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American Banker: Community banks seek broader exemption from CRA changes

American Banker, March 12, 2020: Community banks seek broader exemption from CRA changes

Community banks are asking regulators to broaden the scope of institutions that would be granted regulatory relief from a new Community Reinvestment Act framework.

The CRA reform plan proposed by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. would allow banks with under $500 million of assets to stick with the old regime.

But community banks and industry representatives say that threshold should be closer to $1 billion to relieve smaller banks of the compliance ordeal of transitioning to a new framework.

Meanwhile, community reinvestment advocates, who assert the OCC and FDIC’s plan would hurt key groups that rely on the CRA, say a broad exemption for small banks raises further doubts about the overall proposal.

“If you raise the exemption threshold, you end up in a situation where the vast majority of FDIC banks are exempt from the new system, which begs the question — why sign on to the proposal at all if you’re preserving the way CRA is now for most banks?” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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