Pub. 10 2020 Issue 1

8 www.azbankers.org It is important for banks to participate in the 60-day comment period before any potential finalization of reform takes place. Reactions remain mixed, with the potential of using the aggregate balance sheet ratio causing most concerns. would be eliminated, and banks would take on an average month- end approach: investments purchased before the most recent exam would only receive credit based on their monthly average balance during the exam period. Performance Measurements This is a major area of change: banks’ performance evaluations currently are based on their size (small, intermediate and large banks). The new proposal would set general performance standards for evaluating all banks with assets of more than $500 million. The required quantitative targets would be more transparent for achieving “outstanding” or “satisfactory” ratings. There would be two fundamental tests: a distribution test and an impact test, both evaluated to the specific targets established before the beginning of a bank’s evaluation period. Distribution would measure the number of qualifying loans to LMI individuals, small farms, small businesses and LMI geographies. Impact would measure the value of the bank’s qualifying activities related to its retail domestic deposits. One signif - icant change that could affect tax incentives is that the bank would be evaluated on both the number of CRA-eligible loans and investments and the total amount of loans and investments to communities. It is important for banks to participate in the 60-day comment peri- od before any potential finalization of reform takes place. Reactions remain mixed, with the potential of using the aggregate balance sheet ratio causing most concerns. It is likely implementation would be phased over several years to allow for institutions to prepare. Additionally, as the Federal Reserve did not endorse the proposed draft, it is important for banks to keep in mind that any proposals do require unanimous consent among all three regulators. But a clay model is on the table; we’re just waiting to see if the finished model hits the assembly line. w 1 Clozel, Lalita. “Bank Regulator Pitches Low-Income Lending Rule Changes on U.S. Road Trip.” The Wall Street Journal Aug. 19, 2019. https://www.wsj.com/articles/bank-regulator-pitches-low-income- lending-rule-changes-on-u-s-road-trip-11566229418 2 FFIEC Interagency CRA Rating Search: https://www.ffiec.gov /%5C/craratings/default.aspx Elizabeth K. Madlem Associate General Counsel Elizabeth has come back to Compliance Alliance as Associate General Counsel & Compliance Officer. Elizabeth will be handling C/A document reviews, participating in the Education department, and contributing as a featured author. She is looking forward to assisting members with their compliance and regulatory questions. Contact the Membership Development Team at 888-353-3933 or info@compliancealliance.com Continued from Page 7