BPI Supports CRA Lending Goals, Cautions New Proposal May Stray from the Law’s Core Mission

Washington, D.C. –

The Bank Policy Institute submitted a written statement to the House Financial Services Subcommittee on Consumer Protection and Financial Institutions today as the Committee considers potential reforms to the Community Reinvestment Act. The hearing, titled “Better Together: Examining the Unified Proposed Rule to Modernize the Community Reinvestment Act,” will examine a recent joint proposal by the banking agencies to modernize the Community Reinvestment Act, the first interagency effort to implement major changes to the law since 1995.

What BPI is saying:

“BPI supports the goals of the CRA in encouraging financial institutions to meet the credit needs of the communities they serve, and we appreciate the agencies’ coordinated effort to update the rules implementing the statute. However, the current joint proposal is poorly calibrated, unnecessarily complex and could undermine the law’s core mission of better serving communities. The challenges are resolvable through the rulemaking process, and we encourage the agencies to continue collaboration with industry to help the rule better meet the goals of the CRA.” — Paige Pidano Paridon, BPI senior vice president and senior associate general counsel

Here’s the background: The Community Reinvestment Act was originally enacted in 1977, requiring the Federal Deposit Insurance Corporation, Federal Reserve and the Office of the Comptroller of the Currency to assess financial institutions’ records of meeting the credit needs of their communities, including low- to moderate-income neighborhoods. On May 5, 2022, the agencies issued a joint proposal to modernize the rule. This effort follows a previous rulemaking effort by the OCC, which was abandoned in July 2021.

Problems with the proposal:

  • The proposal is needlessly complex and, therefore, would fail to achieve one of benefits of revisiting the rule in the first place — for banks and their CRA partners in the communities to understand what counts as CRA credit, and creating an efficient process for implementing it.
  • The proposed rule is poorly calibrated and would result in widespread downgrades of large banks and new barriers to achieving “outstanding ratings,” which could lead to reduced incentives to strive for such ratings, and thus, undermine the goals of the CRA.
  • Banks would be evaluated outside of their facility-based assessment areas; however, because it takes time and dedicated resources to build meaningful CRA infrastructure in a given geography, banks may be disincentivized from offering lending products in many places outside their facility-based assessment areas where they lack the resources. As a result, underserved communities could suffer from a constriction in the availability of credit, frustrating further the very purpose of the CRA.

To access a copy of the letter, please click here.


About Bank Policy Institute.

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

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