Federal Reserve Releases Plan to Reform Community Reinvestment Act

The Federal Reserve on Monday issued an Advance Notice of Proposed Rulemaking (ANPR) that invites public comment on an approach to modernize the regulations that implement the Community Reinvestment Act (CRA). The CRA requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income (LMI) neighborhoods. Of note, the Office of the Comptroller of the Currency issued a final rule on CRA earlier this year, but the Federal Deposit Insurance Corp. did not finalize the rule and the Federal Reserve did not sign on. This was unusual for the bank regulators to issue different proposals. Now, the Federal Reserve has issued its own proposal. In a press release, the Federal Reserve says that public comment on the ANPR will assist the agency in refining CRA modernization proposals to:

• Strengthen CRA's core purpose of meeting the wide range of LMI banking needs and addressing inequities in financial services and credit access;
• Address changes in the banking industry;
• Promote financial inclusion by including special provisions for activities in Indian Country and underserved areas, and for investments in Minority Depository Institutions and Community Development Financial Institutions;
• Bring greater clarity, consistency, and transparency to performance evaluations that are tailored to local conditions;
• Tailor performance tests and assessments to account for differences in bank sizes and business models;
• Clarify and expand eligible CRA activities focused on LMI communities;
• Minimize data burden and tailor data collection and reporting requirements;
• Recognize the special circumstances of small banks in rural areas; and
• Create a consistent regulatory approach.