FED – FED issues Advance Notice of Proposed Rulemaking on an approach to modernize regulations that implement the Community Reinvestment Act

The FED on Monday issued an Advance Notice of Proposed Rulemaking (ANPR) that invites public comment on an approach to modernize the regulations that implement the Community Reinvestment Act (CRA) by strengthening, clarifying, & tailoring them to reflect the current banking landscape & better meet the core purpose of the CRA. The ANPR seeks feedback on ways to evaluate how banks meet the needs of low- & moderate-income (LMI) communities & address inequities in credit access.

“By releasing a thoughtful & balanced ANPR & providing a long period for comment, the Federal Reserve is hoping to build a foundation for the banking agencies to come together on a consistent approach to CRA that has the broad support of the intended beneficiaries as well as banks of different sizes & business models,” said FED Chair Jerome H. Powell.

“The CRA is a seminal piece of legislation that remains as important as ever as the nation confronts challenges associated with racial equity & the COVID-19 pandemic,” said FED Governor Lael Brainard. “We must ensure that CRA continues to be a strong & effective tool to address systemic inequities in access to credit & financial services for LMI & minority individuals & communities.”

Public comment on the ANPR will assist the Board in refining CRA modernization proposals to:

• Strengthen CRA’s core purpose of meeting the wide range of LMI banking needs & addressing inequities in financial services & credit access
• Address changes in the banking industry
• Promote financial inclusion by including special provisions for activities in Indian Country & underserved areas, & for investments in Minority Depository Institutions & Community Development Financial Institutions
• Bring greater clarity, consistency, & transparency to performance evaluations that are tailored to local conditions
• Tailor performance tests & assessments to account for differences in bank sizes & business models
• Clarify & expand eligible CRA activities focused on LMI communities
• Minimize data burden & tailor data collection & reporting requirements
• Recognize the special circumstances of small banks in rural areas
• Create a consistent regulatory approach

Congress enacted the CRA in 1977, as part of several landmark pieces of legislation enacted in the wake of the civil rights movement intended to address inequities in the credit markets. The Board, the Federal Deposit Insurance Corporation, & the Office of the Comptroller of the Currency have broad authority & responsibility for implementing the statute, which provides the agencies with a crucial mechanism for addressing persistent structural inequity in the financial system for LMI & minority individuals & communities. The statute & its implementing regulations also provide the agencies, regulated banks, & community organizations with necessary structure for facilitating & supporting a vital financial ecosystem that supports LMI- & minority-focused community development.

Comments on the attached ANPR will be accepted for 120 days after publication in the Federal Register.

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