NCRC Initial Analysis of Federal Reserve’s ANPR on the Community Reinvestment Act: A Step Forward but Needs to be More Rigorous


The Federal Reserve Board has issued an Advance Notice of Proposed Rulemaking (ANPR) on the Community Reinvestment Act (CRA). The ANPR proposes to build upon the existing CRA exam structure of separate tests for retail and community development activity. The board is exploring how to create assessment areas, geographical areas on CRA exams that receive ratings, that will capture lending and deposit-taking activity outside of branch networks. Overall, the Fed’s approach is a good first step. The proposal must be strengthened going forward, however, to instill more rigor in some of the performance measures in order to prevent the continued grade inflation that has resulted in nearly every bank receiving a satisfactory grade or higher regardless of the impact and flexibility of their lending and investment activity. More rigor is key to ensuring that CRA exams leverage more lending, investing and services for traditionally underserved communities. 


In late September, the Federal Reserve Board approved an ANPR on CRA. This ANPR is thorough; it runs 186 pages and asks the public 99 questions. The public will have 120 days from publication in the Federal Register to offer their comments and respond to the questions. As an ANPR, this document is not a proposed change to the Federal Reserve’s CRA regulations. However, it offers much detail about a rule change the board is contemplating, including new performance measures, possible changes to the structure of new CRA exams, expansion in the geographical areas covered by CRA exams and expansion and refinement to the activities that would count on CRA exams.

The Fed’s ANPR follows a final CRA rule issued this May by the Office of the Comptroller of the Currency (OCC). The OCC’s rule would decrease lending, investment and services in low- and moderate-income (LMI) communities by over-simplifying performance measures on CRA exams and broadening what counts on CRA to include activities that either partially or tangentially benefit LMI communities, including infrastructure like major bridges that may not be in or near LMI communities. 

The main performance measure in the final OCC rule is the dollar amount of CRA activity divided by deposits. This focus on dollar amounts will increase the likelihood that banks favor the large deal. Banks will load up on the largest community development and infrastructure projects they can find to meet this metric, instead of much-needed smaller dollar home and small business lending in LMI neighborhoods. 

In contrast to the OCC, the Fed does not rely mainly on dollar amounts to measure CRA activity. The proposals in its ANPR adhere to the statutory purposes of CRA to rectify redlining experienced by LMI neighborhoods and communities of color by designing tests that focus on numbers of loans, branches and services in LMI communities. While the Fed’s proposal includes measures that look at dollars of community development activities, these measures are specific to each geographical area, tempered by qualitative considerations and are not rolled up to the institution level, which encourages large dollar deal seeking. The Fed is also addressing issues of racial inequities and asks the public for suggestions as to how a new CRA rule can do that. 

Overall, the Fed’s proposal is thoughtful and a solid foundation for a proposed CRA rule. It is based on data analysis of over 6,300 CRA exams from 2004 through 2017 in contrast to the OCC’s rule that is not justified by robust data analysis.[1] Yet, some proposals in the Fed ANPR need to be made more rigorous, and others need to be changed.

Structure of CRA Exams

Currently, CRA exams are structured differently for banks of various asset sizes and business models. The largest banks have the most detailed exams with separate tests scrutinizing their lending, investments and services. The smaller banks have a retail lending test only. The Fed would maintain these distinctions and would reduce the number of different types of exams slightly. The smaller banks would still have only a retail lending test, and the large banks would have a retail test (separate subtests for lending and services) and a community development test (separate subtests for financing and services). [2]

Unlike the OCC, the Fed would maintain separate exams that would explicitly scrutinize and rate the number and percent of bank branches and deposit products offered in LMI communities. This is vitally important because a large body of research has established that retail lending increases in LMI communities as the number of bank branches increase.[3] Fed sponsored research has also found that the current services test has encouraged banks to retain profitable branches in LMI communities. [4]

The Fed is asking for public input on the asset thresholds dividing small from large banks. The Fed is contemplating thresholds of $750 million or $1 billion in assets.[5] Even the lower threshold is too high. Currently, the cut-off for designating the smallest banks is $326 million.[6] Banks above that threshold are expected to engage in important community development financing. NCRC has documented that most of them succeed in doing so.[7] We urge a lower threshold in order to prevent banks with assets between $326 million and $750 million winding down their financial support for needed community development projects such as affordable housing and community health centers. 

