The recently unveiled Community Reinvestment Act modernization rule will provide greater clarity to banks about what actions regulators will count toward fulfilling their CRA obligations, Federal Reserve Vice Chairman for Supervision Michael Barr said today. During a Q&A at a National Housing Conference event, Barr said the changes were meant to provide greater consistency and greater transparency to both communities and banks about CRA eligibility.
“We do that primarily in two ways,” Barr said. “One is there is a set of illustrative, eligible activities that are spelled out in detail in the rules. So really, for the first time, you can say in the rule itself, ‘Here are the activities that count.’ And the second thing is we set up a process so if a community or bank has an activity, and they’re not sure whether it counts or it doesn’t count, they can come to the bank regulators and show them the project and say, ‘Is this a CRA-eligible project?’”
Barr also said that community development will be measured in many ways. “There’s community development investments that get specially called out,” he said. “There’s community development lending. We made sure that we highlighted the importance of the Low-Income Housing Tax Credit and the New Markets Tax Credit as avenues for investment by banks because those tools are critical to serving low- and moderate-income communities. We have the ability of banks to get credit nationally for their community development activities, both lending and investment… This approach lets those dollars flow really where they’re needed all across the country.”