The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have announced proposed changes to the Community Reinvestment Act, a law that requires regulators to document how well banks do in lending to low-to-middle income neighborhoods.
Proposed Changes
Under the proposed revisions, bank examiners would put more weight on the lending banks do in certain communities and geographies, and less on how many branches they open or how much in deposits they take in from a local community. The number of banks that would need to comply with the law would be reduced as well.
The definition of a small bank will increase from banks with under $412 million in assets to banks with $1 billion in assets. Banks between $1 billion and $10 billion in assets will now be classified as an intermediate bank. This would reduce the number of banks who need to comply with parts of the CRA by 800 banks. Only 86 banks, or roughly 3% of all institutions, would be subject to the full extent of CRA under the new regulations.
Impact on Community Development Groups
Another change that is likely to be fought over relates to how banks give money to community development groups. Under the CRA, banks can donate money to local organizations that do poverty or low-income housing work in their communities to show they are providing resources to a local community. The new regulations could narrow the groups and programs that banks could donate to in order to meet those obligations.
Jesse Van Tol, the CEO of the National Community Reinvestment Coalition, said that it was “unfortunate” that the bank regulators were politicizing grant making under the CRA. “CRA was created to work for low-to-middle income people. A lot of these changes are going to discourage banks from making grants, particularly in rural areas, where I expect there will be significant drops in activity,” Van Tol said.
The CRA was passed in 1977 to combat redlining, a practice whereby banks would discriminate against the poor and minorities by choosing not to lend or open branches in minority-majority neighborhoods or in poor neighborhoods.
Original reporting: KTBS 3 (Shreveport) — read the source article.