Carefully designed performance measures needed to make CRA ratings rigorous

Retail lending subtest

The board proposed to improve upon existing performance measures in CRA exams. One current measure is the amount of lending activity. Exams usually just report the dollar amount and number of loans and compare the market shares of a bank’s loans and deposits. The exams usually lack any critical analysis of whether the amount of lending is sufficient. This exam criterion is designed to ensure that banks are not just retaining deposits but are actually lending. In order to better realize this objective, the Federal Reserve proposes a retail screen that would consist of a ratio of the dollar amount of retail lending activity divided by deposits. [8]

The Federal Reserve would presume that a bank would earn at least a Satisfactory on this screen if its ratio of loans to deposits is 30% of the aggregate ratio (all banks in the geographical area).[9]  Acknowledging this ratio is low, the Fed states that it wants to account for some banks selling their loans on the secondary market, which lowers the ratio.[10] The most important consideration is whether this screen ensures that banks are lending and not just letting deposits sit idly. Further consideration is necessary to determine if the 30% threshold needs to be increased.   

In addition, the proposed retail lending test would use the percent of home loans to LMI borrowers and to LMI communities as performance measures. The bank’s percentage would be compared to those of its peers and the percent of the population that is LMI.[11] The Fed would establish a presumption of Satisfactory performance on these measures that would be the following thresholds: a bank’s percentage of loans is 70% of its peers or 65% of the portion of the population that is LMI.[12] The bank earns Satisfactory if it exceeds the lower of the two measures. [13]

In addition, the Fed suggests that it would establish ranges that would correspond to the other possible ratings of Outstanding, Needs-to-Improve and Substantial Noncompliance.[14] However, the Fed has not indicated what the ranges would be, such as whether Outstanding would be above 100% for the peer threshold. NCRC will be further analyzing these various thresholds and assessing adjustments, such as whether banks should presume to pass on the retail test if they hit the higher instead of lower performance measure threshold. 

The Fed has reduced the number of possible ratings on the subtests from five to four.[16] The five ratings on the current subtests are Outstanding, High Satisfactory, Low Satisfactory, Needs to Improve and Substantial Noncompliance. At least five ratings should be preserved because CRA exams need more nuance in ratings, not less in order for banks to be motivated to continually and affirmatively serve their communities as required by the statute. Currently, about 90% of banks receive Satisfactory as a final grade.[1] It is inconceivable that such a high percentage of banks perform in the same manner. When ratings blur distinctions in performance like this, the ratings lose their motivating power to encourage banks to improve their performance, particularly those that are not genuinely performing in a Satisfactory manner. Thus, the five ratings on the subtests serve an important purpose to separate bank performance into High and Low Satisfactory in addition to the other ratings.

Reducing the number of possible ratings on subtests increases the chances that an inflated rating scheme will continue. In addition, the Fed discusses how its selected thresholds essentially mimicked ratings on previous CRA exams.[17] Rigorous CRA reform would not mimic inflated ratings but would result in more gradations such that 90% of banks do not receive the same rating. The Fed should require more detail regarding its thresholds while insisting that they must reveal more distinctions in performance, not less. At the very least, the five ratings must be preserved on the subtests, with more banks split up among High and Low Satisfactory performers. The public should have access to a searchable database that can be downloaded into excel so the public can more readily observe distinctions among banks and even within a bank’s performance across assessment areas. 

The Fed states that for the determination of a presumption of Satisfactory performance, the Federal Reserve would combine retail home loan products and purposes (home purchase, refinance and home improvement lending would be considered together) and that low-income and moderate-income borrowers would be considered together.[18] The Fed acknowledges drawbacks such as a possible incentive for banks to focus on moderate-income borrowers in order to increase their percentage of loans to LMI borrowers. In addition, varying performance regarding meeting needs for home purchase, refinance and home improvement lending could be obscured in blending these loan types together.

