Did you catch the news about the proposed changes to the Community Reinvestment Act? While the bill still has a long way to go, there are clear signals about the changes coming for financial institutions. One of the most significant changes includes how banks are evaluated on the service test. Making preparations now for when the final changes are enacted can help make your next examination go smoothly.
Changes in Regulation
Since the last time that regulators updated CRA, services have come a long way. Under the old regulations, financial institutions could only count services so long as they involved financial expertise. However, there are strong indicators that the different types of qualifying activities will broaden under the proposed rules. In the notice, “[regulators] would no longer require that services be related to the provision of financial services.” Rather, “all activities conducted by the bank . . . would be considered” eligible for CRA credit. This is a dramatic shift in the way that regulators audit CRA activities. Be prepared for the change with these helpful tips:
Update How You Track CRA Activities
The collection, recording and reporting of CRA activities has always had an associated financial value with the activity. It doesn’t look like this will change the new proposal. However, the standards will be more exacting. Details such as volunteer hourly compensation and relevant assessment areas will require financial institutions to improve their processes to take on these more robust assignments. Audit your workflows to help them be more agile for the forth coming changes.
Pro Tip: Consider investing in a software vendor. In our 2019 Marketing and Compliance Report, 64% of respondents indicated that they plan to implement this tool in their workflow processes this year.
Align Your Marketing and Compliance Teams
Within change lies opportunity. Many banks try to silo their marketing and compliance teams into different units. While this may help improve the efficiency of the workflow, it reduces the number of opportunities to get the most out of your CRA activities. CRA compliance teams collect information on qualifying activities – including events that some marketing team members might not even know about. Your bank’s involvement in the community should not only count toward CRA credit but should also be celebrated in your marketing communication. Promote and earn credit for the work you are already doing!
Pro Tip: Share recording documents. Enable marketing teams to enact on information as soon as its recording to maximize its impact on the community.
Crowdsource Ideas from Your Community
Since the number of qualifying service activities is set to expand, it opens an almost limitless number of ways for your community bank to help. With so many more options, it can be daunting to know where to begin. Engage your employees to find service projects that are most interesting to them to help improve their engagement. Take the next step and gather ideas from your customers and followers. These members know where the most critical areas of need are and can help improve the effectiveness of your CRA activities.
Pro Tip: Run surveys and polls on social media to help you find projects. It will also help guide you toward the most worthwhile projects first while building engagement and inspiring others in the community to give back.
We recently covered more on the proposed changes to CRA. Listen to our webinar or read our other coverage below.