Modernization of the Community Reinvestment Act
Authored by Jennifer Kincel
The Office of the Comptroller of the Currency (OCC) issued a final rule in May 2020 to help modernize the Community Reinvestment Act (CRA). The new rule will go into effect for OCC regulated banks on Oct. 1, 2020, with compliance of the updated regulation going into effect Jan. 1, 2023, or Jan. 1, 2024.
In addition, there will be three categories of institutions determined by asset size, which will define what provisions apply to each bank:
- $600 million or less in assets
- Between $600 million and $2.5 billion in assets
- More than $2.5 billion in assets
Major changes to the CRA
Below is a list of the major changes to the CRA that will be put into place when the final rule becomes effective:
Assessment area
One of the items that all OCC-regulated banks will need to comply with going forward is the new assessment area that will be broken down into two parts. The first part will still be the same as the previous version of the law, which is to complete an assessment area around the bank’s physical deposit-taking locations. The second part will now take into consideration the digital footprint of the bank, which will force institutions to consider where their deposits are coming from. If it is determined that the bank receives more than 50% of its deposits from areas outside of its physical bank footprint, the entity must complete an additional digital assessment area. In addition, banks will also need the physical address of each depositor too.
Qualifying activities criteria and list of qualifying activities
Qualifying activities is another significant area that will apply to all OCC-regulated banks. The OCC will maintain a list of what is approved and what is not approved as a qualifying activity to help banks streamline the process of determining if an activity will receive the CRA credit.
Pre-approval process
Additionally, a Qualifying Activity Request Confirmation Form will be put out on the OCC website. This form will allow banks to determine if an activity will count as a qualifying activity. The OCC will respond within 60 days with the option of a 30-day extension.
Performance measures
New performance measures will only apply to banks with assets of more than $2.5 billion and are still to be determined. Banks under $2.5 billion will be subject to the existing small or intermediate bank test.
Data collection and reporting requirements
This area will now require all institutions to collect and maintain the value of each retail domestic deposit account and the physical address of each depositor. Banks with assets over $2.5 billion will also be required to report this information to the OCC.
Keep in mind that, as of now, this is not an interagency rule. The Federal Reserve System (FED) and the Federal Deposit Insurance Corporation (FDIC) opted not to join in the rulemaking, which means that this new rule will only apply to OCC-regulated banks. The OCC has also issued specific CRA frequently asked questions related to COVID-19.
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