On January 1, 1986, with the implementation of Michigan's interstate banking statute, Section 130b of the Michigan Banking Code, the Bureau entered a new era of responsibility for community reinvestment. This statute provides that in connection with an application filed by a bank holding company:

"...the commissioner shall assess the composite record of the bank subsidiaries of the bank holding company in meeting the credit needs of the communities in the state in which the bank subsidiaries are located, including low and moderate income neighborhoods, consistent with the safe and sound operation of the bank subsidiaries of the bank holding company. In assessing the record of the bank subsidiaries of the applicant, the commissioner shall consider the factors considered by the appropriate federal financial supervisory agency pursuant to regulations promulgated under the community reinvestment act of 1977..."

Section 802(a)(3) of the Community Reinvestment Act of 1977 states:

"The Congress finds that-

(1) regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business;

(2) the convenience and needs of communities include the need for credit services as well as deposit services; and

(3) regulated financial institutions have continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered.

For nearly ten years the Financial Institutions Bureau (Bureau) had little involvement with community reinvestment beyond the receipt of annual reports of residential and home improvement lending activity by institutions doing business in Michigan. This annual report is required pursuant to Michigan's Public Act 135 of 1977 (PA 135), which provides for gathering such data.

Community groups in this state have voiced concerns that the CRA and PA 135 have not been effectively implemented by federal and state regulators, respectively. In other words, financial institutions have not been induced by the regulators to be responsive to the credit needs of the local communities, and in particular, the needs of low and moderate income groups within the communities. Further, community groups have complained that the federal and state regulatory processes have been inaccessible to them for voicing their concerns.

The Bureau, in an effort to fulfill its statutory responsibilities, has weighed, and continues to weigh, the language of the Michigan interstate banking statute and of the Community Reinvestment Act for intent. Historically, community attention has been focused on a financial institution's activity in residential mortgage and home improvement lending. This focus is largely attributable to the redlining concerns of community groups and the reporting requirements of the Home Mortgage Disclosure Act (HMDA) and PA 135, which address housing related lending activity. However, meeting the credit needs of the community is a much broader concept than just meeting the housing related credit needs of the individual. Based upon this understanding, the Bureau deems it necessary to consider an institution's overall lending activity in its community including, but not limited to, residential mortgage and home improvement lending. Further, a simple analysis of loans originated by number and size does not provide an indication of the credit needs which exist. The credit needs of any community are likely to be more than just one type or several types of loans.

The extent of a community's credit needs can only be known when a conscientious effort is made by management of an institution to determine such needs. The Bureau recognizes the identification of needs as the essential, primary step which an institution must undertake before it can expect to adequately address the credit needs of the community. Each community is unique, and each will have its own set of needs. Also, it is likely that more than one community will exist within a given city or defined market area.

Many types of needs will be disclosed in the needs identification process. Some of the identified needs will be properly addressed by the services and products of a financial institution. Other needs will be better addressed by other community members, organizations or governmental agencies.

Additionally, a financial institution might not have existing products or services to meet those needs identified. In such cases, it may be appropriate to develop new services or products. However, new product development will not be expected if such products would not conform with the institution's typical business operations and product lines. It will be expected that an existing product line will be accessible to all segments of the respective market.

After management has identified the credit needs and has determined which credit needs will be targeted by the institution, the goal of the CRA can be addressed effectively. The goal, meeting the credit needs of the community, is attained by the successful delivery of products and services which meet identified needs. The level of success which management of a financial institution achieves in meeting an identified need can be demonstrated by the volume of product or service delivered to meet the need. Therefore, it is important for management to maintain a system for documenting, summarizing and reviewing the efforts which are made to that end.

Thus, the process for an institution to help meet the credit needs of the community which it serves is one of basic market research, followed by product and service development, and finally, product and service delivery.

The Bureau views a financial institution's role in a community as essential and integral to the stability and growth of the community. By assertively addressing this role, an institution can strengthen the fabric of a community through constructive, responsible leadership and participation in development of the community as a whole rather than limited segments of the community.

In all instances the precept of safe and sound lending practices and business operations must be observed. Meeting the credit needs of a community on a continuing basis can be accomplished only by promoting creative thoughts and actions which result in financially sound programs in that community.

In conclusion, the Bureau, in its review of interstate applications, will be attentive to the process which an applicant has developed and utilized and to the conclusions reached by the applicant in determining how to fulfill its obligation to help meet the credit needs of the communities in which it is chartered.