The Fed notes that blending loan purposes and groups of borrowers together simplifies the exam and also states that separate analyses for low-income and moderate-income borrowers will occur when the Fed is determining the specific rating after calculating whether the bank passes the presumption of Satisfactory threshold.[19] NCRC will likely suggest that the Fed not combine borrower and loan purpose categories as the exam becomes more rigorous and precise with more disaggregation. Finally, NCRC appreciates that the Fed will include non-bank mortgage companies in the peer comparisons since they play an important role in serving LMI borrowers and hold considerable market share.[20]

Retail Services Subtest

The Fed has also proposed measures of performance for the other subtests, such as retail services. This test would assess the percent of branches in LMI tracts. In addition, the Fed proposes to continue the current practice of examining the record of opening and closing branches in LMI tracts, branch-related services and non-branch delivery systems.[21] Regarding non-branch delivery, the Fed is considering examining the number and percent of customers by income category of census tracts but notes that data collection could be challenging due to different collection systems across banks.[22] A rulemaking of this nature provides an opportunity to create uniformity for collecting carefully selected data points that would boost the rigor of exams.

The Fed is also contemplating providing CRA consideration for banks operating branches in bank deserts within their assessment areas. The Fed has not developed a definition for bank deserts and invites comments. Further research is necessary to determine if a rigorous definition can be developed to ensure that this contemplated element of the service test does not become a vehicle for inflating ratings by giving banks credit for operating in areas that are not actual bank deserts. [23]

In an improvement over the current service test, the Fed desires to use data on deposit products for LMI customers in a more systematic way, but the Fed has not decided how to collect data on deposit products and asks questions about how to do so. Possible deposit products considered on the services subtest would be low-cost transaction accounts, prepaid cards, international remittance services and individual development accounts.[24] Current CRA exams consider deposit products in an ad hoc and inconsistent manner and more rigor and consistency are necessary. [25]

Community development financing subtest

The Fed is proposing to combine community development investment and lending in one subtest. Currently, community development lending and investment are examined in separate tests. The separate tests can create perverse incentives for banks to strive for amounts of community development loans and investments that they think they need to pass the separate tests when some deals in various geographical areas are best structured as either a loan or an investment. [26]

In addition, the new test combining both community development investment and loans will consider outstanding financing as well as new financing during the CRA exam cycle.[27] Banks and community organizations have complained that a focus on new financing creates incentives to structure deals with shorter terms than are optimal. While including past loans or investments is appropriate, separate benchmarks for prior and current community development financing are necessary. These benchmarks can be weighed less than the combined prior and current benchmark but the separate benchmarks would better ensure that not all financing was in prior years. 

A community development financing performance measure would consist of the dollar amount of community development divided by deposits. This builds on existing measures. While this is a dollar-based measure, it is different from the OCC measure because it assesses just one aspect of performance, that is, community development financing, and is calculated for each geographical area on the CRA exam instead of at the institution level (the entire geographical footprint). 

The Fed is considering the use of two benchmarks: one would be a ratio of community development financing divided by deposits for the assessment area and one would be a national ratio. The Fed has not decided how to use these two thresholds and is asking for comment.[28] This approach was considered because some assessment areas with a concentration of large banks may be hot spots with banks competing vigorously for a finite number of community development deals and thus contributing to higher ratios than are sustainable for the long term. While this is an understandable concern, the reverse can occur when the local ratio is much lower than the national one. In this case, the bank might be excused for striving for a relatively low local ratio. A possible compromise is to weigh the local ratio at a higher percentage, such as 60%, than the national ratio in determining the rating on this performance measure. In this manner, the Fed would emphasize meeting local needs while still allowing for an adjustment in cases of overheated markets by also considering how a bank compares to the national benchmark. Another possible approach that the Fed should consider is a regional benchmark that might be a more appropriate comparison for a local ratio than a national ratio. 

The quantitative measures of performance would be accompanied by qualitative measures called impact scores (a scale of one to three), which gauge how innovative and responsive the community development financing is to local needs.[29] The impact scores should consider whether a bank is responding to local needs by altering the mix of financing for affordable housing, economic development, community services and revitalization. For example, in areas with high employment but a scarcity of affordable housing, a bank engaging in no affordable housing finance for rental housing would most likely receive a lower impact score. In addition, if a bank is focused on community development lending as opposed to investments in an area in need of investments, the impact score should be lowered. 

