities that promote economic development

Bank activities that promote economic development may be considered to support Community Development, under CRA regulations, if those activities meet both a size and a purpose test. The size test refers to size eligibility requirements in the CRA regulations.

The purpose test explains the phrase “promote economic development” and is intended to ensure a bank’s lending, investment and service activities have a community development purpose. Those that qualify help to create, retain and/or improve jobs for LMI individuals, in LMI geographies, or in areas targeted for redevelopment by federal, state, local or tribal governments because they promote economic development.

For job retention, the OCC considers a loan, investment or service as helping or retaining jobs if a bank can demonstrate that the jobs retained were at risk of loss.

Use of demographic, aggregate and market share data

For HMDA reporting banks, the OCC compares the bank’s lending distributions to demographic data and aggregate data under the applicable lending test. Aggregate data includes loans originated or purchased by lenders that report under HMDA and/or are subject to CRA small business/small farm reporting requirements. The OCC also compares a non-HMDA reporting bank’s lending distributions to aggregate HMDA data in addition to comparing the bank’s data to demographic data. For large bank lending activity criteria, the OCC uses a bank’s market share and market rank data to evaluate the adequacy of performance.

Evaluating borrower distribution of loans outside bank AAs

In evaluating borrower distribution of loans outside a bank’s AA the OCC evaluates lending state by state and compares the level of bank lending to statewide demographic comparators. This evaluation does not need to include all states where the bank originated or purchased loans. Examiner will select states for evaluation where the level of bank lending is sufficient to conduct a meaningful analysis of borrower distribution.

As long as a bank has adequately addressed the needs of borrowers within its AA, an examiner may consider the borrower distribution of loans originated or purchased outside a bank’s AA. However, lending to LMI persons and small business and small farms outside a bank’s AA does not compensate for poor lending performance within the bank’s AA.

Performance evaluation frequency and timing

CRA performance evaluation frequency and timing is governed by OCC policy, subject to limitations for smaller banks.

For banks with total assets of more than $250 million, OCC policy requires performance evaluations every 36 to 48 months, generally.  Under the Gramm-Leach-Bliley Act of 1999 the OCC may conduct a CRA performance evaluation for banks with assets of $250 million or less no sooner than 48 months after the previous evaluation for banks with a satisfactory CRA rating and no sooner than 60 months for banks with an outstanding CRA rating.

Banks with less than 30 rating areas at previous CRA evaluation are subject to a 36 month cycle.  Banks with 30 more rating areas at the previous CRA evaluation are subject to a 48 month cycle. A rating area is assessment area with quantitative and qualitative data. Expectations regarding a de novo bank’s obligations to help meet the credit needs of its community are established in the chartering process.

For the first evaluation after implementation of the revised policy, the previous evaluation start date will correspond to the date shown on the title page of the bank’s previous performance evaluation. The examination start date will be based on the start date cited in the request letter to the bank.

CRA performance evaluation period

OCC policy provides that examiners will consider retail and community development activities in full calendar year increments, regardless of bank size. For small and intermediate small banks, the evaluation period is expanded to three full calendar years.  For large banks, the evaluation period is each full calendar year starting with the end date of the previous CRA evaluation.

Evaluating home mortgage loans

CRA regulations require evaluation of a bank’s record of helping to meet the credit needs of its AA through its lending activities by considering a bank’s home mortgage lending as defined under HMDA, whether or not the bank is an HMDA reporter, among other things.  The OCC evaluates performance and bases performance evaluation conclusions on home mortgage lending in the aggregate and examiners should consider and address any significant differences in the bank’s lending record among the different types of home mortgage loans in evaluating performance.

Consideration of performance context in evaluation process

Performance context information is included in the description of the institution, the description of the bank’s operations in the state or multistate MSA, and in narrative comments supporting conclusions on performance in full-scope areas. The OCC will include identified performance context factors into discussions regarding bank performance throughout the performance evaluation, when applicable. Performance context is a broad range of economic, demographic, and bank- and community-specific information that an examiner reviews to understand how a bank’s record of performance should be evaluated.

Consideration of ending activity in the overall large bank lending test rating

Loan volume, in combination with other factors, is considered when evaluating a large bank under the lending activity performance criteria. Good or excellent loan volume cannot compensate for lack of lending in LMI geographies or to LMI borrowers.

Comparing bank performance to demographic factors

When assessing a bank’s performance relative to defined demographic factors, the OCC begins with the base quantitative analysis described in the interagency CRA examination procedures and consideration of:

  • Loan distributions in the context of lending volume; when volume is limited, examiners will assess whether the distribution suggests a willingness or unwillingness to lend to LMI segments
  • The actual number of owner-occupied housing units in each geography; examiners also determine whether the bank makes loans to investors (non-owner-occupant borrowers) as well as owner-occupant borrowers in considering the opportunities to lend across geographies of different incomes
  • High rates of poverty as it may indicate fewer opportunities to lend to LMI borrowers; poverty level data does not automatically explain poor borrower distribution of home mortgage loans

Branch proximity

The large bank service test includes an evaluation of the availability and effectiveness of a bank’s systems for delivering retail banking services including the distribution of the bank’s branches among low, moderate, middle and upper income geographies. A branch outside an LMI geography that the bank believes serves the needs of the LMI area residents must be supported by evidence showing that the branch actually serves customers in the LMI area.

Communication with OCC supervised banks

During the course of the performance evaluation, the OCC will provide the following to the bank:

  • Performance evaluation data tables
  • Description of the institution
  • Descriptions of operation in each rating area
  • Scope of the evaluation
  • Community profiles for full-scope areas

Imposed as conditions for approval of corporate applications

Periodically, the OCC has conditioned approval of a corporate application on the bank establishing a CRA plan with established goals based on performance criteria to address identified deficiencies in CRA performance. The OCC may consider performance context factors related to the bank’s ability to meet plan goals, such as dramatic shifts in economic conditions as well as results of performance related to the CRA plan under each applicable test when assessing overall CRA performance.

Use of benchmark or thresholds

The OCC considers the environment the bank operated in during the evaluation period when assessing and concluding on a bank’s performance.  Examiners may use demographic data or other comparisons when assessing bank performance and should not apply standardized, artificial benchmarks that fail to account for activities that are responsive to credit and community development needs and opportunities.

Presenting performance at the MSA or combined statistical area level

OCC performance evaluation tables present data and narrative comments that address performance at the MSA level when a bank has defined two or more metropolitan divisions as separate AAs within the same MSA or multistate MSA.  Examiners are now permitted to include tables in the performance evaluation setting forth data at the metropolitan division level, if the examiner performs the data analysis and concludes on performance at the metropolitan division level.

For more information, please see OCC Bulletin Clarifying CRA.