Regulators approve Community Reinvestment Act final rule

Federal regulators issued an interagency final rule to reform Community Reinvestment Act regulations.

Key Provisions: The nearly 1,500-page final rule largely takes effect in April 2024 and will require bank compliance by Jan. 1, 2026. It includes provisions to:

• Create a qualifying activities list and preapproval process to increase certainty about whether prospective loans or investments count for CRA credit.

• Raise the “small bank” threshold from its current level of $376 million in assets to $600 million in assets. Small banks will be permitted to opt in to the new Retail Lending Test or continue to be evaluated under the existing exam small bank lending test.

• Apply the new Retail Lending Test to “intermediate” banks between $600 million and $2 billion in assets, raising the upper bound from the current $1.503 billion threshold.

• Classify all banks over $2 billion in assets as large banks subject to the new Retail Lending Test, Retail Products and Services Test, Community Development Financing Test, and Community Development Services Test.

• Require large banks that conduct less than 80% of their retail lending inside their assessment areas to delineate additional Retail Lending Assessment Areas in areas where they have a concentration of loans but not a physical branch presence.

ICBA Response: In a national news release, ICBA said that while the rule includes some beneficial changes, it is concerned about disproportionate implementation costs for community banks. The rule also does not sufficiently differentiate between community banks and the nation’s largest banks, ICBA President and CEO Rebeca Romero Rainey said.

Dissenting Votes: In separate votes by the Federal Reserve Board and FDIC board of directors, Fed Governor Michelle Bowman, FDIC Vice Chairman Travis Hill, and FDIC Director Jonathan McKernan voted against the rule, citing its complexity and impact on community banks.

Background: The final rule—which implements a proposal issued in May 2022—is designed to adapt CRA regulations to banking industry changes, improve clarity to regulated institutions, tailor evaluations and data collection to bank size and type, and maintain a unified interagency approach.

More Information: Additional resources, including staff memoranda and statements from regulators, are available on the Federal Reserve and FDIC board meeting pages.

Previous ICBA Advocacy: ICBA last year called on federal banking regulators to issue a uniform CRA final rule that minimizes new data collection and reporting burdens for community banks. In previous congressional testimony, ICBA urged Congress to hold a hearing on applying CRA to tax-exempt credit unions.

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