Federal Reserve Board Community Reinvestment Act (CRA)

The Federal Reserve Board on Friday invited public comment on proposed revisions to its regulations implementing the Community Reinvestment Act (CRA) that are intended to reduce regulatory burden on community banks while making CRA evaluations more effective in encouraging banks to meet community development needs.

The Board's notice of proposed rulemaking is identical to proposals approved by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) on February 22, 2005. The proposal would:

Exempt banks with assets between $250 million and $1 billion, referred to as "intermediate small banks," from the data reporting obligations the current CRA regulations imposed on banks with assets larger than $250 million.

Subject intermediate small banks to a two-part test (retail lending and community development) instead of the current three-part test (lending, investment, and service). For intermediate small banks, a satisfactory community development rating, as well as a satisfactory retail lending rating, would be necessary for an overall rating of "Satisfactory."

Revise the definition of "community development" for all banks of any size to make it more responsive to the community development needs of rural 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 July 2004 when it withdrew a February 2004 proposal to raise the small-bank threshold to $500 million. The Board expressed concern in July 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. It would also refine the definition of "community development" in rural areas in an effort to make the regulations more effective in encouraging rural development.

Comments are due within 60 days from the date of publication in the Federal Register, which is expected shortly. 2005 Banking and consumer regulatory policy Release Date: February 25, 2005 For immediate release