The long-anticipated proposed amendments to the Community Reinvestment Act (CRA) have finally been released! Significant changes are in store for financial brands and a quick preview is available in the joint statement released by the FDIC and OCC. These proposed rules enable the compliance framework to catch up to technological trends and help banks better serve their community.
With clear, objective and transparent information, financial brands will be less hindered by vague and ambiguous requirements. Most importantly, this proposal allows banks to better connect with their community and fulfill the original intention of CRA.
Updated Rules for Activities
After receiving over 1,500 different comments, the proposed rules aim to reflect the interest of the stakeholders. The key points in the proposed regulation include:
- Clarifying and expanding the number of qualifying activities
- Increasing the size and scope of assessment areas
- Establishing objective standards to evaluate performance
- Streamlining data collection, recording and reporting
Banks must maintain a public file that includes: all written comments and responses; a copy of the public section of the bank’s or savings association’s most recent CRA performance evaluation; a list of the bank’s branches, their street addresses, and census tracts.Proposed Rule, 12 CFR 345
The new policy aims to increase the objectivity, transparency and fairness of regulations. The requirements of a public file will necessitate a more automated, intelligent data collection for most banks.
Key Takeaway: Standardizing reporting will mean additional data collection and reporting requirements for banks; however, more objective, quantifiable metrics should ease the burden.
Increased Emphasis on Services and Investment
One of the most consequential proposed changes centers on how services and donations will be tracked and qualified for CRA credit.
“the CRA regulations would no longer require that Community Development services be related to the provision of financial services (i.e., banks would receive credit for all volunteer hours, including manual labor, provided to a CD project).Proposed Rule, 12 CFR 345
Under the old legislation, some of these forms of services and donations – such as manual labor – did not have a quantified metric, nor did they qualify unless using financial knowledge. With these new proposed rules, these activities now count for credit more easily. Service activities that are documented and tracked will be credited toward CRA at the hourly salary of the service job for the number of hours provided.
Key Takeaway: This means that financial brands who work on tracking volunteer hours may count those activities.
Illustrative List of Qualifying CRA Activities
The final piece of the proposed changes includes details on how regulatory agencies can help financial brands determine the eligibility of activities for CRA credit. Examples will be periodically published by each of the regulating agencies to help guide financial institutions’ understanding of evaluative criteria.
The FDIC shall maintain a publicly available illustrative list on the FDIC / OCC’s website of non-exhaustive examples of qualifying activities that meet and activities that do not meet the criteria in § 345.04.Proposed Rule 345.05
If you are having trouble documenting a particular activity, you can seek confirmation from your regulator by completing a Qualifying Activity Confirmation Request Form. This will help financial brands excel in their understanding of the nuances of compliance and accelerate their ability to meet regulatory requirements.
Key Takeaway: The number of activities eligible for CRA credit is increasing and the processes for determining how each activity is counted has never been easier.
The proposed changes will significantly impact the way financial brands meet the requirements of CRA. From qualifying activities to the scope of assessment, we’ll have a lot more information coming about what you should expect and how you start preparing now.
Want to know more? Register for our upcoming webinar on January 21st where we cover all things CRA.