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From Banking and Finance Law Daily, April 04, 2018

Treasury releases Community Reinvestment Act modernization recommendations

By Nicole D. Prysby, J.D.

The Department of the Treasury has announced the release of a report with recommendations to modernize the Community Reinvestment Act. The recommendations were issued to the Office of the Comptroller of the Currency, Federal Reserve Board, and Federal Deposit Insurance Corporation. The report explains that the regulatory and performance expectations under the CRA have not kept pace with the organizational and technological changes in the banking industry over the past four decades. Therefore, Treasury reviewed the CRA, with the focus on identifying modifications to align banks’ CRA activities with the needs of the communities they serve.

"Forty years since the passage of CRA, it is time for modernization to fit today’s banking landscape and community needs," said Treasury Secretary Steven T. Mnuchin. "Our recommendations will improve the effectiveness of CRA by enhancing the assessment and examination process, enhancing the ability of banks to deliver services in the communities they serve while considering technological advances in the financial industry."

The recommendations are based on meetings with close to 100 stakeholders representing community and consumer advocates, academics and think tanks, financial institutions, trade associations, and law firms, all three CRA regulators, and a review of a wide range of data, research, and published material from both public and private sector sources.

The recommendations are focused in four major areas:

  • updating the definitions of geographic assessment areas to reflect the changing nature of banking arising from changing technology, customer behavior, and other factors;
  • increasing clarity and flexibility of CRA examinations to increase transparency and effectiveness of CRA rating determinations;
  • improving the examination process to increase timeliness of evaluations and increasing accountability for banks’ planning of their CRA activity; and
  • incorporating performance incentives to better serve the CRA’s intended purpose of encouraging banks to meet the credit and deposit needs of their communities.

Trade associations approve. A number of groups have issued reactions to the report. The American Bankers Association noted with approval that Treasury recognized that the CRA needs to be updated to reflect mobile technology and other modern banking methods. The Consumer Bankers Association welcomed the recommendations, again focusing on the need for banks to have the flexibility to use mobile, online, and other digital technologies to serve communities. The Financial Services Roundtable also welcomed the report, stating that it includes common-sense recommendations that should allow financial institutions to more easily serve low to moderate income customers. The FSR also urged the OCC, FRB, and FDIC to pursue a unified interagency initiative to achieve the goals specified in the report.

Companies: American Bankers Association; Consumer Bankers Association; Financial Services Roundtable

MainStory: TopStory CommunityDevelopment

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