85% of community development activity currently conducted under the Community Reinvestment Act (CRA) could be lost if the proposed changes from the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) are finalized, further analysis from the National Community Reinvestment Coalition (NCRC) has found.
“We continue to analyze these proposed changes, and everywhere we look we find new reasons for alarm. Our new analysis shows that up to 85% of community development activity could be at risk among top OCC and FDIC regulated banks,” said Jesse Van Tol, NCRC’s president and CEO. “This proposal threatens to weaken investment, lending and accountability in the very communities the Community Reinvestment Act was enacted to protect. The consequences could be felt in communities across the country for years to come. That is why we are calling on everyone with a stake in a strong CRA — NCRC members and partners, community organizations, financial institutions and individuals — to make their voices heard and take action against this proposal. This is not the time to sit on the sidelines.”
NCRC’s latest analysis examined how the proposal could allow large banks to receive credit for community development (CD) loans across a broader geographical area once their qualifying activity in the communities they are assessed in reaches 0.625% of their Tier 1 capital. Put simply, Tier 1 capital is a measure of a bank’s core financial strength.
The proposal does not explicitly say that reaching 0.625% is enough to earn a passing CRA rating. But by writing that number into the rule and identifying it as the minimum needed to avoid a “Needs to Improve” rating, regulators could effectively create a new target for banks. Banks may come to view 0.625% as the point at which they have done enough, potentially reducing the incentive to make additional community development loans where they are most needed.
NCRC then analyzed the proposed Tier 1 benchmark on the?69 OCC- and FDIC-supervised banks in the top 100 banks by assets and found that they currently provide about $102 billion a year in community development lending, investments and grants in the communities where they are evaluated under CRA. If those same banks provided only the amount represented by the proposal’s 0.625% benchmark, that total would fall to about $14.8 billion, roughly 85% below current levels.
To read the latest analysis, visit https://ncrc.org/cras-new-benchmark-could-put-85percent-of-current-community-development-activity-at-risk/.
To take action, visit www.ncrc.org/cra.
