Fed Seeks Comments on CRA Revisions

April 01, 2005

The public is invited to comment on proposed revisions to the Community Reinvestment Act (CRA). Enacted in 1977, the CRA encourages depository institutions to help meet the credit needs of the communities they serve, including low- and moderate-income neighborhoods.

The revisions are intended to reduce regulatory burden on community banks and make CRA evaluations more effective. Comments are due by May 10.

The Board's notice of proposed rulemaking is identical to proposals approved by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.

The proposal would:

  • exempt banks with assets between $250 million and $1 billion, referred to as "intermediate small banks," from the data-reporting obligations currently required for banks with assets larger than $250 million.
  • subject intermediate small banks to a two-part test on retail lending and community development instead of the current three-part test on lending, investment and service. (The community development test would provide greater flexibility to intermediate small banks than under the large bank tests applicable to them currently, by enabling them to allocate their resources for CRA purposes among community development loans, investments and services based on the needs of their community. For intermediate small banks, a satisfactory community development rating and a satisfactory retail lending rating would be necessary for an overall rating of "satisfactory.")
  • revise the definition of community development for banks of any size to include activities such as affordable housing in underserved rural areas and designated disaster areas.
  • clarify when illegal lending practices—for example, by a bank's affiliate—might reduce the bank's CRA rating.

The proposal addresses concerns expressed by the Board in 2004 when it withdrew a proposal to raise the small-bank threshold to $500 million. The Board expressed concern that the proposal was not certain to yield significant cost savings for banks, but might reduce community development capital in some rural communities. The current proposal would deliver greater cost savings while maintaining scrutiny of banks' community development records, though on a more flexible basis.

To submit comments to the Federal Reserve Board on the proposed revisions, identified by Docket No. R-1225, interested persons can use any of the following methods:

  • visit www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm and follow the instructions;
  • visit www.regulations.gov and follow the instructions
  • send an e-mail to regs.comments@federalreserve.gov and include the docket number in the subject line of the message;
  • send a FAX to (202) 452-3819 or (202) 452-3102; or
  • mail comments to: Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, NW, Washington, D.C. 20551

Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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