The federal bank regulatory agencies have jointly issued a final rule to enhance and modernize the implementation of the Community Reinvestment Act (CRA). The CRA, a significant law enacted almost 50 years ago, aims to encourage banks to meet the credit needs of their communities, particularly in low- and moderate-income areas, in a safe and sound manner.
Based on feedback from commenters and research, the final rule updates the CRA regulations to achieve several key goals:
1. Encouraging banks to provide greater access to credit, investment, and banking services in low- and moderate-income communities. The final rule includes evaluating bank performance across different activities and communities, ensuring that the CRA remains an effective tool in addressing disparities in access to credit and financial services. It also supports bank activities with Minority Depository Institutions, Community Development Financial Institutions, and in areas with high-need, such as Native Land Areas, rural areas, and persistent poverty areas.
2. Adapting to changes in the banking industry, such as internet and mobile banking. The final rule updates the CRA regulations to evaluate lending outside of traditional assessment areas, considering the rise of non-branch delivery systems like online and mobile banking. It recognizes the importance of bank branches while establishing a framework to assess digital banking products and services for certain banks.
3. Providing greater clarity and consistency in applying the CRA regulations. The final rule introduces a metrics-based approach to evaluate bank retail lending and community development financing, using benchmarks based on peer and demographic data. Data tools will be developed to offer additional insight into performance standards. It also clarifies eligible CRA activities, specifically targeting affordable housing in low- and moderate-income, underserved, native, and rural communities.
4. Tailoring CRA evaluations and data collection to bank size and type. Recognizing differences in bank size and business models, the final rule adjusts the evaluation framework accordingly. Small banks will continue to be evaluated under the existing framework with the option to be evaluated under the new framework. Small and intermediate banks are exempt from new data requirements, while certain new data requirements only apply to large banks with assets exceeding $10 billion.
Most of the rule’s requirements will take effect on January 1, 2026, with the remaining requirements, including data reporting, applicable on January 1, 2027. Communication details for media contacts are also provided.
Read the original Federal Reserve release here.