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On May 5, 2022, the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (together, the “Banking Agencies”) issued a Notice of Proposed Rulemaking (the “Proposal”) that would change the system Banking Agency Regulations implementing the Community Reinvestment Act 1977, as amended (the “CRA”).1
Under the CRA, Covered Banking Institutions have a “continuing and affirmative obligation to assist in meeting the credit needs of the local communities in which they are licensed”. To encourage banks to help meet the credit needs of local communities, the CRA requires bakery agencies to “review bank records regarding meeting the credit needs of their entire community, including neighborhoods low and middle income”. With this objective in mind, the proposal, the first major interagency reviews since 1995, aims to revise the ARC implementing regulations to take account of changes in the banking industry, including the growing role of banking services mobile and online.
The bank branches identified the following as the five key elements and objectives of the proposal:
- Expand access to credit, investment, and basic banking services in low- and middle-income communities.
- Adapt to changes in the banking sector (including online and mobile banking, branchless banking and hybrid models).
- Provide greater clarity, consistency, and transparency by adopting a metrics-based approach to CRA assessments (including public benchmarks) and clarifying CRA’s qualifying activities, among other measures.
- Tailor ARC assessments and data collection to the size and type of bank.
- Maintain a unified Bank Branch approach.
It is important to note that under current ARC regulations and in the proposal, ARC’s performance on these tests is an important factor taken into account by bank branches when deliberating on applications, including including mergers, deposit insurance, branch openings and moves, conversions and acquisitions. and other apps.
Below, we provide a summary of the key elements of the proposal, which include: (1) changes to the asset threshold for different categories of banks; (2) changes to activities eligible for CRA credit; (3) new types of assessment domains that allow for increased flexibility in earning ARC credits; (4) revisions to the assessment framework with respect to the grading scale, size definitions, performance tests, and strategic planning process; and (5) new data collection and reporting obligations. Comments on the proposal are due no later than August 5, 2022.
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1. Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, Community Reinvestment Act Joint Notice of Proposed Rulemaking, Federal Register Notice (May 5, 2022), available here.
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