Kristopher M. Rengert, Community Development Expert, Office of the Comptroller of the Currency
The combination of the expanded definition of community development from the 2005 amendments to the Community Reinvestment Act (CRA) regulations and the geographic flexibility for consideration of CRA-related activities in the hurricanes Katrina and Rita-designated disaster areas enhances the ability of banks to receive positive CRA consideration for support of the Gulf Coast recovery effort. This article discusses the CRA treatment of types of investments banks might make in support of recovery from major disasters.
Community Development Redefined
Effective September 1, 2005, the CRA regulations expanded the definition of community development for the purposes of the CRA. The definition added consideration for activities that revitalize or stabilize designated disaster areas to the list of community development activities qualified for positive CRA consideration. Such disaster areas must be "major disaster areas" as designated by the federal government, typically the Federal Emergency Management Agency.
These qualifying activities will be considered by examiners for 36 months following the date of designation, although this period may be extended when there is a demonstrable community need to assist in long-term recovery efforts. For the Gulf Coast, this period was recently extended until 2011.
In March 10, 2006, the OCC, along with other financial regulators, issued interagency guidance on this additional CRA consideration. The 2006 CRA Q&As explained that an activity will be considered to revitalize or stabilize a designated disaster area if it helps to attract new, or retain existing, businesses or residents and is related to disaster recovery.
Additionally, an activity will be considered to revitalize or stabilize a designated disaster area if it is consistent with a bona fide government revitalization or stabilization plan or disaster recovery plan. Accordingly, examiners give greater weight to activities that are most responsive to community needs, including the needs of low- or moderate-income individuals or neighborhoods.
Activities that may qualify for consideration as revitalizing or stabilizing a designated disaster area include:
- Financing to help retain businesses in the area that employ local residents, including low- and moderate-income individuals.
- Financing to attract a major, new employer that will create long-term job opportunities, including for low- and moderate-income individuals.
- Financing for essential communitywide infrastructure, community services, and rebuilding needs.
- Activities that provide housing, financial assistance, and services to individuals in designated disaster areas and to individuals who have been displaced from those areas, including low- and moderate-income individuals.
CRA performance is evaluated primarily in the context of how its CRA-related activities help meet credit and community development needs in a bank's assessment area. CRA-related activities that occur in the broader statewide or regional areas surrounding a bank's assessment area may also receive positive consideration.
However, owing to the unprecedented impacts from hurricanes Katrina and Rita, examiners have been given additional flexibility when evaluating the geographic aspect of CRA-related activities in these particular designated disaster areas.
OCC Bulletin 2006-6, "Community Reinvestment Act: Hurricanes Katrina and Rita," provides guidance regarding how national banks located outside the designated disaster areas may receive positive CRA consideration for activities that revitalize or stabilize the designated disaster areas related to those hurricanes (provided that the banks have otherwise adequately met the CRA-related needs of their assessment area).
In this regard, national banks may provide CRA-related activities directly or through a third party. A national bank also may receive positive consideration for activities benefiting people who have been displaced by these hurricanes, including evacuees relocated to other states.
CRA consideration for qualified activities benefiting the designated disaster areas related to hurricanes Katrina and Rita should be discussed in the narrative section of a bank's public performance evaluation if they are outside of the bank's assessment area.
The OCC's District Community Affairs Officers (DCAOs) can provide technical assistance to national banks seeking further information about how their support of the recovery effort in the Gulf Coast region might receive positive CRA consideration.
Visit the OCC's Web site for DCAO information.