The long awaited CRA proposal was published in the Federal Register on January 9, 2020, meaning that comments on the proposed rule are due on March 9, 2020. This joint proposal between the OCC and FDIC did not include the support of the Federal Reserve, who currently have a slightly different take on how CRA regulations should be revised (according to comments by Federal Reserve Governor Lael Brainard on January 8, 2020).
As we have explained before, this would be the first substantial update to the rules in nearly 25 years if the rule is finalized. According to the release, the proposed rules are intended to do a number of things including:
increase bank activity in low- and moderate-income communities where there is significant need for credit,
encourage more responsible lending,
provide greater access to banking services, and
make improvements to critical infrastructure.
The proposals attempt to clarify what qualifies for credit under the CRA, enabling banks and their partners to better implement reinvestment and other activities that can benefit communities. The agencies stated they will also create an additional definition of "assessment areas" tied to where deposits are located—ensuring that banks provide loans and other services to low- and moderate-income persons in those areas. In addition, the agencies explained that the proposed rules are intended to address digital banking changes and to further encourage lending to low- and moderate- income borrowers living in underserved communities, such as rural areas and tribal lands far removed from urban centers where bank branches are concentrated.
As the proposal would require complying with certain collection, recordkeeping, and reporting requirements under the new performance standards, this process may impose a disproportionate burden on small banks. Accordingly, the proposal provides an exemption for banks with $500 million or less in total assets where they would be permitted to opt-in to the new framework or continue to be evaluated for CRA compliance under the existing performance standards, recognizing that the benefit of requiring the data-based approach for small banks may be outweighed by the cost of compliance.
As proposed, these CRA rules would only apply to federally insured depository institutions supervised by the FDIC and OCC (which conduct approximately 85 percent of all CRA activity). While the Federal Reserve did not participate in the proposed rule, there have been statements that the agencies are hopeful that the final rule will we a joint issuance between the FDIC, OCC, and Federal Reserve. Therefore, it would be beneficial for Federal Reserve Banks to also consider commenting on the proposed rule as this proposal could have a future impact on such banks as well.
Comments are due 60 days after publication in the Federal Register.
The proposed rule can be found here.
