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).

  • The Federal Reserve Board, OCC, and FDIC should modernize CRA jointly, resulting in a consistent, uniform rule for all banks.

  • 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.

  • 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 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 December of 2021, the Office of the Comptroller of the Currency (“OCC”) finalized a rescission of its June 2020 CRA rule, returning to the 1995 framework while it works with the FRB and the FDIC to promulgate an interagency proposal. ICBA supports withdrawing certain aspects of the 2020 rule, including the geocoding of deposit data and nationwide performance metrics, but also urges the regulators to retain certain positive changes such as increased asset thresholds and a qualifying activities list and confirmation process.

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 2020 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 any interagency rule raise the asset thresholds for small banks and ISBs to no less than the $600 million and $2.5 billion levels used by the OCC in 2020. This would 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.

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 (CDFIs), 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. An uneven playing field places community banks at a competitive disadvantage and inhibits their ability to serve their customers and their communities.

Staff Contact: Mickey Marshall

Staff Contact

Mickey Marshall

Director, Regulatory Legal Affairs

Washington, DC

Email

Letters to Congress and Regulators

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