Our Position

Community Reinvestment Act (CRA)

Position

  • 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 (CRA).
  • CRA implementing regulations should be comparable among agencies.
  • Consistency between CRA examinations and among agencies is critical for an effective CRA, as are clear expectations and timely feedback for bankers.
  • The current asset thresholds defining “small,” “intermediate small,” and “large” banks should be increased to reflect the current banking environment.
  • Community banks know and understand their communities and are best positioned to define their assessment areas, not regulators.
  • Regulators should provide a non-exhaustive, illustrative list of activities that are presumed eligible for CRA credit.
  • To preserve flexibility for smaller banks, we urge the FDIC and FRB to emulate the OCC’s decision to allow small banks the choice of continuing to be evaluated under their current framework or to opt-in to a modernized rule.
  • Internet banks should have their community reinvestment performance evaluated on a nationwide basis, rather than being evaluated only in the immediate vicinity of their main office. Any nationwide benchmark for internet banks should require a level of community reinvestment that is at least equivalent to CRA expectations for branch-based banks.
  • 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.

Background

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 June of 2020, the Office of the Comptroller of the Currency (“OCC”) finalized a new CRA rule that attempts to account for technological changes and to create a quantitative, metrics-based framework for CRA evaluations. In October of 2020, the Federal Reserve Board (“FRB”) issued an advance notice of proposed rulemaking, which sets out their alternative for a modernized CRA regulatory framework.

The Examination Process Should Be Clear, Consistent, and Timely
Community banks experience 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. Agencies must adopt consistent definitions and qualifying activities criteria. Additionally, there is virtually no feedback during or following an examination until the actual performance evaluation is shared with the bank.

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. The OCC’s final rule made a positive step by increasing the small bank threshold to $600 million and the intermediate small bank threshold to $2.5 billion.

ICBA recommends that the asset threshold for small banks be increased to assets of less than $10 billion for banks that are not intermediate small banks. The asset threshold for intermediate small banks should be between $1.5 billion and $10 billion. Any bank with assets of $10 billion or more should be considered a large bank. This would significantly ease the CRA regulatory burden for most community banks without impairing agency assessment of CRA performance.

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. An illustrative list was included in the OCC’s final rule and should be emulated by the FDIC and FRB. While the qualifying activities list would not capture the entire universe of activities that would receive credit, it would provide banks with greater clarity.

Any Metric-Based System Must Not Be “One-Size-Fits-All.”
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. To prevent metrics from becoming “one-size-fits-all,” the agencies should avoid nationwide benchmarks for community banks. Instead, benchmarks should be tailored to individual assessment areas and should reflect local differences in the availability of qualifying loans and investments.

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 such 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. We also believe that there should be an incentive for all banks to enter into partnerships with MDIs, CDFIs, and women-owned financial institutions. An incentive could come in the form of a credit multiplier or impact score that would affect performance context.

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. Branchless, internet banks should be evaluated on a nationwide basis, with performance benchmarks that are at least equivalent to branch-based banks. Anuneven playing field places community banks at a competitive disadvantage and inhibits their ability to serve their customers and their communities.

Sep 20, 2021 | NewsWatch Today

OCC issues proposal on rescinding CRA rule

Sep 9, 2021 | NewsWatch Today

OCC proposes rescinding CRA rule

May 18, 2021 | Press Release

ICBA Supports OCC Reconsidering CRA Rule

May 7, 2021 | NewsWatch Today

ICBA, groups urge OCC to withdraw CRA rule

Feb 16, 2021 | Press Release

ICBA Continues Call for Joint CRA Rulemaking