Fed keeps own counsel on CRA-reform proposal as OCC, FDIC push forward

The Federal Reserve remained mum Friday about its plans for modernizing the Community Reinvestment Act (CRA) the day after its sister federal banking regulators issued their own proposals for making changes to anti-redlining rules.

Thursday, in separate actions, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC) released a joint proposal for reforming their rules implementing the 1977 CRA. The law was passed by Congress to combat the practice of some banks (at that time) to take deposits from communities, but then not to lend to those communities, particularly those with low- and moderate-income (LMI) neighborhoods.

To push more credit into those communities, the law requires the Federal Reserve, FDIC, and OCC to encourage financial institutions to help meet the credit needs of the communities in which they do business, including LMI areas.

The most recent comment by the Fed came Thursday via Reuters. The news service reported that an agency spokesperson released a statement saying “any modernization of the Community Reinvestment Act must further the goal at the heart of the statute – encouraging banks to meet the credit needs of local low- and moderate-income communities. We look forward to studying the public comments on the rule proposed by the OCC and FDIC. At this time, no decisions have made about how the Federal Reserve will proceed.”


On Wednesday, in a press conference following the meeting of the rate-setting Federal Open Market Committee (FOMC), Fed Chair Jerome H. (“Jay”) Powell said his agency “worked very hard to try to get aligned with the OCC” on its proposal (which serves as a model for the FDIC proposal). “And, my hope is that we can still do that,” Powell said. However, he sounded almost skeptical about accomplishing that. “I don’t know whether that will be possible or not; we’ll just have to see,” Powell said. “If we can’t, I’m not sure what the path forward would be.”

He also said the Fed would not want to create either confusion or tension between the various regulatory regimes that may (or may not) be adopted by the other federal banking agencies and may be “slightly different.” “I hope that’s something we don’t have to face, but we will if we have to,” Powell said.

Thursday, Comptroller Joseph Otting released a statement about the CRA proposal, saying the action attempted to achieve four things:

  • Clarify what counts for CRA credit by articulating clear standards and requiring agencies to publish an illustrative list of qualifying activities.
  • Preserve assessment areas in the local areas around branches and require banks that draw a large portion of their deposits outside of their facilities-based assessment areas to designate additional assessment areas wherever they have significant concentrations of deposits.
  • Evaluate CRA performance more objectively by assessing what portion of a bank’s retail lending is targeted to LMI individuals and areas as well as measuring the impact of that activity by comparing the value of a bank’s CRA qualifying activity with its deposits in each assessment area and at the overall bank level.
  • Improve the transparency and timeliness of reporting.

The proposed rule also allows small banks (those with $500 million or less in total assets) the option to continue to be evaluated under the current CRA small bank test or opt in to the new general performance standards.

Otting called the proposal “an important step toward making CRA work better for everyone and reflects more than 18 months of work by dozens of dedicated staff at the federal banking agencies and thousands of stakeholders who have advocated for improvements in the current framework that was last updated in 1995.”

The joint proposed rule was issued with comments due 60 days following publication in the Federal Register.

FDIC and OCC Propose to Modernize Community Reinvestment Act Regulations

Comptroller Statement Regarding Joint Proposal to Modernize the Community Reinvestment Act Regulations