This is the same anon that posted the question about permanent vs. temporary financing. I'm posting anon because I don't know who else in my organization is on these threads.

In the CRA training the home office provided we were told that poor performance on CRA could result in both criminal penalties and revocation of our bank charter.

Is this true?

Substantial noncompliance with CRA will not result in criminal penalities, fines, or revocation of your bank charter. What it will do is make it more difficult (if not impossible) to expand your bank operations in any way, as well as make sale or merger with your financial institution difficult at best.

Substantial noncompliance may in the long run cause your bank to fail, due to the lack of ability to grow, and the perception in your community that you don't care about meeting the credit needs of your community. While this is not revocation, this still is a detrimental affect you should keep in mind.

I know you didn't ask, but I'd like to mention as well that it is no coincidence that banks with CAMEL ratings of 1 and high profitability often have Outstanding CRA Ratings. Positive work in your community goes hand in hand with profitability, especially now a days.

Thanks Dawnie!

I certainly didn't mean to imply that I thought poor performance on CRA was no big deal. I agree that it is a very big deal, but as you pointed out, there are actually real reasons why doing well on CRA is important, and it shouldn't be necessary to use made up reasons to convince people to take it seriously.

The CRA statute passed by Congress specifically prohibits regulators from using what we affectionately call our enforcement authority on CRA matters. Enforcement authority includes our ability to enter into formal agreements or cease & desist orders with your bank, or assess civil money penalties. So all those bullets in our arsenal are voided by the statute. There are no criminal penalties for a poor CRA rating.

Instead, Congress called upon us to use our "corporate leverage" to improve CRA performance. In other words, we have to consider your CRA rating whenever you apply for a branch, merger or some other corporate or licensing activity. Presumably, if you have poor CRA performance, it will be harder to get what you want from a corporate standpoint.

The only other "penalties" to CRA are the public disclosure of your rating, and the CRA regulation's requirement to develop a plan to improve your performance. That plan must be in your public file and must be updated quarterly. The examiners may also make your CRA performance a significant item your report of examination, but you typically won't see violations cited since we can't use our enforcement bullets anyway.

I suppose chartering authorities have the ability to revoke charters, but when is the last time you heard of that happening, particularly over CRA? There would have to be some pretty blatant and gross stuff going on in a bank for a charter to be revoked, so I really don't see that happening to anyone diligent enough to participate in this forum. AR.