Analysis of public comments on the Community Reinvestment Act

Banks want more certainty and easier exams, but points of consensus emerge

See NCRC’s #TreasureCRA hub for more background.

This fall, the Office of the Comptroller of the Currency (OCC) issued an Advance Notice of Proposed Rulemaking (ANPR) that asked community organizations, banks and the public for their views regarding the Community Reinvestment Act (CRA) regulations.[1] An ANPR does not propose specific changes to the regulation but asks stakeholders to opine broadly on what works and does not work in the regulations. Getting this right is critical.

A large body of research unequivocally concludes that CRA has increased safe and sound lending and investing in low- and moderate-income (LMI) communities.[2] CRA achieves this via public accountability: each bank undergoes an exam and receives a rating based on the extent to which they are making loans and investments to LMI people and communities. Members of the public can comment to CRA examiners as they are completing their evaluations and also when banks seek to acquire and/or merge with other banks. Augmenting public accountability mechanisms will make CRA even more effective while reducing accountability will result in decreases in lending and investing in LMI communities.

It is a basic aspect of human behavior that we all want easier exams and jobs. Banks are no exception. Despite a pass rate of 98 percent, a major thrust of bank comments is that they want easier exams with fewer moving parts and less uncertainty. At first glance, community groups may have a hard time sympathizing with these sentiments but if these issues can be addressed in a thoughtful manner perhaps loans and investments that are truly responsive to needs will actually increase.

Before a detailed review, here is a summary of areas of differences and possible consensus:

Areas of Disagreement

  • Bank trade associations advocate for increasing asset thresholds, which is a fancy way of saying they want easier exams for banks with assets up to $5 billion that will lessen scrutiny of their branching and community development financing.
  • Banks and their trade associations advocate for broader CRA consideration for infrastructure developments and other projects that are not necessarily targeted to LMI people and communities. Community groups believe the focus must remain on LMI people and communities. A system of pro rata consideration is a possible middle ground.
  • Industry comments also suggest that a wider range of activities such as supporting venerable organizations like Special Olympics should count on CRA exams. While these are worthwhile causes, the original impetus for CRA was eradicating redlining. Therefore, the central focus of CRA must remain on increasing access to credit and community development. In addition, industry comments suggest diminishing the scrutiny of branch placement in LMI tracts on exams, a position at strong odds with community organizations which assert that branches in LMI tracts are essential for access to loans and deposit accounts.
  • Industry comments support streamlined merger application processes for banks with the highest CRA ratings. However, public comment opportunities are at the core of CRA and cannot be compromised.

Areas of Agreement and Possible Consensus

  • Assessment areas or the geographical areas on CRA exams should continue to include geographical areas containing bank branches. Assessment areas should also consider lending and other business activity beyond branches. The details of how to consider activity beyond branches is an area where differing views remain but some banks are closer to the views of community groups on this question.
  • The one ratio, which is a major concept promoted by the OCC, is not popular among banks nor community groups. The ratio would divide the dollar amount of CRA activities by bank assets. Its use would be a substantial departure from the current structure of CRA exams that focus on whether local needs are being met per CRA’s statutory requirements.
  • Predictability and consistency on CRA exams could be improved significantly. The development of guides and databases on qualified community development financing would assist in promoting consistent treatment of community development activities. A system of eligibility determinations with banks proposing projects for review and agency approval/modification could also help increase predictability and foster collaboration with community organizations on community development projects.

Let’s review industry comments on key areas of the CRA regulations and exams:

For comparison purposes the NCRC comments can be accessed here.

Asset Thresholds Have a Profound Impact on Level of Community Development Financing and Branching

When community groups first encounter “asset thresholds,” that terminology can make their heads spin and eyes glaze over. Asset thresholds is a fancy way of saying how hard the CRA exam will be. Intuitively, it makes sense that larger banks should have more demanding and complex exams than smaller banks. However, if the smaller bank exams become too easy, banks will be left off the hook for engaging in the types of community development finance and services that they have proven to be capable of executing. The largest banks with assets above $1.25 billion have lending, investment, and service tests. Intermediate small banks (ISB banks) with assets between $313 million and $1.25 billion have a more streamlined exam that nevertheless still expects community development financing as well as retail lending.[3] The small bank exam for banks with under $313 million only looks at retail lending.