Community Development Services Subtest 

The Fed proposes to include a community development subtest that would evaluate quantitatively and qualitatively a bank’s community development services. These services have a primary purpose of community development and usually are related to the provision of financial services. Financial education is a common community development service. A bank’s service on the board of a community development organization is another example of a community development service. The Fed is considering various metrics, including the number and hours of community service and a ratio of the number of community service hours divided by the number of employees. A ratio like this would improve consistency across exams. In addition, a qualitative measure would involve impact scores and could be informed by bank data, such as whether clients of financial education increased their savings rates.[30] 

Community development services should be related to financial services or the regulatory definition of community development (including affordable housing and economic development). The Fed is considering making an exception for rural areas and allowing activities such as volunteering in homeless shelters. The Fed reasons that opportunities for offering community development are limited in rural areas, so banks need other opportunities for earning credit on the community development services subtest.[31]  Rather than providing a broad exemption, the board should consider a narrower definition of community development services in rural areas that would engage banks to offer services such as financial education and coaching directly through its branch network if the area lacks a nonprofit organization or other established means of offering community development services. 

Strategic Plan Option

Under the current CRA regulations, a bank has the option of creating a strategic plan and being evaluated on it instead of the regular CRA exam. The strategic plan can be up to five years and indicates goals or performance measures for obtaining Satisfactory or Outstanding ratings. The Fed asks various questions about how to improve the process. NCRC will maintain that public comment on the proposed plans not be constrained in any way and that a community benefits agreement (which NCRC and our members have negotiated with several banks)[32], not be eliminated as a plan option (Banks have asked that community benefits agreements not be required as a core part of strategic plans)[33]. Finally, if a bank has considerable lending or deposit-taking activity outside of its branch networks, creating assessment areas outside of branches to capture this activity should not be optional but must be required (the Fed asks for opinion about voluntary vs. required assessment areas).[34] 

Assessment Areas – Geographical Areas on CRA exams

Currently, assessment areas are defined as areas on CRA exams encompassing bank branches. The Fed’s research found that the vast majority of banks continue to concentrate their lending activity around branch networks, so it proposes to keep using geographical areas with bank branches as assessment areas.[35] However, the Fed also acknowledges that banks are embarking on lending and deposit-taking beyond their bank branch network. It has asked the public whether additional assessment areas should be created that include geographical areas with concentrations of deposits and/or loans. Further, it has asked whether internet banks should have a national assessment area. For retail internet banks, NCRC does not support a national assessment area; local and state assessment areas are feasible for these banks. [36]

If an institution is mostly a deposit-gathering institution, then deposit data needs to be used to designate local and state assessment areas rather than adopting a national assessment area. Most banks will engage in both lending and deposit gathering; thus, both loan and deposit data should be used to identify areas with significant amounts of activity. Loan and/or deposits data to designate assessment areas beyond geographical areas with bank branches should be readily available.

Likewise, a threshold for designating assessment areas must be chosen that results in 75% or more of a bank’s loans being captured by assessment areas. Our research suggests that when assessment areas cover a minority of bank lending, CRA rating inflation is more likely.[37] NCRC found that when assessment areas cover less than 50% of a bank loans, the banks are more likely to receive Outstanding ratings on their lending test and less likely to receive Low Satisfactory ratings on their lending test. This suggests that if a test covers less than a majority of a business activity, a bank will have an easier time focusing on the relatively fewer areas in which it is responsible for its CRA performance. This does not mean, however, that the bank is lending in an equitable manner throughout its business footprint and it is least likely to be doing so in the areas in which it is not examined. 

The Fed offers an approach that would use a threshold of 100 loans. This is preferable to their suggestion of 250 loans or only creating non-branch-based assessment areas for institutions with more than 75% of their loans outside of assessment areas (Fed research shows these alternatives would create fewer assessment areas than a 100 loan threshold).[38] The Fed should also investigate the impact of a 5% loan market share threshold that we have suggested in previous comments to the OCC.[39] 

It is encouraging that the board contemplates assessment areas for areas with loan production offices (LPOs).[40] Assessment areas should be created in geographical areas with LPOs if these areas contain bank lending that exceeds a threshold for establishing an AA. The board should not offer banks the option of designating assessment areas for areas with only deposit-taking ATMs.[41] If these ATMs generate a level of deposits that exceeds a threshold for establishing assessment areas, the areas should be automatically included. 

