CRA Ratings - Up or Down?

If your bank was rated "Outstanding" under the old procedures and will soon be examined as a large bank for the first time, you should not expect to maintain that rating without a lot of work.

Joel Palmer, OTS-Atlanta, shared some information with the Florida Bankers Association's Compliance Seminar. He found that the OTS has now completed 26 large institution examinations. A total of four institutions were rated "Outstanding," 21 were rated "Satisfactory" and one was rated needs to improve. But here's the rub: eight of those institutions examined dropped from "Outstanding" to "Satisfactory."

One of the important factors in this, Palmer found, was the investment test. The investment test is important and the bank cannot expect to earn a high rating without good performance. In most of these eight drops in rating, it was the investment test that drove them down.

Palmer advises CRA managers to communicate throughout the institution to find the investments. The bank may be making investments that would support a better rating, but they are missed because the people responsible for making the investment are not aware of the CRA dimension.

Copyright © 1999 Compliance Action. Originally appeared in Compliance Action, Vol. 4, No. 2, 2/99