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 consistent and transparent implementation of the Community Reinvestment Act (CRA).
  • While the Federal Reserve Board, OCC, and FDIC’s new CRA rule includes some features tailored to community banks, it is unreasonably long and complex and will be a significant compliance burden for many community banks that have long histories of meeting the credit needs of their communities, who will nevertheless not achieve a satisfactory rating under the new rule.
  • In particular, the new Retail Lending Test, which will apply to all banks with more than $600 million in assets, is unduly burdensome.
  • Regulators should do more to differentiate between larger community banks and the largest Too Big To Fail banks instead of grouping all banks over $2 billion in assets into the category of “large banks.”
  • Community banks know and understand their communities and are best positioned to define their assessment areas, not regulators.
  • 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 2023 the OCC, FDIC, and Federal Reserve Board published a nearly 1,500-page final rule creating a new CRA framework. We view some aspects of the rule, 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 deeply concerned that the complexity of the new tests, in particular the Retail Lending Test, will 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 have the unintended consequence of causing larger community banks to reduce or eliminate lending away from their branches in order to avoid triggering the creation of RLAAs.

Staff Contact

Mickey Marshall

AVP, Regulatory Counsel

ICBA

Email

Michael Emancipator

SVP and Senior Regulatory Counsel

ICBA

Email

Lawsuit Background

On February 5, 2024, ICBA and other groups filed a lawsuit against the federal banking regulators, challenging the agencies for exceeding their statutory authority with their recent Community Reinvestment Act final rule.

The complaint — which was filed in the Northern District of Texas with the Independent Bankers Association of Texas, Texas Bankers Association, Amarillo Chamber of Commerce, American Bankers Association, U.S. Chamber of Commerce, and Longview Chamber of Commerce — asks the court to vacate the final rule and seeks a preliminary injunction to pause it while the court decides the merits of our case.


About the Lawsuit

The complaint explains how the new rules will limit future bank lending. It also identifies how the regulatory agencies exceeded their statutory authority in violation of the Administrative Procedure Act by:

  • Evaluating bank lending well beyond banks’ deposit taking footprint, as required by CRA. The final rules will evaluate bank lending across the entire country, eliminating the statutory focus on a bank’s lending in its “local community.”

  • Evaluating institutions with more than $10 billion in assets for providing deposit products and services to low- and moderate-income consumers, even though the CRA only authorizes regulators to assess a bank’s record of meeting the credit needs of its local communities.

Litigation Contact (non-media)
Maria Amoruso

Jenna Burke
EVP, General Counsel, Government Relations & Public Policy, ICBA
[email protected].

Media Contact
Nicole Swann

Nicole Swann
VP, Communications, ICBA
[email protected]

Related Press Releases

ICBA Urges Changes to Community Reinvestment Act Proposal

April 08, 2020

Washington, D.C. (April 8, 2020) — The Independent Community Bankers of America® (ICBA) today called on federal regulators to make needed changes to their proposal to reform Community Reinvestment Act regulations to promote equitable, consistent, and transparent implementation of the law.

"ICBA and the nation's community banks appreciate regulatory efforts to modernize the Community Reinvestment Act, whose mission of maximizing the availability of financial services and credit in local communities is the essence of community banking," ICBA President and CEO Rebeca Romero Rainey said today. "We hope that the federal banking regulators will continue to work with stakeholders to create a more refined, uniform, and transparent rule."

In a comment letter to the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., ICBA said it generally supports modernizing CRA regulations to enhance transparency and reflect banking industry changes driven by technology.

It also specifically appreciates provisions in the proposal to create a list of pre-approved CRA activities and a process by which banks can receive regulator confirmation that a loan or activity qualifies for CRA credit. However, ICBA said, community banks are concerned the new regulatory framework is too complex and would impose new and excessive data-collection costs.

  • Among its recommendations, ICBA called on regulators to:
  • Allow community banks up to $5 billion in assets to opt into the revised framework to avoid excessive burdens on these local institutions and a one-size-fits-all approach.
  • Exempt traditional, branch-based banks from tracking the location of deposits and delineating deposit-based assessment areas.
  • Continue working with the Federal Reserve Board to create a uniform CRA rule.
  • Publish examiner’s guidance on documentation requirements before beginning exams under the new framework to alleviate uncertainty.
  • Continue working with stakeholders to develop a metric that addresses changing technology and stays true to CRA’s purpose of expanding access to credit in low- and moderate-income communities before finalizing a performance evaluation framework.
    • The proposed complex dollar-based metric favors large loans and investments over more numerous small loans to LMI families while undervaluing activities such as community development services.
    • Nationwide benchmarks to establish a presumptive rating are not sufficiently tailored for individual banks, especially community banks, and deemphasize the CRA’s core focus on serving the needs of individual communities.

ICBA will continue working with the regulatory agencies on the CRA modernization initiative.

About ICBA
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. With more than 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ nearly 750,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets, nearly $4 trillion in deposits, and more than $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.

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