Helping Bankers and the CommunityApril 28, 2017
Ariel Cisneros, senior advisor with responsibility for community development investments for the Tenth District, recently sat down with Michael Steckline, Vice President in the Consumer Affairs Department of the Supervision and Risk Management Division of the Kansas City Fed. Steckline talked about the 2016 Community Reinvestment Act (CRA) Q&As and about the Bank’s Consumer Affairs Department.
What feedback are bankers providing about the CRA Q&As?
That CRA examination procedure may not be keeping track with financial industry product and service delivery changes and concerns around evaluation consistency. As the financial industry changes, these issues will inevitably continue to be challenges. The revised Q&As recognize these challenges and attempt to address them by noting alternative delivery systems and providing additional guidance that will be used by examiners to foster process consistency. The guidance, along with the clarified descriptions and examples, has been well received by many of our financial institutions.
What do you think bank and community organizations should take away from the updated Q&As?
That the regulatory agencies are listening to the communities and financial institutions they serve. Over the last few years, the regulatory agencies have publicly spoken about and promoted workforce development for low- and moderate- income individuals and families, small businesses and farms. The 2016 Q&As were clarified to ensure these efforts receive community development credit under the purpose of either activities provided by community development service organizations, or for economic development by providing technical expertise and/or administrative support for small business and farms. The changes also address alternative retail delivery systems and include updated examples to reflect technological advances. It is important to note for both bank and community organizations, these revisions are intended to encourage the broader availability of alternative delivery systems, while at the same time not diminishing the value of full-service branches in evaluating a Large Bank’s Service Test performance. We have heard some community organizations share their concerns that investments in rural locations tend to be low or absent since they may not be a part of a specific assessment area delineated by the bank. The 2016 changes and revisions to the CRA Q&As provide helpful guidance clarifying that community development activities made at a broader statewide or regional area, including nationwide investments, can receive CRA credit by the examiners.
What do you want the community to know about the Consumer Affairs function?
The Federal Reserve Bank of Kansas City has a strong focus on fostering relationships within the community. Staff in the Consumer Affairs Department keeps apprised of consumer- and regulatory compliance-related matters through outreach activities targeted to banks, participation in various banking and community forums and joint activities conducted with the Bank’s Regional, Public and Community Affairs Department. The feedback received through these activities is provided to staff at the Board of Governors for consideration as supervisory policies and regulations are developed. The Consumer Affairs Department monitors and mitigates consumer harm (and by extension community harm) as we provide guidance to and supervise financial institutions under our jurisdiction. This duality of function is important for fostering a fair and sound financial industry, which in turn results in strengthened communities.
How do Consumer Affairs and Community Development collaborate to assist the broader community?
To better understand what is taking place in communities covered by our CRA assessments, we rely on community development data showing economic and demographic trends. In turn, the comparative lending data and information gleaned from our community contacts help us better understand ground-level community needs and access to credit—through the eyes of individual bankers and community residents. This is especially relevant in the smaller and rural communities we serve; where there may be fewer outlets for making their sometimes unique credit needs known.
How does the Fed prepare its examiners for changes in the Q&As and other regulatory changes?
When there are substantive changes to the regulations or examination procedures, the Federal Reserve System provides just-in-time training for all Consumer Affairs examiners. For procedural consistency, training is provided using methods that ensure all examiners hear the same guidance and may refer to the guidance later as questions arise, including via recorded training and examination work papers. Examiners also attend interagency training provided to the public and industry, including the July 25, 2016, Interagency Outlook Live Session on the new CRA Q&As.
Are there resources you believe would benefit bankers in understanding the CRA or assist them with their work?
Consumer Compliance Outlook Live sessions and the Consumer Compliance Outlook magazine can provide bankers with helpful information relating to many compliance issues, including CRA. For example, the fourth quarter 2016 issue of the Consumer Compliance Outlook has information for banks transitioning from an Intermediate Small Bank to a Large Bank and developing a successful CRA strategy (Discussed in the Q3:2014 report). The Tenth district’s CRA OneSource is a valuable resource to help community groups and institutions understand the act and community credit and development needs. It also provides substantive guidance on navigating the CRA evaluation process.
About Michael Steckline—Steckline is Vice President of the Consumer Affairs Department in the Supervision and Risk Management (SRM) Division for the Federal Reserve Bank of Kansas City. He joined the Bank in 1992 as an assistant examiner trainee in Consumer Affairs and had several examiner positions in SRM prior to being promoted to manager in 2000. In 2005, he was appointed assistant vice president of Consumer Affairs and served as assistant director of Federal Reserve Consumer Help. He was appointed to his current position in 2016. Steckline has Bachelor of Science and Bachelor of Arts degrees in economics and a Juris Doctor degree from Creighton University.