The community bank lobby wants to overhaul the asset thresholds and exam structure. The Independent Community Bankers of America (ICBA) wants small bank exams with only the retail lending test for banks with assets of up to $1 billion and ISB exams for banks with assets between $1 billion to $5 billion.[4] In other words, most of today’s ISB banks would not be tested for community development financing. Examples of this financing are construction loans for rental housing, Low Income Housing Tax Credits, or equity investments in small businesses. NCRC calculates that ISB banks currently make about $3 billion in community development (CD) financing annually or about the same size of the Community Development Block Grant program.[5] If most ISB banks are no long examined for community development financing, most of this annual funding level would be lost, which is a blow that many revitalizing communities cannot afford.

In addition, small banks, including ISB banks, do not have exams that scrutinize branching in LMI communities. Branches are critical outlets for LMI people to receive loans as research has demonstrated.[6] Less exam attention paid to branches would likely result in fewer branches in LMI communities, which translates into fewer safe and sound home and small business loans. The ICBA’s letter suggests this change to asset thresholds and exam structure, but fails to examine its costs and benefits. The costs are severe while benefits are unclear given the high CRA exam pass rates.

Like the ICBA, other trade associations complain about an inordinate amount of attention paid to branches on CRA exams. While important, branches are becoming secondary points of access to service according to the industry comment letters such as those from the Consumer Bankers Association (CBA).[7] While fewer people are accessing branches for regular transactions like deposits, LMI borrowers rely on branches for more complicated transactions like receiving loans. Therefore, exams must continue to retain an analysis of branches as a key component.

In order to respond to bank suggestions that exams consider “digital” or non-branch provision of services, exams must to a better job of looking at actual data on the number and percentage of deposit accounts held by LMI people. Yet, the industry letters are mostly silent on how to examine non-branch service delivery though they insist that more attention must be paid to it. Like the saying, “you can’t have your cake and eat it,” exams cannot simply downplay branches without adding other measures of performance to assess bank delivery of services. Such an approach will decrease access to bank services and lending for LMI people.

Don’t Dilute CRA’s Focus on LMI Consumers and Communities

Senator Proxmire, the lead author of CRA, was focused on rectifying redlining of working class neighborhoods and communities of color. On the Senate floor he stated, “Banks and savings and loans will take their deposits from a community and instead of reinvesting them in that community, they will actually or figuratively draw a red line on a map around the areas of their city, sometimes in the inner city, sometimes in the older neighborhoods, sometimes ethnic and sometimes Black, but often encompassing a great area of their neighborhood.”[8] The Senator’s focus was on neighborhoods most in need of credit and community development.

Banks do not complain about the parts of the CRA exam that measures how many retail (home and small business) loans they are making to LMI borrowers and communities. They tend to complain more about qualifying CD projects for favorable consideration on CRA exams. For example, the American Bankers Association (ABA) comments, “Many opportunities to participate in community development initiatives that would benefit a bank’s entire community—such as hospital construction, water and sewer extension, transportation, workforce development, and financial literacy instruction —do not receive community development credit. This is because current regulatory practices only recognize such initiatives if they are targeted to LMI individuals.” The ABA continues, “Community development projects cannot be for the primary purpose of serving LMI. The economic reality is that these projects are designed to benefit all residents in an entire area—sometimes multiple counties. They simply cannot be designed to benefit select segments of the population.”[9]

The ABA is mainly reacting to difficulties of qualifying infrastructure projects such as bus routes or sewer lines that can serve both LMI census tracts and middle- and upper-income ones. CRA examiners have been inconsistent in how much credit these projects receive on CRA exams. Banks have legitimate concerns when none of their CD financing receives credit on CRA exams when the financing benefits both LMI and non-LMI census tracts and/or populations. This can be addressed by a system of pro rata credit. For example, if 40 percent of the bus route travels through LMI census tracts, 40 percent of the bank’s loan is reported on the exam as suggested by the National Association of Affordable Home Lenders (NAAHL).[10] This builds upon pro rata consideration that examiners use today.

