American Bankers: Fed’s Brainard offers glimpse of what revamped CRA could look like

American Bankers, March 12th, 2019: Fed’s Brainard offers glimpse of what revamped CRA could look like

WASHINGTON — A Federal Reserve Board governor detailed possible steps forward on reforming the Community Reinvestment Act, including an updated approach to CRA assessment boundaries, revising how banks are tested for community development activities and tailoring certain CRA requirements based on bank size.

Gov. Lael Brainard said one idea under discussion is allowing banks “of a certain scale” to have separate assessment areas for their retail activities and community development activities. The aim is to recognize activities beyond a bank’s branch network — the traditional CRA assessment boundary — while still prioritizing activities within that network.

“By creating separate assessment areas for retail and community development activities, we believe that banks would continue to place their community at the center of their retail lending and service activities while participating in meaningful community development opportunities that may have greater impact due to their broader reach,” she said in a speech Tuesday to a conference of the National Community Reinvestment Coalition.

The Fed, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. have struggled to develop a joint CRA reform plan, but Brainard’s comments appeared to give a glimpse into their discussions. She said some of the ideas on the table have been triggered by public comments responding to the OCC’s advance notice of proposed rulemaking on reforming CRA policy.

In addition to separate assessment lines for retail and community developments activities, Brainard also raised the idea of a “comprehensive” test for community development. In large-bank CRA assessments, community development loans currently fall under the lending test but community development investments are judged in a separate category. Spreading those activities across separate tests can lead to “distortions,” Brainard said.

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