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 consistent and transparent implementation of the Community Reinvestment Act (CRA).
• The Federal Reserve Board, OCC, and FDIC should modernize CRA jointly, resulting in a consistent, uniform rule for all banks.
• 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.
• Minority and women-owned financial institutions and Treasury-certified CDFIs should have a streamlined CRA exam, with a presumed rating of high satisfactory.
• 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 equivalent 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 2022 the OCC, FDIC, and Federal Reserve Board published a notice of proposed rulemaking outlining a new CRA framework. We view some aspects of the proposal, including the increased asset thresholds, a qualifying activities list and confirmation process, and the ability of small banks to opt-in to the new framework or continue to be evaluated under their current framework as beneficial to community banks.

However, we are concerned that the complexity of the new tests, in particular the Retail Lending Test, may increase the cost of compliance and make it more difficult to attain “high satisfactory” or “outstanding” ratings. We are also concerned that Retail Lending Assessment Areas (“RLAAs”) may cause larger community banks to reduce lending away from their branches in order to avoid triggering the creation of RLAAs.