Treasury unveils CRA ‘modernization,’ including updating definitions of ‘geographic assessment areas’

Recommendations to reform the Community Reinvestment Act (CRA) were released by the Treasury Department Tuesday, with an aim to “better align CRA activity with the needs of the communities that banks serve, while being conducted in a manner consistent with a bank’s safety and soundness,” according to a release.

“Forty years since the passage of CRA, it is time for modernization to fit today’s banking  landscape and community needs,” said Treasury Secretary Steven T. Mnuchin. “Our recommendations will improve the effectiveness of CRA by enhancing the assessment and examination process, enhancing the ability of banks to deliver services in the communities they serve while considering technological advances in the financial industry.”

In its release, the Treasury Department said its key recommendations for changing CRA (an anti-redlining law) included:

  • Updating the definitions of geographic assessment areas to reflect the changing nature of banking arising from changing technology, customer behavior, and other factors;
  • Increasing clarity and flexibility of CRA examinations to increase transparency and effectiveness of CRA rating determinations;
  • Improving the examination process to increase timeliness of evaluations and increasing accountability for banks’ planning of their CRA activity; and
  • Incorporating performance incentives to better serve the CRA’s intended purpose of encouraging banks to meet the credit and deposit needs of their communities. “Treasury’s recommendations will incentivize bankers to do more for low- and moderate-income communities, especially in cases where the bank has underperformed in prior assessment periods,” the Treasury release stated.

Treasury Releases Community Reinvestment Act Modernization Recommendations