Fed Moves To Revamp Community Reinvestment Act

The Federal Reserve Board on Monday (Sept. 21) took the first step toward overhauling the regulations that affect banks’ lending in economically challenged areas.

The system’s governors voted to solicit public input for four months into ways the Community Reinvestment Act might be updated to contemplate changes in the banking system.

“CRA plays a vital role in supporting economic opportunity in low-income and minority communities in both rural and urban areas. It is a top priority for the Federal Reserve,” Fed Chairman Jerome H. Powell said during a webcast meeting of the Fed governors on Monday.

“By releasing a thoughtful and balanced ANPR and 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 and business models,” Powell added in a prepared statement.

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

The Community Reinvestment Act, which was signed into law in 1977, affects a number of federal agencies in addition to the Federal Reserve Board.

In seeking input on modernizing the regulations that implement the law, areas the Fed targeted for consideration include addressing inequities in financial services and credit access, addressing changes in the banking industry, promoting investment in areas with large populations of Native Americans, and encouraging investment in minority-owned banks.

The Fed also said it wants to “bring greater clarity, consistency and transparency to performance evaluations that are tailored to local conditions; tailor performance tests and assessments to account for differences in bank sizes and business models; minimize data burden and tailor data collection and reporting requirements; and recognize the special circumstances of small banks in rural areas.”

Last week, another regulatory agency, the Consumer Financial Protection Bureau (CFPB), said it was changing the way it analyses data from minority- and women-owned businesses.