Banking regulators issue joint notice of proposed rulemaking to strengthen and modernize the CRA regulations

Banking regulators issue joint notice of proposed rulemaking to strengthen and modernize the CRA regulations
On May 5, 2022, the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), issued a joint notice of proposed rulemaking (NPR) to strengthen and modernize the Community Reinvestment Act (CRA) regulations.

The CRA was enacted in 1977 to encourage federally insured banks to help meet the credit needs of their local communities, including low- and moderate-income neighborhoods, in a safe and sound manner.  The last major revisions to the CRA regulations were made in 1995.  This NPR would update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.  The proposal contains the following key objectives:

  • Expand access to credit, investment, and basic banking services in low- and moderate-income communities. Under the proposal, the agencies would evaluate bank performance across the varied activities they conduct and communities in which they operate so that CRA is a strong and effective tool to address inequities in access to credit. The proposal would promote community engagement and financial inclusion. It would also emphasize smaller-value loans and investments that can have high impact and be more responsive to the needs of low- and moderate-income (LMI) communities.
  • Adapt to changes in the banking industry, including internet and mobile banking. The proposal would update CRA assessment areas to include activities associated with online and mobile banking, branchless banking, and hybrid models.
  • Provide greater clarity, consistency, and transparency. The proposal would adopt a metrics-based approach to CRA evaluations of retail lending and community development financing, which includes public benchmarks, for greater clarity and consistency. It also would clarify eligible CRA activities, such as affordable housing, that are focused on LMI, underserved, and rural communities.
  • Tailor CRA evaluations and data collection to bank size and type. The proposal recognizes differences in bank size and business models. It 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.
  • Maintain a unified approach. The proposal reflects a unified approach from the bank regulatory agencies and incorporates extensive feedback from stakeholders.

The agencies are seeking comments on the joint proposal by August 5, 2022.  We will be working with our industry partners to review the NPR and provide comments before the deadline for submission.  In that regard, we look forward to hearing any concerns, comments or suggestions you may have.  We also want to let you know that on May 11th at 3 pm, the Federal Reserve Board, FDIC, and OCC will provide an overview of the proposal. To attend the webinar, register here.

More information on the proposed rules can be found below.