Federal regulators are proposing exempting more community banks from the Community Reinvestment Act..The proposal, issued July 31 by the OCC and FDIC, would increase the asset size of a small bank under CRA to $1 billion from $412 million, reducing the number of banks subject to community development loan, investment and service tests larger institutions face by 800. Banks with between $1 billion and $10 billion in assets would be deemed an intermediate bank. Only 86 banks would face the full extent of the law under the new regulations.Agencies would shift their consideration of retail banking services to focus on lending and adjust their consideration of donations and grants with the stated purpose of ensuring community development grants improve communities. The Community Reinvestment Act requires agencies to review a bank’s record of meeting the credit needs of low- and moderate-income neighborhoods. “The rulemaking would streamline other requirements and increase the clarity, transparency and objectivity associated with CRA evaluations for banks of all sizes,” according to the agencies. Last summer, federal regulators proposed rescinding a court-challenged 2023 CRA rule requiring larger community banks to face the same CRA standards as the largest financial institutions. The change would have been the first modernization of CRA since 1995. It would have required community banks with more than $2 billion in assets to go through a new retail lending test and face expanded assessment areas along with more challenging data and reporting obligations.
