affiliates, as well. Discriminatory lending activities, or other illegal
credit practices, whether conducted by an affiliate of a regulated
institution or the institution itself and whether located inside
or outside of its designated assessment area(s), will negatively
impact the overall CRA rating.
In determining the effect on the overall CRA rating of the institution, regulators will consider the nature, extent, and strength
of the evidence of discrimination or other illegal credit practices;
the policies or procedures that the institution (and/or its affiliate)
has in place to prevent such practices; and any corrective action
that the institution or affiliate has taken, or has committed to
take, including voluntary corrective action resulting from self-assessment. Get involved with your institution’s lending compliance
team to ensure that they understand the risk that an inadequate
fair lending/consumer financial protection program will have on
your CRA exam results. If they have identified weaknesses, find
solutions to mitigate them. If you have not already done so, it is
time to engage with your compliance counterparts.
Conduct a Periodic evaluation of Cra
Performance—do you need a “tune up”?
As a car goes to the mechanic for a periodic “tune up” to ensure that
it runs optimally, financial institutions should conduct periodic
self-assessments of their CRA performance to identify weaknesses that could compromise the success of a CRA examination.
These self-assessments should include all aspects of a regulatory
examination—lending, investments, and service tests, as well as
the previously identified fair lending considerations. Start today.
Don’t wait until it’s too late in the examination process to be
helpful. Get started while there’s time to take corrective action.
For an institution that has been previously evaluated as a
large bank, begin the process with a review of your last public
evaluation. If you have not been evaluated as a large bank, you
might find a similarly situated peer institution and
compare your performance
against its most recent public
■ ■ Chief Compliance Officer
■ ■ Legal Division
■ ■ Branch/Retail Division
■ ■ Mortgage Lending
■ ■ Small Business Lending
■ ■ Community Development
Department
■ ■ Government/
Not-for-Profit Department
■ ■ Marketing
■ ■ Special Programs/
Departments
evaluation. Once you’ve defined the tool to use for comparison
purposes, organize your CRA data in such a way that it can be
easily compared. Depending on the size of your institution and
the availability of CRA-related software, this process might be as
simple as generating the examiner worksheets in a proprietary
CRA software package or as complicated as designing your own
worksheets in a spreadsheet or text document. Once you’ve established a framework, it can be reused to compare performance
and identify trends across the exam period.
Over the course of your exam period, you will want to concentrate on each component of the examination—lending, investments, and services. In an ideal world, you would want to study all
three components at once by periodically performing an annual
or semi-annual “mock” examination. However, if that is not possible given resource constraints, conducting a mock examination
of each test separately can still provide useful information to help
prepare for the real thing.
Consider any strategic initiatives that your institution has made
since the last examination that might impact performances, such
as the acquisition of another institution or a new line of business,
the divestiture of an affiliate, the discontinuance of a particular
lending program, or the opening or closing of branches. Document the due diligence associated with entering or exiting these
activities to provide to the regulators as a part of your performance
context analysis.
In light of your current performance, based on the ratings
you received in the prior exam period, what rating would you
anticipate receiving if examined today? Is that rating in keeping
with the desires and expectations of the company? Do you have
any fair lending or other consumer compliance challenges that
would be expected to impact your rating?
Communicateyour Mock examination results
Test results are meaningless unless they are shared. Report your
findings to the senior officers in your organization who are
responsible for CRA-related aspects of the examination so they
might better understand their performance. Depending upon
the size and nature of your institution, consider establishing a
CRA Committee to review the institution’s CRA performance
on a regular basis.
When weaknesses are identified, ask these officers to help
explain them or, better yet, to take action to reverse the trends.
You might want to work with responsible parties to establish
goals and to monitor performance against those goals to
help ensure you receive the rating your company desires.
top Cra examination road Blocks and
Possible solutions
CHALLENGE #1: Data Integrity
Before they actually begin evaluating an institution’s
performance, examiners will determine whether the
data provided is reliable for analysis. It must be validated
for all three tests—lending, investments, and services.
