FDIC, OCC propose CRA reforms with modernized thresholds

The FDIC and OCC issued a joint proposal to amend Community Reinvestment Act regulations, including revised thresholds for many community banks.

Rule Update: The proposed rule would retain the key elements of the 1995 CRA regulatory framework while incorporating changes designed to better align with CRA statute and reduce unnecessary regulatory burdens, particularly for community banks.

Community Bank Relief:

• The proposal would adjust the “small bank” asset threshold under CRA rules from $412 million to $1 billion, the top “intermediate bank” limit from $1.649 billion to $10 billion, and the “large bank” threshold to institutions over $10 billion, meaning nearly 80% of supervised banks would qualify as small banks.

• Under these revised thresholds, community banks with $10 billion or less in assets would not be subject to data collection, maintenance, and reporting requirements and would receive more flexible supervision, while banks under the $1 billion threshold would no longer be subject to a community development test.

Other Provisions: Additionally, the proposal would tighten the kinds of banking services the agencies would subject to CRA, list community development activities that qualify for CRA credit, establish a process for confirming activities qualify as community development, and require banks over $10 billion in assets to impose a 15% cap on overhead expenses associated with community development grants.

ICBA View: In a national news release, ICBA said it is strongly encouraged by elements of the proposal that would modernize regulatory thresholds, noting it has long supported modernizing CRA regulations and minimizing community bank regulatory burdens.

Rescission of 2023 Rule: The FDIC, OCC, and Federal Reserve last year issued a joint proposal to rescind the 2023 CRA rule, with the agencies applying the 1995 CRA regulations to banks. ICBA applauded the agencies’ previous announcement of the proposal, citing the rule’s disproportionate implementation costs for community banks.

CRA Litigation Update: Separately, the FDIC and OCC on Friday filed motions in ongoing litigation over regulators’ 2023 CRA rule, asking the court to declare that rule and 2016 CRA guidance unlawful, to impose limits on future CRA regulations related to deposit products and assessing retail lending activities outside the geographic areas served by physical banking offices, and to resolve their role in the litigation. The Fed’s role in the litigation is proceeding separately.

Background on ICBA Litigation: In 2024, ICBA and other groups filed an appellate brief with the Fifth Circuit challenging the 2023 CRA final rule, arguing it unlawfully evaluates banks’ performance nationwide, not within the bank’s “community.” In their original complaint, the groups asserted that regulators exceeded their statutory authority with the CRA final rule, violating the Administrative Procedure Act, and that the rule would limit future bank lending.

ICBA Advocacy: ICBA has long sought CRA reforms to recognize the disproportionate reporting burden on community banks, including last year calling on regulators to rescind the 2023 CRA rule and reinstate the prior version in a letter responding to the Office of Management and Budget’s request for information on deregulation.

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