Federal Reserve Board Gov. Lael Brainard on Tuesday reiterated the importance of the Community Reinvesment Act’s (CRA) focus on place and noted ideas offered for CRA rule changes that could include expanded assessment areas once this issue moves to the proposed rule stage.
Speaking before the 2019 Just Economy Conference of the National Community Reinvestment Coalition, Brainard highlighted some of the changes offered by commenters on the CRA advance notice of proposed rulemaking (ANPR) issued by the Office of the Comptroller of the Currency (OCC) as well as input received during the Fed’s own outreach sessions and symposium on the topic.
Here are a few of the key concepts she said regulators are considering based on that input:
- Rework the assessment area definition so that banks of a certain scale would have separate assessment areas for their retail activities and their community development activities. “This would retain the law’s focus on the credit needs of a bank’s local community by evaluating the retail lending and services it offers in the county or other geographic area surrounding its branches, deposit-taking ATMs, and other concentrations of lending and deposit-taking,” she said. As part of this approach, she said, a bank could get CRA consideration for community development activities in a more expansive area.
- Address current distortions in the current structure of performance tests by creating a separate, comprehensive community development test to evaluate community development loans and qualified investments “through a similar lens, possibly along with community development services. A separate, comprehensive community development test could encourage banks to provide the patient, committed financing – in the form of loans as well as investments – that community development organizations value the most,” she said.
- Address some of the rule’s definitions. Brainard noted that many commenters have suggested an expansion of the definition of “community development” to include loans to or investments in community development financial institutions (CDFIs), regardless of the bank’s assessment area, because the sole purpose of CDFIs is community development. “There are also suggestions that in high-poverty rural areas, where incomes overall may be low relative to federal benchmarks, it may be helpful to adjust the definition of what qualifies as low- and moderate-income so that more CRA activity receives consideration, which we will study,” she said.
Tailoring of the CRA rules and consistence in their application have also been recurrent themes, she said.
Brainard, in her prepared remarks, offered no hints as to when a proposed rule would be out. The current ANPR was issued by the OCC alone; it’s presumed that a notice of proposed rulemaking will come jointly from the OCC, the Fed and the Federal Deposit Insurance Corp. (FDIC). What Brainard did say is that the Fed will be working with other regulators “to formulate regulatory changes that preserve what is best about CRA while ensuring its value and relevance for another generation.”
The Community Reinvestment Act: How Can We Preserve What Works and Make it Better? – Speech by Fed Gov. Brainard at the 2019 Just Economy Conference, National Community Reinvestment Coalition, Washington, D.C.