ABA, BPI caution against CRA rule changes

Two recent policy developments could fundamentally alter banks’ Community Reinvestment Act programs, and policymakers should avoid finalizing proposed changes to the CRA rules until these issues are resolved, the American Bankers Association and the Bank Policy Institute said today in a joint letter to federal banking regulators. The first is a proposal by regulators to dramatically raise capital requirements for large and midsize banks. The second concerns a recent federal court order regarding a CFPB rule implementing Section 1071 of the Dodd-Frank Act, with a Texas judge staying implementation of the rule for ABA and Texas Bankers Association member banks until the U.S. Supreme Court decides on the constitutionality of the bureau’s funding structure.

The proposed capital requirements would directly undermine bank lending efforts related to the CRA, ABA and BPI said. “We do not believe that the agencies or the public fully understand the impacts that the proposed capital changes would have on banks’ CRA programs, which must be considered, both by the agencies and the public, before any new CRA rules are finalized. The agencies should consider whether changes to the CRA proposal are warranted in light of the proposed changes to the capital rules, and, if so, the agencies must seek comment on any such changes.”

The stay of small-business lending rule will delay the establishment of benchmarks for small-business lending without the full 1071 data set, the associations said. As a result, the agencies will not have the data they need to fully implement the CRA proposal as intended. “The possible impact of the 1071 litigation on CRA modernization is one more reason that the agencies should refrain from finalizing the CRA rules until that impact is understood,” they said.