Some Advice From The Pros

ABA's National Regulatory Compliance Conference featured a panel on the CRA investment test. Three CRA-seasoned bankers, Margaret Causby, Old Point National Bank in Hampton, VA, Anna Rentschler, First National Bank of Audrain County, and Kathy Weise, NationsBank (and formerly Barnett Bank) shared their best ideas with the audience. They were joined by Joy Molloy from the San Francisco Federal Reserve Bank.

The bankers on the panel agreed that the weakest link in meeting the investment test is that investments are made by bank staff that are not CRA-aware. The biggest problem with investments is finding out about the investments the bank has actually made.

Causby said that she considers the investment test to be a training process within the bank, so that staff will recognize and report qualified investments. When investments are discussed in training or in meetings - including board meetings - make sure that the minutes reflect the discussion. This is a key way of reinforcing the message and holding people accountable.

Weise agreed and offered the corollary that the most difficult problem is finding the right people to talk to. She recommends that you ask each person you talk to about investments to suggest who else in the bank you should talk with. She observed that one commonly overlooked investment is providing in-kind donations, such as the use of space or used computer equipment.

Rentschler said she uses an information sheet for bank staff to fill out on contributions and investments. Her form includes space for information on the number of low- and moderate-income people served, the way they are served, and the proportion of funds that go to the benefit of low- and moderate-income residents. Molloy reminded the audience that the bank must be able to show who is being served by donations and investments.

Molloy told the audience that CRA is a hot topic in the educational community. She advised banks to contact schools in or near the bank's assessment area(s) to find students or faculty interested in doing studies. Generally their work is free to the bank as long as they are able to use the material for their academic purposes. Colleges and universities having business schools, government and sociology departments, and public administration or city planning should make particularly good partners for CRA research.

Another place for ideas are the PEs of other banks. While an idea from another bank's PE won't be quite as innovative the second time around, it can be a helpful method of finding community investment opportunities that passed the test and earned credit for the bank. Since other examiners use them, banks might as well.

Molloy also encouraged CRA managers to check websites of the regulatory agencies and interested groups such as fair housing or community group alliances. She recommends periodic cruising on the 'net to find new resources. Many of the agencies already offer PEs on their websites. OTS will have theirs up early this fall.

Both Molloy and Edwin Chow, San Francisco Regional Director for OTS, urged the audience to attend seminars and meetings sponsored by the regulatory agencies. These meetings are sponsored by the community affairs staff in each agency and usually feature successful and innovative projects. When looking for ideas, the regulator's sessions can be the best source.

Molloy supplied the audience with a list of community investments that have been counted in the CRA exam. She also handed out a book compiling all the opinion letters on community investments issued since the current CRA regulation was adopted.

Molloy recommends looking through the "Community Development Investments Directory", published annually, which lists investments that have been counted or "approved" during the previous year. These lists should provide you with ideas and still leave room to be innovative.

Externally, stay in touch with investment information sources such as local governments, local community organizations, and foundations. Consider possibilities not only in the context of dollar amount and innovativeness. Look at the responsiveness to community need. Ultimately, no matter what the nature or description of the investment, whether it counts in your CRA examination will depend on whether it is responsive to community needs.

ACTION STEPS

Check the San Francisco FRB's web site for CRA materials and information. Bookmark the site and check it periodically.
Contact your agency's regional Community Affairs staff and get to know them. Make sure you are on their mailing list for information and conferences.
Don't overlook the importance of investment information in your CRA training. Also, reinforce any training with regular (perhaps quarterly) memos to remind staff to consider CRA implications in investments.
Consider using a form to collect information on donations, investments, and in-kind donations or services. Be sure to include detailed information on the people who benefit.
Contact anyone in your bank that could have anything to do with investments. Talk with them to make sure they understand and report any investments that might qualify for CRA consideration. Then ask them who else you should talk with.