Banking Regulators Release CRA Final Rule

Posted: Nov 01 2023

The Federal Reserve, FDIC and OCC have released the final rule to modernize how they assess compliance with the Community Reinvestment Act. According to a Fed overview of the nearly 1,500-page document, the final rule leaves in place several aspects of the proposed rule unveiled last year, including flexibility in retail lending evaluations for banks with less than $600 million in assets, and new data collection and reporting requirements for banks over $2 billion.
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Among its provisions, the final rule would implement a new retail lending evaluation for banks with between $600 million and $2 billion in total assets and provide them the option of evaluation under a new test for community development financing. Banks over $2 billion would be evaluated under four tests: a retail lending test, a retail services and products test, a community development financing test and a community development services test. In addition, retail services and product evaluations for banks over $10 billion would include digital delivery systems. Banks with limited retail products and services, or “limited purpose banks,” will be evaluated exclusively on community development financing activities. In addition, the final rule retains the strategic plan option.
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The final rule also creates new “retail lending assessment areas” for banks with more than $2 billion in assets where the bank makes more than 150 closed-end home mortgage loans or 400 small-business loans in each of the two prior calendar years. In a departure from the proposal, banks that conduct 80% or more of specified retail lending activity inside of their facility-based assessment areas are exempt from the retail lending assessment area requirements.
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The final rule makes other modifications to the proposal, including giving equal weight to retail and community development activities and maintain the current standard for CRA downgrades for “discriminatory and other illegal credit practices” rather than adopting the proposed rule’s incorporation of illegal credit and noncredit practices. In addition, banks would be given more time to come into compliance compared to the 12 months proposed in the original version of the rule, with reporting requirements taking effect in 2027.

To read the final rule, visit: https://www.federalreserve.gov/aboutthefed/boardmeetings/files/frn-cra-20231024.pdf

To read an interagency fact sheet, visit: https://www.federalreserve.gov/aboutthefed/boardmeetings/files/fact-sheet-cra-20231024.pdf

To read an interagency overview of key objectives, visit: https://www.federalreserve.gov/aboutthefed/boardmeetings/files/cra-key-objectives-20231024.pdf