Otting’s Approach to CRA May Not Be in the Best Interests of His ‘Customers’

In early 2018, Comptroller of the Currency Joseph Otting raised eyebrows by describing banks as his agency’s “customers” in a banking conference speech. A powerful regulator referring to those he oversees as his customers struck many as inappropriate. 

Early in his tenure, Comptroller Otting identified modernization of the Community Reinvestment Act (CRA) as one of his top priorities. His approach has engendered significant discomfort in the banking industry.

Since the Great Recession, banks have worked to repair their collective brand image. A 2019 American Banker/ Reputation Institute Survey revealed ongoing problems for the industry. Many banks benefited from federal tax reform and rollbacks of the Dodd-Frank financial regulatory framework, stoking the image of banks as “special interests” whose allies in government are “rigging the system.” Otting’s approach to CRA reform, widely viewed as lowering the bar for banks to meet their community reinvestment requirements, appears to be the proverbial bridge too far and has mobilized unprecedented public opposition. 

In 2018, the Office of the Comptroller of the Currency (OCC) released an Advanced Notice of Proposed Rule Making (ANPR), which gave the first clear indication of Otting’s approach. One concept described in the ANPR, a “one ratio” approach to ratings, was roundly rejected in a broad-based consensus of the public comments. Under this method, all CRA activities — from loans to volunteer hours — are boiled down to a dollar value and the rating relies primarily on the ratio of CRA investments to the bank’s retail deposits. 

None other than JPMorgan Chase weighed in firmly against this “one ratio” approach. In a 2018 letter, the megabank provided this analysis: “If banks are only required to strive for a total volume of CRA activity, they could choose to focus all CRA activity in only a few markets and provide little to nothing in the others. This would undermine one of the pillars of CRA: encouraging banks to meet the credit needs of their communities.” With public comments like these, many banks signaled that the comptroller was going too far. 

In December 2019, Otting ignored overwhelming opposition and took the next step by signing off on a Notice of Proposed Rulemaking (NPR) that doubled down on the “one ratio” approach. The NPR proposes that banks would only have to meet their CRA obligations in half of their geographic assessment areas, as long as they meet a single top-of-house ratio. In effect, banks will be able to opt out of meeting their CRA obligations in markets that are hardest to serve, which are often small urban and rural markets. 

The NPR also proposes to give “double credit” to incentivize certain kinds of investments. The “double credit” method allows banks to make half of the investment to get the same credit they would receive today. Many in the community development finance industry are concerned that this method will lead to market distortions and a reduction in capital flowing to low- and moderate-income communities.  

These and other troubling elements of Otting’s approach notwithstanding, his strident rhetoric and public stumbles have galvanized opposition. Beyond describing banks as his customers, he stated in an interview that he would not “tolerate” community organizations that “disrupt” the ratings process. In front of the House Financial Services Committee, he indicated that he had “never personally observed” discrimination in banking. Not since the Great Recession has bank regulation mobilized such widespread activism. In addition to a flood of public statements, op-eds and street protests, the backlash to Otting’s proposals has included a New York Times editorial board opinion and top-tier focus from the House Financial Services Committee.

Regardless of whether Otting bulldozes his NPR through the regulatory process regardless of the widespread concerns that have been raised, it is clear that efforts to overturn the rule will be persistent.  The banking industry will face an ongoing lack of certainty about the regulatory environment and, fairly or not, will have to answer for Otting’s approach. 

Rep. Gregory Meeks (N.Y.), chairman of the House Subcommittee on Consumer Protection and Financial Institutions recently warned that Otting is “making it more likely that Congress will have to legislate on CRA.” Depending on the results of November’s election, there may be a full-blown effort to rewrite the legislation. 

In a June 2018 article, the Reputation Institute indicated that the most effective way of counteracting negative sentiments among bank customers is by demonstrating ethical behavior and good citizenship.  In this regard, Otting isn’t doing his “customers” any favors. 


Noel Andrés Poyo serves as executive director of National Association for Latino Community Asset Builders (NALCAB), a U.S. treasury-certified CDFI with a mission to strengthen the economy by advancing economic mobility in Latino communities.

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