In contrast, a CRA rating would be further inflated if the full amount of CD financing was reported on a CRA exam for a large infrastructure project that sprawled over a large area with only a small portion serving LMI people. While an appropriate amount of credit such as pro rata credit would facilitate these types of projects, too much credit for projects that do not meaningfully benefit LMI people or communities will result in fewer CD loans and investments targeted to LMI people and communities.

Activities that Count Must Focus on Lending and Community Development

In addition to diminishing the focus on LMI people and communities, industry comments urged the OCC to expand the range of activities receiving favorable consideration on CRA exams. Currently, the central thrust of CRA exams is to measure retail lending, bank services and branches, and community development financing. The agencies have developed these focal points carefully over the decades in response to CRA’s purpose. As envisioned by Senator Proxmire, CRA was created to eradicate redlining and disinvestment by stimulating more access to credit for LMI borrowers and channeling financing to help communities revitalize via economic and community development projects. Banks have financed nearly $1 trillion in community development lending since 1996 according to NCRC’s analysis.[11]

Despite bank success with CD financing, some still want to qualify a broader range of activities. For example, Central Bank of the Midwest states, “Organizations such as the American Red Cross, Special Olympics, and United Way provide unparalleled benefit to the individuals they serve, yet except in very narrowly defined circumstances, it is impossible to receive any community development credit because their missions are not implicitly directed at LMI individuals.”[12] No one disputes the worth of these venerable organizations. However, CRA was not designed to solve all of society’s problems, but was focused on redlining and disinvestment. An expansion of CRA in this manner will hinder the progress made in revitalizing neighborhoods.

We Can All Agree that We Need Predictability and Consistency

While community organizations cannot support diversion away from LMI and community development, we can bolster bank calls for more predictability and consistency from exam to exam and from one agency to another. Banks often complain that a project can qualify for CD credit on one exam but not another. This impedes needed community development and collaborations between banks and community groups for revitalizing neighborhoods. As TD Bank puts it, “Banks, communities, nonprofits, and other stakeholders can more readily and effectively collaborate by knowing whether an activity will receive favorable CRA consideration in advance of undertaking the activity.”[13]

One of the main tools available to banks and community groups for determining what counts on CRA exams is the Interagency Question and Answer (Q&A), a document that is useful but unwieldy at times. The agencies also publish useful examples and guides regarding activities that qualify as community development. However, these guides would be enhanced with a list or database of eligible activities as advocated by the ABA and ICBA.[14]

The ABA also advocates for a system of pre-determinations in which a bank shares a proposed CD project with an agency in order to determine if the project would qualify on CRA exams. NCRC agrees with these suggestions. In addition, the agencies should require banks to submit data annually on the types and locations of their CD projects at a census tract and county level.

The One Ratio Would do More Harm than Good

One of the pet CRA reform projects of OCC head Joseph Otting is a concept called the one ratio. The one ratio is the dollar value of CRA activities (loans and investments) divided by assets. Presumably, different ranges for the one ratio would correspond to various CRA ratings. The profound shortcoming of the one ratio is that CRA’s purpose was to ensure that banks meet local needs for credit in all of the areas they serve. A one ratio cannot effectively measure banks’ responsiveness to needs across the areas they serve.

As JP Morgan Chase puts it, “In our view, a single aggregate total for evaluation purposes would not modernize CRA but could have unintended consequences of reducing banks’ incentives to serve every market in which they have a presence, resulting in communities or states being left out and going “unserved.” If banks are only required to strive for a total volume of CRA activity, they could choose to focus all CRA activity in only a few markets, and provide little to nothing in the others. This would undermine one of the pillars of CRA: encouraging banks to meet the credit needs of their communities.”[15]

The industry suggests that the one ratio model might not fully capture the performance of various banks of different sizes and business models. The ABA says, “A universal metric has the potential to create winners and losers due to the wide array of bank business strategies and operating models that exist in the U.S. banking system.”[16] The ICBA similarly states, “broad concern among community banks that a metric will become a “one-size-fits-all” approach and will not capture the unique efforts of community banks of all sizes.”[17]

