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“You’re taking a person from an underprivileged area of the community and you’re helping them reach outside that community to gain skills and be successful people,” he explains. “I think banks will do more in those communities if we give them guidance on what will qualify, and we broaden the categories of available investments,” says Otting. Outside of cities, in suburbia and rural areas, other community-oriented lending and investments also may qualify. “I’m open to people putting forth ideas,” says Otting. “Let’s open our minds about what can be done to improve the world. I’d like to have people talk to us about asset classes that should be included, and not look so narrowly, as has happened historically.” One suggestion that he’s heard is supporting infrastructure that brings broadband service to rural users. Another facet of Otting’s view of how CR A regulation ought to be revamped entails a focus on results, rather than details. “If I told you to go to the Capitol and you did, and then I asked you, ‘How many steps did it take you to get there?’ You’d say, ‘I didn’t think of measuring that.’” He continues, “Let’s go right to the end and figure out the most effective way to accomplish the goal.”

Yet a not her cha nge t hat t he new Comptroller would make to CRA regulation is the concept of the assessment area. “I think assessment areas are a little archaic, frankly,” says Otting. “If banks are operating in a particular state, they should be making investments in that state. But the old days of drawing a circle

People give me high fives when I talk about where I’d like to take CRA. We can make this simple and do more for inner cities around one county and saying that’s your assessment area and the only place you can make qualified CRA investments, I think that time has come to an end.” Much of what will be proposed is anticipated to take place in the regulatory, rather than legislative, arena. The original CR A law is brief and most of what

grew up around it is in the form of rules, exam procedures, and official Q&As.

Key focus: Credit quality

Former Comptroller Tom Curry brought a career of state-level bank regulatory experience to the job. Otting brings a career of being a regulated banker to it. He sees being regulated as an industry advantage, and one that he believes no banker wishes to give up. This sets the tone for his thinking on the regulator’s role. “Our core responsibility is the safety and soundness of the banking system,” says Otting. “I’m a big believer that credit quality is number one, and that the only thing that can truly destroy a bank, generally, is poor credit quality. You can rebound back from a lot of things, but not deterioration beyond your capital levels.” Even compliance and regulatory management can be seen as a facet of safety and soundness, Otting believes. And he’s established that cybersecurity will be a key focus. While historically there have been banks with reputation issues that took them down—he cites Riggs Bank’s debacle in the mid-2000s—ty pically credit deterioration is the key factor. Is the bank regulator’s role in credit March 2018



Banking Exchange March 2018  
Banking Exchange March 2018