US bank regulators have proposed an update to fair lending rules, which would place additional scrutiny on how banks distribute grants. The proposal from the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency aims to ensure that grants benefit communities and that organizations receiving funds do not have excessive overhead costs.
Key Changes
The new proposal would require banks to prove that most of the funds distributed via community development grants are spent in the relevant communities. It would also exempt more banks from data collection and reporting requirements, with banks having under $10 billion in assets being exempt from some requirements.
The proposal has been met with criticism from Democrats, who argue that it would gut a critical tool for spurring community investments. Senator Elizabeth Warren and other Democrats on the Senate Banking Committee stated that the proposal would make America’s housing crisis worse.
The rule faces an uncertain future, as the Federal Reserve did not issue its own complementary proposal. The three agencies previously updated the rules in 2023, but the new regulations were rescinded under President Donald Trump following a legal challenge from the banking industry.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