One of the many pitfalls of the one ratio is that in areas of the country with lower housing and land costs, the one ratio will appear to be artificially low since the dollar amount of the numerator will be depressed. As NAAHL states, “Focusing on the dollar volume of CRA activity would disadvantage rural, non-coastal, and other markets with low home prices, as well as the banks that serve these areas. Worse, one $750,000 mortgage for an upper-income homeowner in a gentrifying LMI neighborhood in Brooklyn should not be worth five mortgages in Chicago or ten in Appalachia.”[18] Peoples Bank, a Community Development Financial Institution (CDFI) bank based in Mississippi, echoes NAAHL’s concern about the one ratio disadvantaging rural-based institutions.[19]

A NCRC analysis of industry comments found that about one half did not address the one ratio, 12 percent opposed the one ratio, about 30 percent proposed other metrics, and only four percent supported it. To classify this as lukewarm support would be generous. The OCC’s grand one ratio idea flopped because it is out-of-whack with the central purpose of CRA and the structure of its exams.

Yet, the one ratio is far from dead. The OCC may plow ahead since many industry letters were conciliatory in tone suggesting that the one ratio can be an option in addition to the current exam structure. Moreover, some banks offered strong endorsement of the one ratio. For instance, Huntington Bank states it “would welcome the creation of a metric-based framework for determining compliance with the CRA. The adoption of a metric-based framework would provide a transparent threshold for determining and comparing CRA performance.”[20] It even suggests determining a dollar amount for the one ratio for branches by using the dollar amount of branch operating costs.[21] TD Bank, like Huntington, supports the one ratio with the caveat that one ratios be computed on a state and multi-state metropolitan statistical area (MSA) levels.[22] However the same difficulties would confront state level one ratios: measuring bank responsiveness to needs in urban and rural areas would be difficult and banks could hopscotch away from serving more difficult parts of states.

Assessment Area Reform Should be Focused on Where Activity Is

While the one ratio is an extraneous concept that would be harmful, a genuine CRA reform item is updating assessment areas or geographical areas on CRA exams. Currently, CRA exams designate assessment areas as metropolitan areas or counties that include bank branches. While this works for several banks (assessment areas capture about 72 percent of home lending), some banks are making large numbers of loans via non-branch means including the use of brokers and the internet.[23] NCRC has advocated adding assessment areas where these banks make considerable numbers of loans, taking care to insure that they also include smaller cities and rural areas.

The Central Bank of the Midwest largely agrees with NCRC’s proposal for updating assessment areas. The bank states, “This new approach would depend on a bank’s level of lending, by either number or dollar of loans, in areas that would not qualify as an assessment area under the current rule. If lending in these areas exceed a defined threshold, whether it be a percent of loans to total capital, percent of loans to total loans…these geographic areas would be included as a separate assessment area.”[24]

NAAHL, however, disagrees. “We do not support the idea, which some have raised, that such a bank should have assessment areas in the markets where it makes the largest number of loans; those markets would likely be the largest metropolitan areas, further diminishing CRA’s attention to less populous areas.”[25]

Instead, NAAHL supports national assessment areas for branchless banks. NAAHL should not advocate too strongly for this because if national assessment areas are combined with a one ratio metric, the harms NAAHL associates with the one ratio will be magnified. Such an approach would allow banks to serve local needs to their whim, extinguishing CRA’s statutory requirement.

Out of Assessment Area Activities Must be Targeted

Currently, if a bank has satisfied needs in its assessment areas, it can receive credit for community development financing in a statewide or regional area surrounding its assessment areas. For several years, banks have complained that this procedure has been too constraining although it has not seemed to lower the almost 100 percent pass rate.

The ABA wants the agencies to allow a bank to seek community development financing activities nationwide as long as the bank has received at least a Satisfactory rating on its previous exam. Moreover, the ABA says that activities inside assessment areas can count by some multiple (perhaps by a factor of 2) greater than activities outside of assessment areas.[26] This would be a formula for even more grade inflation.

The procedure of statewide or regional credit should be retained, with the possible addition of allowing banks to serve distressed and underserved areas in other parts of the country. Distressed and underserved areas would be identified via data analysis and could be areas with low levels of loans per capita or areas with high foreclosure or unemployment/poverty rates.

