The three federal financial regulatory agencies on May 5 released proposed updates to the Community Reinvestment Act (CRA), which was passed by Congress in 1977 to ensure that financial institutions served all the communities where they operate, particularly low- and moderate-income and minority neighborhoods.
The Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued the document, which includes a request for public comment. Interested parties are encouraged to submit comments, which are due on or before August 5, 2022.
The CRA is one of the major statutory means of making bank loans accessible, particularly to communities and individuals that have historically faced discrimination in credit availability. The act has not been substantially updated since 1995, and the banking landscape has changed dramatically since then. The goals of CRA reform include:
- Strengthening the achievement of CRA’s purpose. Under the proposal, the regulatory agencies would evaluate large bank performance in the communities where they operate so that CRA continues to address access to credit. The proposal would promote community engagement and financial inclusion, and it would also increase the emphasis on smaller-value loans and investments that can have high impact on low- to moderate-income communities.
- Adapting to changes in the banking industry, including internet and mobile banking. The proposal would update the geographic areas for which financial institutions are assessed for CRA compliance to include areas associated with online and mobile banking, branchless banking, and hybrid models.
- Providing greater clarity, consistency, and transparency. Under the proposal, the agencies would use metrics and public benchmarks as part of CRA evaluations. It would also clarify activities that help financial institutions meet CRA requirements, such as affordable housing activity.
- Tailoring CRA evaluations and data collection to bank size and type. The proposal provides that smaller banks would continue to be evaluated under the existing CRA regulatory framework, with the option to be evaluated under aspects of the new proposed framework.
- Maintaining a unified approach. The proposal reflects a unified direction from the regulatory agencies and incorporates extensive feedback from stakeholders.
On Wednesday, May 11, 2022, at 3 p.m. (ET), the agencies will jointly host a special Ask the Regulators/Connecting Communities webinar for all CRA stakeholders that will provide an overview of the proposal and its objectives. The session will be presented jointly by CRA policy experts from the Board of Governors, the OCC, and the FDIC, and you can register for it here.
Charles Davidson
Staff writer for Economy Matters