Federal Reserve Bank of Minneapolis, September 4, 2019: Understanding The CRA Performance Context
The Community Reinvestment Act (CRA) is a federal law enacted in 1977 that is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) neighborhoods,1 consistent with safe and sound banking operations.2 The CRA requires that each insured depository institution’s record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution’s application for establishing new deposit facilities, including through mergers and acquisitions.
The performance context analysis, a core part of a CRA evaluation, doesn’t always get the attention it deserves. In this article, we provide an overview of the performance context’s use in the evaluation of a depository institution and discuss the categories of information that bank examiners gather for their analysis. We devote particular attention to qualitative information—gathered through examiners’ conversations with local experts and bank leaders—that adds important nuance to quantitative data and better illuminates a community’s needs. Finally, we highlight initiatives across the Federal Reserve System aimed at adding depth to evaluators’ performance context work.