Federal bank regulatory agencies are working together to strengthen and modernize the Community Reinvestment Act (CRA).
The CRA was enacted 45 years ago to encourage banks to help meet the credit needs of their local communities, including low- and moderate-income (LMI) neighborhoods.
“The last major revisions to the CRA regulations were made in 1995. The CRA is one of our most important tools to improve financial inclusion in communities across America, so it is critical to get reform right,” Lael Brainard, a member of the Federal Reserve Board, said. “Today’s proposal seeks to expand access to credit, investment, and banking services in LMI communities. It evaluates bank engagement across geographies and activities in order to ensure the CRA is effective in supporting a robust and inclusive financial services industry.”
The proposal includes several key elements. It would expand access to credit, investment, and basic banking services in low- and moderate-income communities. It would also adapt to changes in the banking industry, including internet and mobile banking. Further, it would provide greater clarity, consistency, and transparency. In addition, the proposal would tailor CRA evaluations and data collection to bank size and type, recognizing the differences in bank size and business models. Finally, it would maintain a unified approach from the bank regulatory agencies and incorporate extensive feedback from stakeholders.
In addition to the Federal Reserve Board, the proposal is supported by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency. It also has the backing of banking industry groups, like the Consumer Bankers Association (CBA).
“This is an important step towards modernizing a law that has not been meaningfully updated in decades, well before the widespread adoption of smartphones and mobile banking. We’re pleased to see the proposal focus on providing banks with the clarity, consistency, and transparency necessary to continue delivering on CRA’s important mission for years to come. We also commend leading regulators for taking a unified approach and incorporating feedback from all stakeholders,” CBA President & CEO Richard Hunt said.
Hunt said banks have invested trillions of dollars into underserved communities since the CRA was enacted.
“Recognizing our shared commitment to expanding access to credit across every community banks serve, it’s imperative any final rule applies new requirements uniformly across the board to all financial institutions. CBA, our Community Reinvestment Committee, and all of our member banks are currently analyzing the proposal and look forward to working with regulators, providing recommendations critical to ensuring the success of this effort,” Hunt added.
The banking regulators will accept comments on the proposals until Aug. 5.