The Fed proposes that the smallest assessment area a large bank can designate is a county.[42] This would increase transparency since, in the past, a number of CRA exams for large banks only designate portions of counties. It is impossible for a member of the public to conduct additional data analysis for those counties to determine the most recent CRA performance for large banks in counties in which only a portion is designated as an assessment area.[43] The Fed proposes that small banks can designate a portion of a county as an assessment area. For these small banks, the Fed must continue with the current examination practice ensuring that their assessment areas do not arbitrarily exclude LMI census tracts or communities of color. A summation of an examiner’s anti-discrimination screenings of assessment areas of portions of counties should be included in CRA exams.  

Qualifications of Community Development Activity

The Fed is contemplating a non-exhaustive list of eligible CRA activities as a means of clarifying what counts on CRA exams.[44] Responding to the OCC NPR, NCRC expressed concern that such a list, especially if it becomes long, may discourage activities as banks become confused about whether the list is non-exhaustive. A more principles-oriented list accompanied by an interactive database of examples of CRA activities qualifying on CRA exams will create more certainty. In addition, the Fed is exploring a process for stakeholders to receive guidance in advance of whether an activity would qualify as a CRA activity which should be adopted.[45] 

The Fed discusses how to sharpen the definition of what would count under a new CRA regulation for community development, such as types of affordable housing or economic development. The issue of how to qualify un-subsidized rental housing that is affordable to LMI tenants has been debated and discussed over the years. The Fed asks if the housing has rents affordable to LMI tenants and is in LMI census tracts, whether it should automatically count as affordable housing.[46] This proposal is problematic and should not be adopted, particularly for neighborhoods that are rapidly gentrifying and in which affordable housing may experience an exodus of tenants as rents increase. One possible approach to address this issue could be through the use of covenants signed by borrowers of multifamily loans that they will commit to retaining units for LMI families.[47] We will be further developing our position on this important topic for our comment letter. 

The Fed surprisingly asks whether financial education for all income levels should count on CRA exams.[48] This proposal should not be adopted. FDIC statistics on unbanked populations by income level suggest that the greatest need for financial education is for LMI populations.[49] Also, if the Fed is concerned about other populations in need of financial education such as older adults or people with disabilities, they should list these populations in their regulation or guidance materials instead of opening up eligibility of financial education to the population at large. Such broad eligibility would result in those most in need not receiving as much education as needed since CRA resources would be spread too diffusely. 

The Fed devotes considerable attention to how to consider community development activity outside of assessment areas. Sometimes, opportunities to engage in community development inside assessment areas is constrained due to lack of or limited capacities of nonprofit or public sectors.[50] In other cases, an assessment area could be a “hot spot” with a concentration of large banks, making it hard for banks to compete for community development financing deals. While some allowance for community development outside assessment areas is sensible, safeguards need to be established to make sure assessment area needs are being met. For example, the Fed proposes its measure of community development activities divided by deposits on an assessment area level, which would result in low ratings if a bank was not serving its assessment areas as revealed by low ratios on this measure. 

The Fed is contemplating the creation of underserved areas that could be areas of high unemployment or poverty, or areas with low levels of lending, based on proposals outlined in previous NCRC white papers.[51] Using NCRC’s definition would effectively target several communities of color as we show in two white papers.[52] However, underserved areas, including underserved census tracts, should also be used as a criterion on the subtests. For example, the percent of loans in underserved census tracts as a performance measure would be effective in channeling loans to communities of color. The Fed did not include underserved areas as criteria on the subtests, and these criteria should be adopted in a proposed rule.

The Fed asks whether banks should get more CRA credit on the community development test for investing in or otherwise assisting minority deposit institutions, women-owned banks and low-income credit unions. The Fed asks whether a bank should get points assisting any of these institutions anywhere in the country and under what circumstances such assistance can increase a bank’s rating.[53] It is possible that permissiveness regarding assisting these institutions in various geographical areas is a positive change but that the potential to increase a rating[54] for such assistance may result in rating inflation and motivate banks to make some large-scale investments in other institutions rather than meeting community needs directly as CRA requires. 

