P. M. BRIEFING : Fed Against Bank Rating Disclosure
The Federal Reserve Board today opposed legislation to make it disclose numerical ratings on how well banks and other financial institutions lend money for community needs, particularly low-income housing, small business and small farm loans.
Martha R. Seger, one of the Fed’s seven governors, told a Senate subcommittee that the Community Reinvestment Act ratings, if released publicly under legislation by Sen. Howard M. Metzenbaum (D-Ohio), could be “misunderstood” as a reflection of financial soundness and “undermine public confidence in the safety of deposits in an institution.”
Under a 1977 law intended to encourage the plowing of deposits back into lending for local needs, the Fed and other regulators now rate banks, savings and loan associations and other deposit institutions on a 1-to-5, best-to-worst scale.
Like commerical examination ratings, the CRA numbers have been treated by regulators as confidential.
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