- Community banks strongly support meeting the credit needs of their entire communities, including low- and moderate- income areas. ICBA supports fair, equitable, consistent, and transparent implementation of the Community Reinvestment Act.
- Consistency is critical between CRA examinations and among agencies. Clarity and timeliness are critical to the process as well.
- The current asset thresholds defining “small,” “intermediate small,” and “large” banks should be increased to reflect the current banking environment. Once changed, all asset thresholds should be subject to annual adjustments.
- Regulators should not unilaterally identify and delineate CRA assessment areas for community banks. Community banks know and understand their communities and are best positioned to define their assessment areas.
- Regulators should provide an illustrative list of activities that are presumed eligible for CRA credit. This list should not, however, be exhaustive.
- If a metric-based approach is proposed, ICBA strongly urges that community banks have the option of continuing to use the current framework as there is a great potential for unanticipated ancillary effects in such a system.
- Minority- and women-owned financial institutions should be exempt from documenting compliance with CRA regulations. A streamlined approach should be available for certified community development financial institutions.
- Credit unions, fintech companies, and any financial firm that serves consumers and small businesses should be subject to CRA in a manner comparable to, and with the same asset-size distinctions, as banks and thrifts.
The CRA was enacted in 1977 to ensure that each insured depository institution serves the convenience and needs of its entire community, including low- and moderate-income (“LMI”) neighborhoods, consistent with [its] safe and sound operation. This mission is the essence of what community banks do. In an effort to modernize the CRA, the Office of the Comptroller of the Currency issued an advanced notice of proposed rulemaking, inviting comments on ways to transform or modernize the regulations. Any modernization effort should clarify and enhance the ability of banks of all charter types and sizes to serve their communities, which will inevitably improve access to credit for all neighborhoods, including LMI neighborhoods.
The Examination Process Should Be Clear, Consistent, and Timely
Community banks are experiencing inconsistencies in the examination process, which creates uncertainty and confusion. The inconsistent manner in which loans and services receive CRA credit occurs between examinations within an agency, as well as between agencies. This makes it incredibly difficult for community banks to plan and implement their CRA requirements responsibly. Additionally, there is virtually no feedback during or following an examination until the actual performance evaluation is shared with the bank. ICBA supports a consistent approach among the regulatory agencies.
Asset Thresholds Should Be Adjusted to Reflect the Current Banking Environment
ICBA believes that the current thresholds defining “small,” “intermediate small,” and “large” banks for purposes of CRA performance tests do not adequately reflect the extensive consolidation and growth that has occurred in the industry since 1977 when CRA was adopted and should be increased. ICBA recommends that the asset threshold for small banks be increased to those with assets less than $5 billion and that are not intermediate small banks. The asset threshold for intermediate small banks should increase to include banks with assets between $1.5 billion and $5 billion. The asset threshold for large banks should increase to include all banks with assets of $5 billion or more. This would significantly ease the CRA regulatory burden for most community banks without impairing agency assessment of CRA performance.
Assessment Areas Should Be Identified and Delineated by the Community Bank
There is a growing trend of reinterpreting geographies and redefining a bank’s CRA assessment area during examination. In some instances, regulators have adjusted assessment areas every time they examine a bank. Such shifts often do not correspond to a bank’s community and create significant uncertainty.
CRA-Qualifying Activities Should Be Expanded and Consistently Applied
ICBA supports a more forward-looking approach in qualifying activities for CRA credit by providing a CRA credit safe harbor for listed activities. While the list would not capture the entire universe of activities that would receive credit, it would provide banks with greater clarity. Additionally, a bank should receive consideration for CRA-qualified activities beyond its delineated assessment area in targeted areas or areas that have historically been largely excluded from consideration, such as LMI and underserved areas. Loans and investments and other community services that are targeted to the entire community, including LMI populations, should receive CRA credit.
Any Metric-Based System Must Allow for Inherent Bank Characteristics
While a metric-based framework could create an objective and measurable standard to provide certainty in the exam process, there is broad concern among community banks that a metric will become a “one-size-fits-all” approach that does not capture the unique efforts of community banks of all sizes and charter types. More important than a metric-based standard, clear expectations and consistency will allow community banks to focus on serving the needs of their communities rather than speculating what activities will receive credit and what documentation demonstrates compliance. If the OCC chooses to include a metric-based approach in a future notice of proposed rulemaking, ICBA strongly urges that community banks have the option of continuing to use the current framework.
Alternative Approaches for Minority- and Women-Owned Financial Institutions and CDFIs
CRA regulations should exempt minority- and women-owned financial institutions from documentation and full-scope examinations. ICBA believes it is appropriate for CRA to support institutions through compliance relief. Additionally, ICBA supports accommodations for bank-designated, certified Community Development Financial Institutions (CDFI), which provide credit predominantly to lower-income borrowers and communities that have been historically underserved.
Parity in the Application of CRA
All financial service providers, including credit unions, fintech companies, and any financial firm that serves consumers and small businesses, should be committed to providing service to entire communities and should be subject to CRA. An uneven playing field places community banks at a competitive disadvantage and inhibits their ability to serve their customers and their communities.
Staff Contact: Lilly Thomas