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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.
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.
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.
Jenna Burke
EVP, General Counsel, Government Relations & Public Policy, ICBA
[email protected].
Nicole Swann
VP, Communications, ICBA
[email protected]
March 30, 2024
The American Bankers Association, the U.S. Chamber of Commerce, Independent Community Bankers of America, Texas Bankers Association, Independent Bankers Association of Texas, Amarillo Chamber of Commerce and Longview Chamber of Commerce issued the following statement after the decision by the Northern District of Texas late Friday to pause implementation of the Community Reinvestment Act Final Rules:
“We welcome this decision by the Northern District of Texas pausing implementation of the Community Reinvestment Act Final Rules until the litigation we filed challenging the rules can be resolved. While we strongly support the goals of CRA, the Final Rules exceeded the banking agencies’ regulatory authority and created disincentives for banks to lend in low- and moderate-income communities that need access to credit the most. We look forward to litigating this matter to a final judgment.”
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About the Independent Community Bankers of America
The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.
As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.
About the American Bankers Association
The American Bankers Association is the voice of the nation’s $23.4 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $18.6 trillion in deposits and extend $12.3 trillion in loans.
About the U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest business organization representing companies of all sizes across every sector of the economy. Our members range from the small businesses and local chambers of commerce that line the Main Streets of America to leading industry associations and large corporations. They all share one thing: They count on the U.S. Chamber to be their voice in Washington, across the country, and around the world. For more than 100 years, we have advocated for pro-business policies that help businesses create jobs and grow our economy.
About the Texas Bankers Association
Founded in 1885, the Texas Bankers Association is the largest state-based banking association in the US. TBA advocates for 400 of its member banks in Austin and Washington; trains more than 10,000 bankers annually; provides nationally recognized community bank services; and invests in Texas communities through financial literacy, scholarships, and charitable activities.
About the Independent Bankers Association of Texas
Formed in 1974, the Independent Bankers Association of Texas (IBAT) represents Texas community banks. The Austin-based group is the largest state community banking organization in the nation with membership comprised of almost 5,000 banks and branches in more than 700 Texas communities. Providing safe and responsible financial services to all Texans, IBAT member bank assets range in size from $28 million to $51 billion with combined assets statewide of $296 billion. IBAT member banks are committed to supporting and investing in their local communities.