Rulemaking Drives Significant Changes to Community Reinvestment Act – Financial Services

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve (Fed), and the Federal Deposit Insurance Corp. (FDIC) (together, the agencies) issued a nearly 700-page notice of proposed rulemaking (NPR)
1 on May 5, 2022, proposing revisions to the Agencies Community Reinvestment Act (CRA) regulations. Congress passed the CRA in 1977 to encourage regulated financial institutions (banks) to help meet the credit needs of the local communities in which they are licensed by requiring a review of bank records to meet the credit needs of the their entire community, including low and moderate income neighborhoods (LMIs). The last major regulatory revisions were completed in 1995. Comments on the proposed regulations are expected by August 5, 2022.

Agencies seek feedback on proposal to modernize CRA regulations by clarifying what matters, updating where activity counts, measuring performance more objectively, and making reporting more timely and transparent . The proposed rule aims to encourage covered institutions
2 to better serve their communities, including IMT neighborhoods by increasing lending, investment, and services to areas that need it most.

Under current CRA regulations, a bank’s activities that qualify for community development fall into four general categories: affordable housing, community development services, economic development, and revitalization and stabilization. To be eligible, an activity must have a primary community development objective.

As a general rule, activities whose primary objective is community development would continue to receive full credit from the CRA under the Community Development Funding and Community Development Services tests. The proposed rule would also create more descriptive and expansive criteria for the type of activities eligible for CRA credit and would include additional definitions to reflect the focus on activities that meet community needs, particularly needs of individuals and communities of IMT and rural communities and areas of indigenous lands, as well as the needs of small businesses and smallholdings.

Significantly for Indian Country, the agencies have for the first time included an entire section defining areas of Indigenous lands to include the following geographic areas: Indian Country, lands held in trust by the United States for Native Americans, Indian reservations d State, Alaska Native Villages, Hawaiian Native Lands, Alaska Native Village Statistical Areas, Oklahoma Tribal Statistical Areas, Tribal Designated Statistical Areas, American Indian Joint Use Areas and state-designated Tribal Statistical Areas.

Identify community development

The RNP aims to clearly define criteria that would better identify the types of activities that meet the definition of community development activity, including 11 categories that set specific eligibility standards for a wide range of community development activities. communautary development. Agencies specified community development activities on indigenous lands that would qualify banks for ARC credits, including investments in revitalization projects, critical community facilities and infrastructure, disaster preparedness and climate resilience .

To qualify banks for ARC credits in Indigenous Lands areas, the project must 1) benefit or serve residents, including LMI residents of Indigenous Lands areas; 2) not displace or exclude LMI residents; and 3) work in conjunction with a federal, state, local, or tribal government plan, program, or initiative that benefits or serves residents of Indigenous Land Areas.

Other community development activities, such as affordable housing or economic development, could also be considered in areas of Indigenous lands, provided they otherwise meet the eligibility standards for those particular activities.

Of added significance to Indian Country, the proposed amendments make it clear that banks can receive credit from the CRA to partner and invest in Community Development Financial Institutions (CDFIs) certified by the US Treasury Department, as well as emerging CDFIs. Under previous interpretations of ARC rules, banks had to invest in their service areas to be eligible for ARC credits, which severely limited the effectiveness of the program in Indian Country given its lack of services. banking.

A link to submit comments and additional information about the NPR publication is available on the Federal Reserve website.


1. OCC, Fed and FDIC Joint Notice of Proposed Rulemaking.

2. The proposed rule would apply generally to all insured depository institutions regulated by the OCC and FDIC, including national banks, state-chartered banks that are not members of the Fed, and credit unions. federal and state savings (banks). These banks perform approximately 85% of all CRA business in the country.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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