CRA Definitions of Small Business and Farm Loans

The Fed contemplates adjusting the loan size and revenue size categories for qualifying retail lending activity to small businesses and small farms. Currently, loan amounts of up to $1 million for small business loans and $500,000 for small farms are the limits for CRA qualification. The Fed asks whether these loan amounts should be adjusted for inflation, which would make small business and farm size limits equal to $1.65 million and $800,000, respectively.[55] A similar issue arises with the current $1 million revenue size of the small businesses and farms.[56] 

NCRC has previously said adjusting loan sizes to account for inflation could be sensible since costs for small firms increase over time. However, we have previously opposed changes to revenue size limits since the smallest firms are under $1 million in revenue.[57] These limits may warrant reconsideration.


The Fed’s ANPR features a nuanced discussion about final CRA ratings. One significant development is that the Fed proposes to eliminate the distinctions between full-scope assessment areas and limited-scope areas. Full-scope areas are typically the largest metropolitan areas receiving the most comprehensive reviews, while limited-scope areas, usually smaller metro areas and rural counties, receive a more cursory review. Elevating the importance of limited-scope areas would leverage more lending, investing and services for them. 

The Fed proposes a weighted average approach for considering ratings across all assessment areas, which could still favor the larger areas. However, the Fed also proposes that a bank cannot neglect the smaller areas, suggesting that a bank cannot receive a higher rating if a certain percentage of assessment areas in a state receive a rating lower than the overall state weighted average would award the bank.

The Fed is proposing a number of activities outside of assessment areas that can contribute to the final rating. These activities include community development financing outside of assessment areas, community development financing in underserved areas, activities in Indian country and support for minority-depository institutions outside of assessment areas.[58] The Fed is still thinking through how these activities would contribute to a final rating. For example, the Fed contemplates a measure of community development financing divided by deposits at the state level that would capture community development financing outside of assessment areas.[59] These measures and procedures for considering out of assessment area procedures need careful consideration to avoid the result that they will always boost CRA ratings and will end up contributing to CRA rating inflation. In other words, if a bank notices it is doing poorly in its assessment areas, it should not be able to game the system and increase its rating by engaging in a few strategic and large-scale projects outsides of its assessment areas.  

Fair Lending and Consumer Compliance

The Fed states that violations of fair lending and consumer protection law will result in downgrades of CRA ratings depending on the severity of the violation. Bank violations in any geographical area can result in downgrades; violations of bank affiliates included on CRA exams can result in downgrades if they occur in assessment areas.[60] The Fed is also considering judging a bank’s compliance systems for detecting violations in deciding whether to issue downgrades.[61] This is similar to a current clause in the CRA regulation, but this criterion should not become a loophole excusing most violations. The Fed is appropriately considering adding violations of the Military Lending Act, the Servicemembers Civil Relief Act and the prohibition against unfair, deceptive or abusive acts or practices (UDAAP) as examples in a non-exhaustive list that can result in downgrades.[62]  The Fed should also add violations of the Americans with Disabilities Act (ADA) to the list. 

In an important development, a regulatory agency for the first-time states that violations in the provision of deposit products can result in downgrades.[63]  In contrast to the Fed, the OCC does not consider fair lending or consumer protection violations in the provision of deposit products as possibly downgrading CRA ratings.[64]  

Additional Data Reporting

The Fed acknowledges that its reform proposals would necessitate additional data reporting. More precision in gathering data for deposits would be required for the retail services subtest that would assess deposit products and for the community development financing subtest. The Fed sought comments on whether it can use existing deposit data collected by the Federal Deposit Insurance Corporation (FDIC) or whether more precise data based on the location of the customers of deposit products is required.[65]  The FDIC deposit data has deficiencies, particularly for deposit-gathering, that does not involve traditional branches. The collection of these data should be improved, particularly for large banks, to ensure the collection address location of deposit customers that can be geocoded to census tracts. 

