Modernizing the CRA: Proposed Changes


On January 9, proposed changes to the Community Reinvestment Act (CRA) regulations by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation were published in the Federal Register. The proposed changes seek to modernize the CRA’s regulatory framework in order to encourage more qualifying CRA activities by banks. Here are the highlights:


Goals of the Proposed Changes

The proposal seeks to make the CRA regulations more objective, transparent, consistent, and easy to understand. The OCC and FDIC state that the proposal would achieve these goals by:

  1. Clarifying what counts for CRA credit
  2. Updating where bank activity counts
  3. Evaluating CRA performance more objectively
  4. Making CRA reporting more transparent and timely

Key Provisions in the Proposal

  • Expanding Qualifying Activities

The proposal would require the agencies to publish a non-exhaustive list of qualifying activities and establish a process for banks to seek confirmation beforehand that an activity qualifies for CRA credit. The proposal would also expand the activities that qualify, including those in areas that have traditionally lacked access to financial services: distressed areas, underserved areas or “banking deserts”, and Indian country.

  • Expanding Where CRA Activity Counts

The proposal would preserve the current requirement that banks delineate their assessment areas around their main office, branches, and non-branch deposit-taking facilities for the purpose of measuring CRA performance. However, regulators recognize the impact of online banking and that many banks receive large portions of deposits outside their facilities-based assessment areas. Therefore, banks would be required to delineate additional, non-overlapping “deposit-based” assessment areas where they have significant concentrations of retail domestic deposits.

In particular, a bank that received 50 percent or more of its retail deposits outside its facilities-based assessment area would be required to describe deposit-based assessment areas where it received 5 percent or more of its retail deposits, based on the physical addresses of its depositors. Such a bank could receive CRA credit for qualifying activities in both the facilities-based assessment area and its deposit-based assessment area.

  • Performance Standards

New general performance standards would measure two fundamental components of a bank’s CRA performance.: The first component will be the number of qualifying retail loans to low-to-moderate income (LMI) individuals, small farms, small businesses, and Low or moderate-income (LMI) areas. The second component will be the impact of a bank’s qualifying activities, measured by the value of those activities relative to its retail domestic deposits.

  • Small Banks

The proposal gives small banks, defined as those with assets of $500 million or less, the option to decide to be evaluated under existing CRA rules or the new regulatory framework.

  • Home Mortgage Loans

The proposal provides that home mortgage loans made to high-and middle-income individuals living in LMI areas would no longer receive CRA consideration.

  • Small Business Loans and Small Farm Loans

The proposal raises the eligible size of a loan that qualifies as a small business loan or small farm loan in an LMI from $1 million to $2 million and indexes this ceiling to account for inflation.

  • Data Collection, Recordkeeping, and Reporting

The proposal calls for enhanced requirements for banks to help the agencies measure, assess, and understand CRA activity.

The Federal Reserve

Significantly, the Federal Reserve Board did not join the OCC and the FDIC in the proposed rulemaking. Federal Reserve officials have indicated the Federal Reserve is considering its own proposal, although it has said that uniform CRA regulation remains its goal. The prospect of different CRA regulations for Fed-supervised banks versus OCC- and FDIC-supervised banks is unprecedented.

Comment Deadline

The proposal has a comment deadline of March 9.

If you would like to discuss how the Community Reinvestment Act could affect your bank, the Banking and Financial Services team is ready to help.

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