Community Reinvestment Act: Interagency Notice of Proposed Rulemaking

Summary

The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) (collectively, the agencies) are proposing to amend their Community Reinvestment Act (CRA) rules by making certain substantive, technical, and process-oriented changes to refocus on the statutory objective of encouraging banks to meet the credit needs of their communities; to better ensure that community development grants reach the communities they are intended to benefit; to reduce unnecessary burden, particularly for community banks; and to provide greater clarity for how to obtain CRA consideration.

Comments on all aspects of the proposed rule are due 60 days after it is published in the Federal Register.

Highlights

• The proposal sets forth a targeted approach for revising the current rules² that leaves much of the current framework in place, thereby providing continuity and minimizing disruption for banks. For example, a bank will continue to be evaluated under performance tests based on its size or business model or, if elected by the bank, under a strategic plan.
• The proposal would more closely align the CRA regulatory framework with the statutory mandate by focusing primarily on lending (which the agencies believe is how a community’s credit needs are best met) by:
  • Narrowing the range of retail banking services the agencies consider to focus on credit services, thereby excluding deposit services; and
  • Clarifying certain concepts to give greater weight to activities with a nexus to lending.
• The proposal would modify the framework to ensure that grants and donations reach the intended communities by:
  • Limiting consideration of community development (CD) grants to those directly used for a plan, project, or initiative with community development as a primary purpose; and
  • Requiring large banks (defined to mean banks with assets over $10 billion) to document that recipients of CD grants do not have overhead costs in excess of 15 percent.
• The proposal would reduce regulatory burden on banks by:
  • Increasing bank asset size thresholds for (1) small banks to $1 billion (from $412 million) and (2) intermediate banks (defined under the current rules as subset of small banks called intermediate small banks) to $10 billion (from $1.65 billion);
  • Exempting banks newly classified as intermediate banks (those with assets between $1.65 billion and $10 billion) from data collection and reporting requirements and granting these banks more flexible supervision;
  • Focusing only on a bank’s major product lines when evaluating its retail lending activities; and
  • Leveraging technology to modernize the availability of a bank’s CRA public notice and public file.
• The proposal would provide greater clarity on how a bank receives CRA consideration by:
  • Codifying an illustrative list of CD activities that do and do not qualify for CRA credit and providing a process to confirm that activities qualify as community development;
  • Clarifying the components of the principles-based definition of community development (i.e., affordable housing, civic assistance for low-and-moderate-income individuals, economic development, and revitalization and stabilization of targeted areas);
  • Explaining more clearly when a bank may receive consideration for CD activities at the bank-, State-, and multistate metropolitan statistical area-level; and
  • Modifying the strategic plan framework so it is a more viable and less burdensome option for banks.

Background

The CRA, enacted in 1977, is designed to encourage banks to help meet the credit needs of the communities in which they are chartered consistent with the bank’s safe and sound operations by requiring the agencies to examine banks’ records of meeting the credit needs of their entire community, including low- and moderate-income neighborhoods. The agencies must consider a bank’s CRA performance when evaluating certain applications.

The OCC’s current CRA rule is codified in the Code of Federal Regulations at 12 CFR part 25. The OCC’s current CRA rule generally dates back to 1995.

Further Information

OCC: Please contact Emily Boyes, Special Counsel; Marjorie Dieter, Special Counsel; or Kevin Behne, Counsel, Chief Counsel’s Office at (202) 649-5490; Cassandra Remmenga, CRA Modernization Program Manager, at (202) 649-5470.

Related Link

• Community Reinvestment Act: Notice of Proposed Rulemaking (PDF)