US banks face more fair lending scrutiny under new regulations
By Pete Schroeder
WASHINGTON (Reuters) — U.S. regulators will begin grading banks on which communities and geographies they service via online lending under tougher new rules modernizing fair lending standards to be finalized on Tuesday.
The changes to 1977 Community Reinvestment Act (CRA) regulations draw a line under a contentious multiyear effort that was delayed amid fierce lobbying by community groups and lenders, as well as by a change of presidential administrations.
They broaden the geographies in which lenders will be required to extend loans and other services to low-income Americans, making it tougher for banks to receive top marks when being graded for CRA compliance.
Conceived to prevent red lining, CRA regulations are central to banks' overall supervisory performance. Poor CRA grades put lenders in a so-called penalty box, meaning they are barred from doing mergers and other deals.
«The final rule takes a critical step forward in modernizing the CRA regulations to help ensure that banks meet the needs of all the communities they serve,» said Federal Reserve Vice Chair for Supervision Michael Barr in a statement.
The Fed approved the proposal Tuesday morning, but Fed Governor Michelle Bowman opposed it, calling it overreaching and overly complex. Two other regulators, the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, were expected to finalize the rules later Tuesday.
Historically, CRA grades focused on how well banks serviced low-income communities where banks have branches. Banks will now also be graded on how well they service low-income communities in the areas in which they provide large numbers of mortgages and small business loans through online and mobile
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