Federal Reserve Board: Merger Process Needs Guidelines for Community Reinvestment Issues
GGD-99-180
Published: Sep 24, 1999. Publicly Released: Sep 24, 1999.
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Highlights
Pursuant to a congressional request, GAO reviewed large bank holding company mergers and the impact of such mergers on low- and moderate-income (LMI) areas, focusing on: (1) the Federal Reserve Board's (FRB) legal responsibilities in assessing Bank Holding Company Act of 1956 (BHC) mergers for Community Reinvestment Act of 1977 (CRA) performance; (2) FRB's process for assessing the CRA performance of six large BHC merger applicants, including how FRB addressed the principal public concerns related to the CRA performance; and (3) the premerger and postmerger mortgage lending in LMI and minority communities for three large BHC mergers.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Board of Governors | To enhance the transparency and improve the efficiency with which CRA concerns are addressed in the BHC merger application process, the FRB should develop written guidelines that summarize how public comments raising CRA concerns are used with CRA examination information in FRB's merger application decisions for large BHCs. For example, such guidelines could summarize important conclusions from previous Board of Governors application decisions. Such guidelines could also include when and how concerns raised in public comments will be considered, the types of analyses FRB is likely to conduct and rely upon in reaching its conclusions, and the situations in which HMDA statistics are limited. |
Closed – Implemented
On September 8, 2003, the Federal Reserve Board launched a web page on its application filing process including an description on how the the Federal Reserve System (FRS) evaluates CRA and other consumer issues in conjunction with an application. The web page summarized in some detail the process by which the FRS considers an institution CRA's record. It noted that FRS acts on an application based on the financial institution's CRA record and compliance record and public comments received. According to the web site, FRS staff determine whether the depository institutions affiliated with the applicant and target in the proposed transactions have satisfactory or better consumer compliance and CRA ratings. In addition, the web site provided the various types of information the FRS reviews when analyzing a depository institution's CRA record, such as CRA and compliance examination reports and recent actions taken to improve CRA and/or compliance performance weaknesses. It also described how HMDA statistics are reviewed. It specifically stated that HMDA statistics are compared with the overall aggregate lending within a specific geographic area. It added that FRS staff will focus their analysis on lending issues raised in public comments received in connection with the application. The web site provided adequate information on how CRA concerns are addressed in the BHC merger application process.
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Bank examinationBank holding companiesBanking regulationCommunity development programsCorporate mergersEconomic analysisEconomically depressed areasLending institutionsMinoritiesMortgage loans