National banks that help rebuild communities affected by hurricanes Katrina and Rita—including communities outside of their assessment areas—may receive positive consideration under the Community Reinvestment Act, the OCC confirmed in February 2006. Using a variety of reconstruction and rehabilitation efforts, banks have expressed their commitment to assist the stricken Gulf Coast region, and this new guidance (available at http://www.occ.gov/news-issuances/bulletins/2006/bulletin-2006-6.html) supports these efforts as long as the banks have adequately responded to community development needs in their own assessment areas.
Activities that benefit people whom Katrina and Rita displaced, including evacuees who have relocated to other parts of the country, may also earn favorable consideration for national banks. Hurricane-related damage created compelling community development needs that extend well beyond the Gulf Coast region, as the guidance recognizes. This broader policy interpretation benefits banks as well as the affected areas and populations.
Under federal banking regulations, an activity related to disaster recovery that helps to attract or retain businesses or residents is generally considered to revitalize or stabilize a designated disaster area. An activity is presumed to revitalize or stabilize the area if it is consistent with a disaster recovery plan or bona fide government plan to revitalize or stabilize the community. Examiners will give greater weight to activities deemed most responsive to community needs, including the extent to which those activities in the disaster areas benefit low- to moderate-income (LMI) individuals and neighborhoods, although all activities related to disaster recovery will be considered.
Examples of qualifying activities include providing housing, financial assistance, and services to individuals in designated disaster areas and individuals displaced from those areas, including LMI persons. Qualifying activities under the revised CRA rules also include the extension of credit or other types of assistance for essential infrastructure, community services, and rebuilding needs. Investments in entities that provide community services to individuals in designated disaster areas and those displaced by disasters also qualify. National banks may provide these CRA-related activities directly or through third parties.
Lag Periods for Disaster Area Activities
For CRA purposes, the agencies will consider disaster recovery-related activities that help to revitalize or stabilize a designated area within 36 months after the date of designation by the federal government. This window is designed to provide sufficient time for banks to finance and undertake a range of activities in response to the needs that result from the disaster. When there is a demonstrable community need to extend the time to assist long-term recovery efforts in a particular disaster area, the regulators will extend the period for positive consideration accordingly. Because of the devastation caused by hurricanes Katrina and Rita in the designated disaster areas on the Gulf Coast, the agencies plan to extend substantially the time beyond 36 months for recovery-related activities.
For further ideas on how banks can help address financial needs in communities affected by the 2006 Gulf Coast hurricanes, see: