The Community Reinvestment Act (CRA) is undergoing significant changes and the final interagency ruling on CRA Modernization is expected to come down sooner rather than later.
As CEO, understanding these changes and their implications is crucial for your bank’s compliance success. The Community Reinvestment Act has long played a vital role in promoting community development and fair lending, and the new regulations will reshape how your institution approaches its community commitments.
Here are ten things CEO’s and Senior Management should consider when planning for the upcoming changes to CRA:
- Plan for Broader Assessment Areas:
The updated CRA rules will expand the assessment areas well beyond the physical branches of your bank. Now, you will need to consider areas where your institution engages in significant lending or deposit-taking activities both physically and through all online channels. This expansion means a broader reach and increased responsibility to serve communities beyond traditional assessment areas.
- Performance Metrics:
The CRA modernization effort introduces new quantitative metrics to evaluate your bank’s CRA performance. These metrics will focus on areas such as lending to low- and moderate-income individuals, small businesses, and community development projects, not just your market area. It will be important to understand and track these metrics to identify potential issues before they become a problem. Tracking and reporting on these metrics will also help demonstrate compliance and success in meeting community needs.
- Data Collection and Reporting: With the new CRA regulations, data collection and reporting will become more crucial than ever. Your bank must enhance its data management systems to capture and analyze relevant information accurately. Automated CRA and Fair Lending Analytics software will enable you to measure your institution’s impact and identify areas for improvement quickly and more effectively.
- Technology Infrastructure:
Upgrading your bank’s technology infrastructure will be an important consideration for effective CRA compliance. The CRA modernization efforts emphasize the importance of data-driven decision-making, which requires advanced data analytics capabilities. Budgeting for improved technology will not only streamline compliance processes but also provide valuable insights into community development opportunities.
- Community Engagement Strategies:
Under the CRA modernization, community engagement and partnerships will play a more significant role. Your bank will need to develop comprehensive strategies to actively engage with community organizations, nonprofits, and stakeholders. Building strong relationships with various community organizations will help identify community needs and provide the bank the opportunity to collaborate on impactful initiatives.
- Redefined Qualifying Activities:
The new CRA rules redefine what constitutes qualifying activities. It is essential to review and understand these changes to ensure that your bank’s efforts align with the updated criteria. This may involve reassessing existing community development programs and exploring new avenues for investment and support.
- Regulatory Expectations:
Regulators will have heightened expectations for CRA compliance as a result of the changes to CRA. The focus will shift from mere compliance to demonstrating measurable impact and effectiveness in meeting community needs. Banks that embrace the updated regulations and are committed to their community development efforts will have a competitive advantage.
- Risk Management:
CRA compliance and community development initiatives carry inherent risks. It will be important to establish a robust risk management framework to identify, assess, and mitigate potential risks. Integrating risk management practices into your overall CRA strategy will help protect your bank’s reputation and ensure compliance.
- Staff Training and Education:
Implementing the CRA changes requires a well-informed workforce. Training and educating your compliance leadership and staff on the updated regulations, compliance requirements, and new community development principles are essential. Empower your employees with the knowledge and skills to drive your bank’s success in meeting CRA obligations. The best organizations see training as an opportunity, not an obligation.
- Strategic Opportunities:
While CRA modernization brings new compliance challenges, it also presents strategic opportunities for your bank. Embracing the updated regulations can help you strengthen your institution’s reputation, improve customer relationships, and drive sustainable growth. By prioritizing community development, your bank can become a trusted partner for the communities you serve.
In conclusion, CRA modernization is set to transform how banks approach CRA, community development and fair lending practices. As a CEO, being well-versed in the changes and their implications will position your bank for success. Your knowledge of the changes will set the tone for the rest of the organization and empower your compliance department to implement these changes effectively. By adapting your strategies, investing in technology and staff training, and embracing community engagement, you can navigate the evolving regulatory landscape while making a positive impact on the communities you serve.
If you’d like to learn more, we have a few upcoming courses related to CRA:
- Identifying and Documenting CRA Community Development Activities
August 22nd, 2023 | 2:00 – 4:00 pm EDT
- The Interagency CRA Modernization Rule – It’s Final, Now What?
September 7th, 2023 | 2:30 – 4:30 pm EDT
- How CRA, SBDCR, and Fair Lending Collide
Two Part Series: September 19th & 25th, 2023 | 2:00 – 4:00 pm EDT