FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, U.S., April 26, 2020. REUTERS/Jeenah Moon
WASHINGTON (Reuters) – A U.S. banking regulator announced on Wednesday it had finalized work on a long-running effort to change community lending standards for banks.
The new rule from the Office of the Comptroller of the Currency (OCC) is an update to requirements stemming from the 1977 Community Reinvestment Act, which requires banks to support lower-income borrowers and their communities, and for regulators to grade them on that effort.
The new rule, which does not take full effect until 2024, was a top priority for the OCC’s chief, Joseph Otting. A former bank executive, Otting came to the job vowing to overhaul the rules, which were last updated in 1995. Multiple media reports said that Otting plans to soon step down from the post where he has served since 2017. An OCC spokesman declined to comment on the matter.
However, the overall fate of the rule is unclear. The OCC is one of three regulators responsible for enforcing the rule, alongside the Federal Deposit Insurance Corporation and Federal Reserve. Neither regulator joined the OCC in adopting the new rules on Wednesday, and the U.S. central bank has yet to even propose any changes.
Regulators with joint responsibility over a set of rules typically strive to adopt a consistent standard. But banks now will be split in terms of rules they must follow, depending on which regulator is in charge of overseeing them directly.
FDIC Chairman Jelena McWilliams said the agency was not prepared to similarly complete its rule rewrite, adding that smaller banks were already facing a “Herculean effort” in helping businesses weather a global pandemic.
The new rule from the OCC is aimed at clarifying for banks what sorts of activities qualify for credit under the rule, and updating qualifying activities to better reflect how banks do business currently, after the industry complained for years the grading process was opaque.
Reporting by Pete Schroeder; Editing by Andrew Heavens and Paul Simao