WASHINGTON–The FDIC and the OCC have put out for comment proposals aimed at giving banks new flexibility in complying with Community Reinvestment Act (CRA) rules aimed at eliminating redlining.
CRA was enacted more than 40 years ago with an objective of ensuring banks made loans in low- and moderate-income areas.
Under the FDIC proposal, the agency would publish more expansive criteria for the types of activities that qualify for CRA credit, according to the FDIC, including what it called “defined criteria” to identify the types of activities that meet the credit needs of banks’ communities and, thus, can be considered qualifying activities.
“These criteria would both encompass the many activities that currently qualify for CRA consideration and include additional activities that meet the credit needs of banks’ communities, such as expanding credit to areas considered distressed or underserved and ‘Indian country,’” the FDIC said in a statement.
The FDIC said its proposal would include retail loans provided to an LMI individual, a small business, or a small farm, loans in Native-American communities regardless of the income of the consumer, and small loans to a business or farm located in an LMI census tract. In addition, it would also list community development activities that provide funding or services to an expansive range of projects and entities.
Some Examples
According to the FDIC, “Examples include adding Community Development Financial Institutions to the CRA credited ventures currently undertaken with minority- and women-owned depository institutions and low-income credit unions, as long as the activity helps the credit needs of the communities where those institutions are chartered.”
A second part of the proposal would require the FDIC to join with the OCC in periodically publishing a list of non-exhaustive, illustrative examples of qualifying activities, and establish a process for stakeholders to seek agency determination if an activity is a qualifying activity.
The FDIC further said its plan would establish new performance standards to evaluate smaller banks, defined as below $500 million in assets. Small banks could select to either be evaluated under the current small bank performance standards, or opt into the NPR’s new performance standards, according to the agency.
The OCC’s separate proposal would apply to national banks. The proposals are out for 60-day comment period.