Treasury Issues Recommendations for CRA Modernization

As bank regulators work toward modernizing the Community Reinvestment Act — with an advance notice of proposed rulemaking expected from regulatory agencies in the days ahead — the Treasury Department today issued a formal memorandum to the agencies highlighting several recommendations for updating and improving administration of the 40-year-old law.

Treasury’s recommendations focused on four key areas, including redefining geographic assessment areas, increasing transparency around the rating process, improving the examination process and incentivizing CRA performance. Acknowledging numerous changes in banking law and technology that have taken place since CRA’s enactment in 1977, Treasury recommended that the agencies provide greater flexibility when determining CRA assessment areas, expand the range of products that are eligible to receive CRA credit and consider alternative delivery channels when conducting CRA evaluations, among other things.

“Adjustments that enhance the transparency, consistency and predictability of the supervisory process — and that recognize the many ways banks meet the credit needs of the communities they support — will help institutions better serve all customers and promote economic growth,” said American Bankers Association President and CEO Rob Nichols. “We’re pleased that this report recognizes changes in mobile technology and the many innovations banks have developed to serve their customers. ”

ABA has concerns over certain recommendations that could potentially constrain the ways that banks serve their communities by imposing numerical performance metrics and frequent reporting requirements and that could inadequately recognize banks’ financial education work. The association remains heavily engaged in the CRA modernization effort. The Treasury report reflects key issues raised by ABA in meetings between ABA staff and Treasury officials, and many of the recommendations echo ideas put forth in a white paper by ABA last December.