The Federal Reserve board has issued an advanced notice of proposed rulemaking (ANPR) to modernize the Community Reinvestment Act (CRA) this week.
The ANPR seeks feedback on ways to evaluate how banks meet the needs of low- and moderate-income communities and address inequities in credit access. Comments will be accepted for 120 days after publication in the Federal Register.
The move comes after the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency released their proposal to overhaul the CRA earlier this year. That plan drew strong criticism from affordable housing and civil rights leaders, who fear the plan will weaken the CRA’s original purpose of spurring investment and expanding financial opportunity in underserved areas.
The Fed did not join the other agencies in their plan. Instead, it released its own proposal this week, with Fed leaders saying they hope the ANPR could lead to a unified framework for revising the CRA.
"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," said Federal Reserve board chair Jerome H. Powell.
According to a fact sheet, the ANPR’s proposals include “assessing large retail banks using a Retail Test and a Community Development Test with separate financing and services subtests. Separate assessments of retail lending, retail services, community development financing, and community development services will support robust bank engagement with communities through a variety of channels.”
In addition, the ANPR proposes “to modernize CRA assessment areas while still maintaining a focus on branches, given their important to individuals and communities.”
The National Housing Conference (NHC) applauded the Fed’s approach, saying it lays the groundwork for aligning all three regulators, is likely to improve investment to low- and moderate-income households and communities, and clarifies examination requirements.
“In a year where partisanship has tainted every corner of political discourse, this is a refreshing exception,” said NHC president and CEO David M. Dworkin. “The Fed’s unanimous support for a modernized approach to CRA sets the table for the FDIC and OCC to come together on a unified approach.”
NHC strongly opposed the final rule published by the OCC earlier this year, arguing that it gutted CRA and eliminated the fundamental value of the statute. The ANPR approved by the Federal Reserve, however, resurrects the opportunity for the FDIC and OCC to agree on a stronger rulemaking that continues to foster lending and investment to communities across the country for years to come.