Community Reinvestment Act Final Rule Released

On October 24, the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), and the Federal Deposit Insurance Corporation (FDIC) jointly issued the Community Reinvestment Act (CRA) final rule.

The CRA, which was designed to encourage banks to help meet the credit needs of low- and moderate-income communities, has been revised to better adapt to changes in the banking industry. The final rule takes effect on April 1, 2024, with staggered compliance dates on January 1, 2026, and January 1, 2027.

The final rule includes revisions such as:

• Establishes and updates four performance tests (Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, and Community Development Services Test).
• Reduces the number of major product lines potentially evaluated under the Retail Lending Test from six to three.
• Limits the evaluation of automobile lending under the Retail Lending Test.
• Adjusts retail lending performance ranges.
• Changes weight of community development financing activities to now be weighted equal to retail activities when evaluating large banks under the Retail Lending Test.
• Tailors requirements for delineating retail lending assessment areas (RLAAs).
• Adds metric under the Community Development Financing Test that focuses on certain investments relative to deposits for banks greater than $10 billion.
• Creates an impact factor under the Community Development Financing Test to evaluate investments made to the Low-Income Housing Tax Credit (LIHTC) and New Markets Tax Credit.
• Clarifies the strategic plan option and provides additional flexibility for banks with nontraditional business models.
• Increases the compliance date for banks to be in alignment with the new requirements from 12 months to more than 24 months after the rule is adopted and published.
• Clarifies the provision on CRA ratings downgrades.
• Allows certain loans to small businesses to be considered as a community development loan under the economic development category.
• Recognizes differences in bank size and business models to include large banks, intermediate banks, small banks, and limited purpose banks.
• Updates asset size thresholds for different bank sizes.
• Exempts small and intermediate banks from new data collection requirements that apply to banks with assets of at least $2 billion.
• Limits certain data collection and reporting requirements to large banks with assets greater than $10 billion.

For a more detailed analysis of the final rule, please see the next edition of the NAHRO Monitor on November 15.

For the final rule, see here.