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AmBA Cautions Against Unilateral Efforts to Reform CRA in Letter to Fed

February 17, 2021

As the Federal Reserve contemplates updates to its Community Reinvestment Act regulations, ABA emphasized the importance of working closely with the FDIC and OCC to “craft a modern regulatory framework that can be adopted by all three agencies.” ABA warned that “failure to act in coordination would yield undesirable results—including perpetuating confusion and inconsistency—which would be contrary to the objectives of the modernization effort.”

ABA also outlined several objectives and principles that should guide any CRA modernization effort, noting that, among other things, a modernized framework should be durable, tailored and aimed at improving consistency, transparency and effectiveness. Additionally, ABA also highlighted the need to make changes to assessment areas to account for digital banking trends, include both quantitative and qualitative assessments, reduce overall complexity and be mindful of excessive data burdens or new reporting requirements.

The Fed’s concept—which it outlined in an advance notice of proposed rulemaking last year—involves a retail test, which would consist of a retail lending subtest and a retail services subtest, as well as a community development test, which would consist of a community development financing subtest and a community development services subtest. Small retail banks could elect to be evaluated under the current CRA framework or choose to be evaluated under the retail lending subtest alone. Small banks could also elect to have their retail services and community development activities evaluated. Read the letter.

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