Final Rule Amending Community Reinvestment Act Regulations
- Source: federalreserve.org
Highlights:
We asked for it and we got it! The Federal Reserve, FDIC, and OCC have released the long-awaited CRA modernization rule. Here are some highlights.
Effective date: April 1, 2024, however assessment area requirements and some general provisions become effective January 1, 2026, and reporting requirements are effective January 1, 2027, with data being reported by April 1, 2027.
Tiered framework: The rule provides for four categories by which banks will fall into. The rule also retains the strategic plan option for banks.
| Category | Total Assets as of 12/31 Prior 2 Years |
Evaluations and Weighting | Data Collection |
| Small | < $600M | Current CRA evaluation criteria
Optional: New Retail Lending test |
No change |
| Intermediate | $600M – $2B | Current Community Development evaluation (50%)
New Retail Lending test (50%) Optional: New Community Development Financing test |
No change |
| Large | >$2 billion | Retail lending test (40%)
Retail services and products test (10%) Community Development Financing test (40%) Community Development Services test (10%) |
Updated and expanded. |
| Limited Purpose | Current “limited purpose” and “wholesale” | Community Development Financing Test | No change |
Tests: The rule maintains, adjusts, and introduces new tests and criteria.
| Test | Geographic Area | Considerations |
| Retail Lending | Facility-based assessment areas.
Retail lending assessment areas: For large banks with 80 percent or less of their lending in facility-based assessment areas, closed-end home mortgage or small business lending would also be evaluated in areas with > 150 closed-end home mortgage loans or 400 small business loans originated in both of the prior two years. Outside retail lending areas: For large banks, as well as for intermediate banks if the majority of their retail lending is outside their facility-based assessment areas. |
Home mortgage loans
Multifamily loans Small business loans Small farm loans Automobile loans (only for certain banks) |
| Community Development Financing | Facility-based assessment areas
At the institution level |
Dollar volume of loans and investments.
Standard benchmarks Impact and responsiveness |
| Community Development Services | Facility-based assessment areas.
Rural areas Nationwide |
Volunteer hours related to financial services or community development.
Activities that promote financial literacy. |
| Retail Services and Products | Facility-based assessment areas.
At the institution level. Retail banking products (which includes both deposit products and credit products and programs) would only positively contribute to a bank’s conclusion on this test. |
Credit and deposit products or programs that facilitate a relationship.
Branch and remote service facilities. Digital and other delivery systems. |
Community Development Categories: The rule defines 11 community development categories providing more clarity regarding the loans, investments, and services that the agencies have determined support community development.
Takeaway:
It will take a while for all of us to digest the almost 1,500 pages of the rule, however, Treliant can assist your institution with evaluating the effects, interpreting the rules, and implementing the requirements.
Our team of experts is experienced in understanding the challenges these dramatic rule changes can have and stand ready to help you navigate through these changes, even helping to determine if a strategic plan is the better option for institutions that do not quite fit in to the new framework.
Additional Sources:
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