Highlights from CRA Modernization Final Ruling

Last week, the Federal Reserve, FDIC, and Office of the Comptroller of the Currency (OCC) released the final rule for CRA Modernization. We are working hard behind the scenes to digest the nearly 1,500-page document, but while we’re working through that, here are a few highlights and elements of the law you should keep in mind as you begin to make a plan for compliance.

Highlights of CRA Modernization

CRA Modernization’s final ruling includes several aspects of the proposed rule unveiled last year. Notably, it includes flexibility in retail lending evaluations for banks with less than $600 million in assets, and new data collection and reporting requirements for banks over $2 billion.

A bulletin released by the OCC identifies the following 9 points as the key elements of the final ruling:

  • The application of four new performance tests to evaluate the CRA performance of large banks (assets of $2 billion or more): the Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, and Community Development Services Test.
  • The evaluation of intermediate banks (assets of $600 million or more but less than $2 billion) under the new Retail Lending Test, and either the current rule’s community development test or, at the bank’s option, the new Community Development Financing Test.
  • The evaluation of small banks (assets less than $600 million) under the current rule’s small bank performance test unless the bank opts into the new Retail Lending Test.
  • The evaluation of limited purpose banks (including banks designated as wholesale banks under the current rule) under the Community Development Financing Test for Limited Purpose Banks.
  • The retention of a strategic plan option, with modifications to reflect the new performance tests and updates to the approval standards.
  • The clarification of community development activities by updating the definition of community development, providing a process by which banks may request confirmation that an activity is eligible for community development consideration, and providing for a publicly available interagency illustrative list of qualifying community development activities.
  • The updated delineation requirements for facility-based assessment areas and establishing new retail lending assessment areas for certain large banks.
  • The updated data collection, maintenance, and reporting requirements for large banks, tailoring those requirements based on large bank asset size and leveraging existing data where possible, while not imposing new data collection and reporting requirements for small and intermediate banks.
  • The continuation of public file and public notice disclosure requirements and creating a new public comment process to facilitate public engagement.

Looking Forward

The final rule takes effect on April 1, 2024, with staggered compliance dates of January 1, 2026, and January 1, 2027.

With that in mind, it is important to get a plan for compliance in place as soon as you’re able.

We recommend that you start by getting familiar with the new final ruling. Once you have a strong working knowledge of it, you’ll know the ways in which it will impact your current CRA program and bank.

Next, be proactive in outlining how your institution can achieve compliance. Once you’ve determined a course of action, you can begin raising awareness about CRA Modernization within your organization. Be sure your Board of Directors and senior leadership teams are aware of the most salient elements of the final rule, the impact it will have on your bank, and how you plan to address that impact.

As you know, we’re here to arm you with the knowledge that will ease the regulatory burden and prepare you for this change. To that end, we’ve developed CRA Modernization: What You Need To Know Now, taking place December 11th, that examines CRA Modernization in-depth and provides the framework to start building a plan for compliance at your bank.