New data for community development lending and investing would need to be collected. These data should be collected on a census tract level, but it needs to be collected at least at the county level in order to effectively measure community development lending and investing in assessment areas.[66] The Fed notes that the following information would need to be collected: the purpose of the activity (such as affordable housing or community development), the type of investment (equity or mortgage-backed securities), the dollar amount and number and whether the financing was new or from prior years.[67]  

Differences with OCC Final Rule

Since stakeholders are comparing the Fed ANPR with the OCC final rule, NCRC offers some observations regarding the major differences:

Performance Measures 

  • OCC rule – The ratio of the dollar amount of CRA activity divided by deposits is the dominant measure determining the rating and is calculated at a bank level. In contrast, the retail lending test is pass/fail on the assessment area level and carries considerably less weight. [68] 
  • Fed ANPR – The Fed does not propose a ratio at the bank level and has retail and community development subtests at an assessment area level. The Fed maintains a service test while the OCC jettisons this test that examines branches and deposit products. The Fed has a community development to deposits ratio, but this is one measure on the community development test and is balanced by a qualitative measure called impact scores. 

Emphasis on LMI communities and borrowers

  • OCC rule – The final rule would divert resources from LMI communities with its emphasis on large infrastructure projects and offers generous partial credit for projects that incidentally benefits LMI residents or communities. In contrast, the current CRA regulation for the Fed and FDIC stipulates that the primary purpose of a community development project must be for LMI communities. The Fed ANPR does not change the primary purpose provision. 
  • Fed ANPR – The Fed acknowledges that CRA provides an allowance for infrastructure projects but expressed concern in the ANPR that this allowance could be used to encourage large projects that drive dollars away from LMI communities.[69]  Currently, in the Fed regulation, infrastructure projects like mass transit or roads count if they benefit LMI communities directly and fall into one of the regulatory definitions of community development (affordable housing, economic development or revitalize and stabilize LMI communities). In contrast, the OCC would add essential infrastructure as a new criterion for the definition of community development.

Assessment Areas

  • OCC rule – The OCC would add assessment areas beyond bank branches only if 50% of bank deposits originate outside of bank branches. Also, these areas would become assessment areas only if more than 5% of a bank’s deposits come from them. A bank with more than 5 assessment areas can fail in 20% of them; a bank with five or fewer assessment areas can fail in 50% of them. 
  • Fed ANPR– The Fed is considering using lending data as well as deposit data for determining assessment areas beyond bank branch networks. The Fed is contemplating thresholds such as 100 loans that appear to capture more areas than the OCC’s final rule. The Fed does not allow failure in a certain percentage of areas but has proposed weighed averages tempered with a requirement that a certain number of areas in a state-level not be below the rating awarded by the weighted average (this is to preserve the importance of smaller areas). 


  • It is premature to state similarities between the OCC and Fed approach since the OCC issued a final rule, and the Fed issued an ANPR. The Fed contemplates a list of eligible CRA activities and a process for stakeholders to ask if a project qualifies for CRA credit. The OCC adopted these mechanisms in its final rule. The specifics of the Fed’s mechanisms are unknown since the Fed asks more questions than indicates the contours of its mechanisms. 


This initial review does not address each of the several important provisions in the Fed’s proposed framework for CRA. However, this analysis provides a review of major pieces of the Fed proposal and how they would work together. While the Fed proposes a solid foundation for a new CRA rule, the building blocks such as thresholds for translating performance into ratings will ultimately determine how rigorous the new CRA rules would be. The degree of rigor determines whether rule changes effectively stimulate more lending, investing and services for underserved communities by revealing more distinctions in bank performance and holding them accountable for safe and sound and responsive financing in underserved communities. 

Josh Silver is NCRC’s senior policy advisor.


[1] Federal Reserve Board, Advanced Notice of Proposed Rulemaking (ANPR), Community Reinvestment Act Regulation BB Docket No. R-1723, RIN 7100-AF94, p. 55,

[2] Fed ANPR, p. 33.

[3] See NCRCs review of the research in The importance of CRA assessment areas and bank branches, June 2018,

[4]Lei Ding and Carolina Reid, The Community Reinvestment Act (CRA) and Bank Branching Patterns, Federal Reserve Bank of Philadelphia, Working Papers, WP 19-36, September 2019,

[5]Fed ANPR, p. 34.

