Question & Answer

Question: Our board is reviewing the new CRA regulation. Several directors have asked why the bank should strive for an "Outstanding" rating. Can you suggest any good reasons to try for the Outstanding?

Answer: One good reason is that "Outstanding" is a safe distance from "Needs to Improve." I don't think any responsible board of directors wants anything less than a satisfactory rating.

There are also positive reasons for working for the top rating. Fundamentally, CRA is all about serving your market. The better the bank is at serving its community, the better its CRA rating will be. Community banks are the first to say that they would be out of business if they weren't actively supporting their community and its economy. In fact, this is usually their competitive edge against the larger banks.

CRA also drives banks to find new customers and new customer needs. There is a constant need for market research and market development. As competition gets tougher, especially from the non-banks, CRA may be helping you find and develop more customers. So, although CRA inevitably involves technical requirements, statistical measurements, and tests, for examination purposes, it comes down to good business sense.

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 9, 6/96