Comptroller of the Currency Joseph Otting will announce this week that he’s stepping down from his position as one of the country’s top bank regulators after his agency finalizes the overhaul of a landmark anti-redlining law, according to two sources familiar with the matter.
Otting, the former CEO of a bank once owned by Treasury Secretary Steven Mnuchin, came into his role in 2017 with reform of the Community Reinvestment Act as his top priority. The proposed version of that reform, put forward jointly with the FDIC, has faced a broad swath of negative reactions, including skepticism from banks and aggressive opposition from community groups.
One of Otting’s fiercest critics, House Financial Services Chairwoman Maxine Waters (D-Calif.), said earlier this year that she had “deep concerns about the misguided proposed rule and the harmful consequences it could have for communities across the country.”
Otting has taken the lead in making the first revision since the 1990s of a controversial law that banks and community groups have criticized as outdated given the advent of the internet. Banks have also sought more certainty as to what will count for CRA credit, saying the criteria are often arbitrary and sometime decided long after loans are made.
The law was passed in 1977 to combat discrimination against poor and minority communities, a historic practice known as redlining.
The FDIC board is not scheduled to meet this week, leaving open the possibility that Otting might be acting alone, an unusual approach considering the importance of the regulation.
The finalized version of the CRA rule, expected Wednesday, will include a number of changes sought by its critics, but it will still determine a bank’s presumptive CRA grade using broad measures of how many loans it has made to low-income borrowers and how much it has invested in poorer areas, according to sources. That aspect of the overhaul has been the target of its most intense criticism.
However, there will not be specific numeric targets set for those metrics until the agency has the necessary data, sources said. The size threshold below which community banks can opt out of the current framework is also being raised to $600 million in assets.
Otting’s planned departure was earlier reported by The Wall Street Journal.
Brian Brooks, another former executive at OneWest Bank, is the agency’s first deputy comptroller and chief operating officer.