The Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) are expected to propose sweeping changes to the Community Reinvestment Act of 1977 (CRA) in the coming weeks – reportedly without the involvement of the Federal Reserve.
While not formally confirmed, the OCC and FDIC are set to release a proposal that would raise the threshold for banks subject to the CRA. The new threshold could increase from $1.6 billion to $10 billion in assets and would subsequently reclassify hundreds of banks currently treated as large institutions as no longer subject to the CRA – effectively downgrading CRA compliance obligations. Notably, CRA operating regulations have not been updated since the 1990s.
New qualifying CRA credit activities
The CRA is meant to address historical redlining by requiring US regulators to grade banks for lending and investments in covered communities, with grades ranging from “outstanding” to “substantial noncompliance.” A CRA credit activity is a loan, investment or service provided by a bank that can increase its CRA compliance score.
The OCC and FDIC plan to propose a list of additional qualifying CRA credit activities, such as affordable housing development and small business lending, that would count toward a bank’s CRA score and give covered institutions more opportunities to obtain higher scores.
The Federal Reserve, which is also responsible for implementing the CRA, is reportedly not involved in the current rulemaking process.
Broader deregulatory context
The anticipated proposal reflects the Trump administration’s ongoing efforts to ease CRA and other regulatory compliance requirements for banks. In May, the OCC extended the time between CRA compliance exams for banks meeting certain criteria, and regulators have also directed bank examiners to focus only on material financial risks. Also, earlier this month, the OCC and FDIC dropped their appeal of a March 2024 federal court decision in Texas that blocked a Biden-era CRA rewrite.
Looking ahead
Banks should closely monitor the OCC and FDIC for the formal release of the expected proposed rule changes in the coming weeks. Once the proposal is published, covered institutions should assess its potential impact on their current CRA compliance obligations – particularly whether the revised large-bank asset threshold would change their classification and how the expanded list of qualifying CRA credit activities may affect their existing lending, investment and service strategies. Banks that currently operate near the proposed $10 billion threshold should evaluate whether a reclassification could alter the scope of their CRA programs, while all covered institutions should review whether their community development activities align with the new qualifying criteria. Engaging compliance, legal and community development teams early will be critical to identifying gaps and positioning banks to submit informed comments during the notice-and-comment period.