If banks are allowed to roam the country for community development opportunities without some targeting, they could cherry pick the easiest opportunities and abandon the areas in most need. Some industry comments such as those of JP Morgan Chase, Peoples Bank, and the Consumer Bankers Association supported the idea of targeting distressed areas.[27]

Safe Harbors for Banks Would Harm Communities

The CBA states that the merger application process should be streamlined and made easier for banks that earn Oustanding ratings as an incentive to earn the highest rating.[28] Some banks such as the Central Bank of Midwest echoed this recommendation.[29]

While this may sound reasonable in theory, in practice exams can be out-of-date and bank performance could have declined since the last Outstanding rating. Even a bank with an Outstanding rating can have areas of weaknesses that should be addressed. Moreover, the merger itself may significantly affect future performance if several branches are closed or management is restructured. Public comment periods must not be shortened. Senator Promxire was motivated to draft the CRA legislation in response to lack of sufficient public comment opportunities and federal agency consideration of access to lending during mergers.

Conclusion: A Path Forward

In response to the 1,581 comments on the ANPR, the OCC and other agencies can now chart a path forward to sensible CRA reform that responds to inconsistencies in current examinations and updates procedures to accommodate changes in the banking industry. Increasing predictability via databases, clearer guidance, and agency determinations regarding eligibility are reforms that can be supported by both banks and community organizations. Updating assessment areas to include areas with considerable bank lending and deposit gathering outside of branch networks is a reform that would be supported by community groups and some banks. Allowing credit for out of assessment area activities in a targeted manner is a reform likely to gather consensus. In contrast, aggressive adoption of the one ratio will not have industry or community support. Adjusting asset thresholds solely for making exams easier for banks to pass, diluting attention to LMI people and communities, discarding branches on exams, expanding activities beyond the realm of lending and community development, and safe harbors on merger applications will be opposed strenuously by community groups and would not benefit underserved neighborhoods.

The ANPR comments have shown the way for a win-win for communities and banks. Let’s hope the OCC seizes this opportunity instead of plowing ahead with ill-conceived concepts that will reverse the progress in lending and investing in underserved communities.

A version of this post appeared in Shelterforce.

[1] To read the ANPR or comment letters, go to

[2] Josh Silver, The Community Reinvestment Act at 40: A Careful Review of the Reviews, September 2017, blog in Shelterforce,

[3] ISB assets are adjusted annually, see

[4] ICBA comment letter, p. 5. Readers can obtain comment letters via the ANPR link cited above.

[5] NCRC, Intermediate Small Banks: The Forgotten but Significant Resource for Affordable Housing and Community Development, November 2017,

[6] Josh Silver, The Importance of CRA Assessment Areas and Bank Branches, NCRC, June 2018,

[7] CBA comment letter, pgs. 5-6.

[8] Congressional Record – Senate, June 6, 1977, p. 17630.

[9] ABA comment letter, pgs. 4-5.

[10] NAAHL comment letter, p. 12.

[11] NCRC analysis of CRA data available via

[12] Central Bank of the Midwest comment letter, p. 6.

[13] TD Bank comment letter, p. 16.

[14] ICBA, p. 13; ABA, p. 24.

[15] JP Morgan Chase comment letter, p. 5.

[16] ABA comment letter, p. 10.

[17] ICBA comment letter, p. 17.

[18] NAAHL comment letter, p. 6.

[19] Peoples Bank comment letter, p. 2.

[20] Huntington Bank comment letter, p. 5.

[21] Huntington Bank comment letter p. 7.

[22] TD Bank comment letter, p. 17.

[23] Percentage of loans in assessment area from Urban Institute; Laurie Goodman, Jun Zhu, and John Walsh, The Community Reinvestment Act: Lending Data Highlights, Urban Institute, November 2018, p. 8,

[24] Central Bank of the Midwest comment letter, p. 4.

[25] NAAHL comment letter, p. 9.

[26] ABA comment letter, p. 20.

[27] Peoples Bank, p. 6; CBA, p. 13; JP Morgan Chase, p. 7.

[28] CBA comment letter, p. 4.

[29] Central Bank of the Midwest, p.7.

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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

Complete the form to download the full report: