The FDIC won’t join a fellow banking regulator in revamping anti-redlining rules as long as the Covid-19 pandemic continues, the agency’s chairman Jelena McWilliams said Friday.
Potential revisions to Community Reinvestment Act rules are better suited for “peacetime, when things are calm, the economy’s doing well,” McWilliams told Bloomberg Law after speaking at a virtual conference on the role of regulation in financial health.
The Office of the Comptroller of the Currency completed rules May 20 that change how banks are assessed on their lending to low- and moderate income communities. The Federal Deposit Insurance Corp. had been part of a joint proposed rule with the OCC but didn’t sign onto the final version, which community groups have sued to block.
McWilliams said she supports the framework of the OCC’s final rule. She said it would help banks better understand their CRA obligations and provide more credit to low- and moderate-income communities in rural and urban areas.
But she also said “the timing wasn’t right” for the FDIC to ask small community banks to meet new regulatory obligations. Some banks could be forced to redeploy staff from important Covid-relief activities, such as small business and consumer lending, McWilliams said.
Examining Social Disparities
As racial discrimination and social disparities remain at the forefront of national and local conversations, the FDIC is also thinking about ways it can address those issues through its regulations, McWilliams said.
Although the FDIC and other regulators have tools such as the Equal Credit Opportunity Act to address discrimination in lending practices, other types of bias may be harder to unveil.
It becomes more difficult when “you’re just examining a bank’s portfolio” or considering new technologies in finance, such as the potential for bias in artificial intelligence used in credit decisions, she said.
The FDIC is combing through its regulations for approaches to issues including wealth, wage, and home ownership gaps, particularly in Black communities, McWilliams said.
“All of these we’ve been working on for awhile and I would say just that we’re even more incentivized with the recent events,” she said.