The recent Notice of Proposed Rulemaking (NPR) to update Community Reinvestment Act (CRA) rules includes a significant reduction in CRA responsibility for 20% of all banks.
The agencies proposed to raise the small asset bank threshold from $346 million to $600 million. Likewise, the intermediate small bank (ISB) asset threshold would be adjusted and would range from $600 million to $2 billion. Currently, the ISB asset thresholds range from $346 million to $1.384 billon.
As a result of this proposal, 767 banks that are ISB banks now would be reclassified as small banks. These banks would no longer have community development finance responsibilities, resulting in a loss of considerable amounts of community development finance. Based on an NCRC study, we estimated that on an annual level, community development finance would decline by about $1.214 billion (in the study, 197 banks with assets between $346 million and $600 million made this amount of community development financing on an annual basis based on a sample of CRA exams conducted in 2016).
Likewise, 201 banks would be re-classified from large banks to ISB banks. These banks would no longer have a service test requiring them to pay attention to the branching and service provision in Low-to-Moderate Income (LMI) communities.
The agencies’ proposal to change the CRA regulations should at the very least expect the same range of reinvestment activity as CRA currently does for all ISB and large banks. In this respect, the proposal goes backwards with no justification about how any reduction in burden for these banks would somehow offset the loss of reinvestment activity from a public benefits perspective. The banks impacted have been engaging in community development or service provision for several years without any apparent deleterious impacts.
Below are three charts and maps that provide more statistics about the numbers of these banks and their distribution across the country.
This chart shows banks changing CRA classifications by large metropolitan area, micropolitan area and rural country.
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Map of banks across the country that would experience a change in CRA classifications. A user can click onto the blue and black dots to see which banks in their state have community change classifications.
Numbers and percent of banks that would experience a change in CRA classifications in this pie chart.
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Josh Silver is Senior Advisor at NCRC.
Photo by Eduardo Soares on Unsplash
