The FDIC and Office of the Comptroller of the Currency today proposed a series of amendments to Community Reinvestment Act regulations to “refocus” on the law’s objective of getting banks to meet the credit needs of their communities, including narrowing the list of qualifying activities for CRA credit to exclude deposit services and certain grants to programs run by nonprofit organizations.
The FDIC, OCC and Federal Reserve last revised CRA regulations in 2023. The American Bankers Association, U.S. Chamber of Commerce and other organizations filed a lawsuit to stop that rule from going into effect, arguing the agencies had overstepped their statutory authority in implementing the rule. The agencies last year proposed rescinding the 2023 rule.
The rulemaking proposed today would largely retain the CRA framework in place before the 2023 changes while making “substantive” changes to ensure banks better serve the needs of their communities, the OCC said in a statement. Proposed changes include:
- Narrowing the range of retail banking services the agencies consider to focus on credit services, thereby excluding deposit services, and giving greater weight to lending activities;
- Limiting consideration of community development grants to those directly used for a plan, project or initiative with community development as a primary purpose;
- Requiring banks with assets over $10 billion to document that recipients of community development grants do not have overhead costs in excess of 15%;
- Increasing bank asset size thresholds for small banks from $412 million to $1 billion, and for intermediate banks from $1.65 billion to $10 billion.;
- Codifying an illustrative list of community development activities that do and do not qualify for CRA credit and providing a process to confirm that activities qualify as community development.
“The proposed rules announced today seek to increase the focus on lending and ensure that community development grants and donations reach the communities they are intended to benefit instead of being diverted to other activities or excessive operating costs,” the agencies said in a joint statement.
Comments on the proposed rule are due 60 days after publication in the Federal Register.
ABA responds
In a statement, ABA President and CEO Rob Nichols said the proposal makes progress to provide banks “with greater clarity to plan and deliver loans and investments that reflect local needs, bank business strategies and today’s banking landscape.”
“While we are continuing to review it closely, we are pleased that the proposal would bring more transparency and consistency to how banks plan and carry out CRA activities,” he said. “We also appreciate that the proposal raises asset caps for small and intermediate bank performance tests, which are too low and do not reflect the evolution those banks have seen in the more than 20 years since the intermediate small bank classification was first established.”
Nichols added that ABA believes that updating the CRA regulatory framework should be an interagency initiative that includes the Fed.
“CRA reforms should be workable and durable so that resources are not redirected from community reinvestment toward implementing multiple revisions to CRA,” he said. “A coordinated effort to update the CRA framework would ensure regulators can apply the law effectively while allowing banks to support economic growth where it is needed most.”
