CRA & Interstate Deposit Production

The Gramm-Leach-Bliley Act (FinMod) contained a provision designed to place controls on deposit production offices and ensure that, at least on a statewide basis, banks serve credit as well as deposit needs. The banking agencies have proposed regulations to implement this provision.

The proposed rule would apply a 50% test to the deposits in any state other than the headquarters state for the institution. The standard of measurement would be a "host state ratio." Every state would have a ratio that is developed based on the loan-to-deposit ratios of all banks chartered or headquartered in that state. This host state ratio would then be applied to the ratios of any bank with branches in that state.

Failure to meet the loan-to-deposit ratio test would trigger an analysis of whether the bank was meeting the credit needs of the area or areas where it failed the test. In other words, the deposit ratio failure would lead to a CRA analysis of meeting credit needs.

Important areas for review and comment include definitions relating to main office, home state, and the impact of this rule on community banks. Comments are due by June 8, 2001.

Copyright © 2001 Compliance Action. Originally appeared in Compliance Action, Vol. 6, No. 5, 5/01