[6] Federal Financial institutions Examination Council, Explanation of the Community Reinvestment Act Asset-Size Threshold Change,

[7] NCRC, Intermediate Small Banks: The Forgotten But Significant Resource For Affordable Housing And Community Development, November 2017,

[8] Fed ANPR, pp. 41-42.

[9] Ibid.


[11] Fed ANPR, p. 49.

[12]Fed ANPR, pp. 54-55.

[13] Fed ANPR, p. 50.

[14]Fed ANPR, p. 60.

[15] Fed ANPR, p. 60.

[16] Josh Silver and Jason Richardson, Do CRA Ratings Reflect Differences In Performance: An Examination Using Federal Reserve Data, May 2020,

[17] Fed ANPR, pp. 56-57.

[18] Fed ANPR, pp. 44-45.

[19] Fed ANPR, p. 61.

[20]Fed ANPR, p. 48.

[21] Fed ANPR, pp. 68-69.

[22] Fed ANPR, p. 76.

[23] Fed ANPR, p. 74.

[24] Fed ANPR, pp. 77-79.

[25] Josh Silver, NCRC, How To Evaluate Community Development Financing And Services Under CRA, December 2019,

[26]  Fed ANPR, p. 96.

[27] Fed ANPR, p. 98.

[28]Fed ANPR, pp. 105-106.

[29] Fed ANPR, pp. 108-109.

[30]Fed ANPR, pp. 112-113.

[31] Fed ANPR, p. 114.

[32] For an example of a community benefits agreement, see NCRC, Morgan Stanley Announce $15 Billion Plan To Increase Lending And Investments In Lower-Income Communities, September 2020,

[33] Fed ANPR, p. 150.

[34]Fed ANPR, p. 151.

[35] Fed ANPR, p. 24.

[36] Fed ANPR, pp. 32-33

[37] Josh Silver, The Community Reinvestment Act and Geography, NCRC, May 2017,

[38] Fed ANPR, p. 32.

[39] NCRC Comments Regarding Notice Of Proposed Rulemaking (Docket ID OCC–2018-0008 And RIN 3064-AF22),

[40] Fed ANPR, p. 27.

[41] Fed ANPR, p. 27.

[42] Fed ANPR, p. 25.

[43] Ibid.

[44] Fed ANPR, pp. 145-146.

[45] Fed ANPR, p. 146.

[46] Fed ANPR, pp. 118-119.

[47] NCRC Comments Regarding Notice Of Proposed Rulemaking (Docket ID OCC–2018-0008 And RIN 3064-AF22),

[48] Fed ANPR, p. 115.

[49] NCRC Comments Regarding Notice Of Proposed Rulemaking, op. cit.

[50] Fed ANPR, pp. 140-141.

[51] Fed ANPR, p. 143.

[52] Bruce Mitchell, PhD. and Josh Silver, NCRC, Adding Underserved Census Tracts As Criterion On CRA Exams, January 2020 and Bruce Mitchell, PhD. and Josh Silver, How To Consider Community Development Financing Outside Of Assessment Areas By Designating Underserved Counties, January 2020,

[53] Fed ANPR, pp. 135-136.

[54] Fed ANPR, p. 172.

[55] Fed ANPR, pp. 87-88.

[56] Fed ANPR, p. 89.

[57] NCRC Comments Regarding Notice Of Proposed Rulemaking, op. cit.

[58] Fed ANPR, pp. 140-141, for Indian country, see pages 143 and 163.

[59] Fed ANPR, p. 164 and 166.

[60] Fed ANPR, p. 169.

Fed ANPR, pp. 170-171.

[62]  Fed ANPR, p. 172

[63] Fed ANPR p. 80.

[64] OCC, Impact of Evidence of Discriminatory or Other Illegal Credit Practices on Community Reinvestment Act Ratings, PPM 5000-43, OCC Bulletin 2018-23, August 2018,

[65] Fed ANPR, p. 177.

[66] Josh Silver, NCRC, Increasing community development financing data a necessary component for CRA reform, March 2019,

[67] Fed ANPR, p. 183.

[68] For a discussion of the major parts of the OCC final rule, see NCRC, Analysis Of The OCC’s Final CRA Rule, June 2020,

[69] Fed ANPR, p. 131.

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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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