The new CRA: Understanding the final rule and its impact on large, intermediate, and small banks | Ballard Spahr LLP

On October 24, 2023,  the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a final rule amending their regulations implementing the Community Reinvestment Act (“CRA”) (the “Final Rule”).  The Final Rule marks the first substantial revision to the CRA regulations in nearly thirty years.  It provides comprehensive changes to how banks’ performances are assessed under the CRA, and will significantly impact the CRA programs of banks of all sizes.

This is the first of three blog posts discussing the Final Rule.  In this blog post, we provide a summary of the major changes impacting large banks (those with assets of at least $2 billion as of December 31 in the two prior calendar years).  Click here for an article containing a more detailed discussion of the impact of the Final Rule on large banks.

Our second blog post on the Final Rule will discuss the impact of the Final Rule on intermediate banks (those with assets of at least $600 million as of December 31 in the two prior calendar years and less than $2 billion as of December 31 in either of the two prior calendar years) and our third blog post will focus on the Final Rule’s impact on small banks (those with assets of less than $600 million as of December 31 in either of the two prior calendar years).

The Final Rule is effective April 1, 2024; however, the compliance date for a large portion of the Final Rule’s provisions is January 1, 2026.  On December 6, 2023 from 3:30 p.m. to 4:45 p.m. ET, Ballard Spahr will hold a webinar, “Community Reinvestment Act Reform: A Discussion of the Final Rule.” 

Facility-Based Assessment Areas

Under the Final Rule, the areas where a large bank’s main office, branches, and deposit-taking remote service facilities are located (“facility-based assessment areas”) must consist of a single Metropolitan Statistical Area (“MSA”), one or more contiguous counties within an MSA, or one or more contiguous counties within the nonmetropolitan area of a State.  Facility-based assessment areas that include a partial county must consist of contiguous whole census tracts.  Unless located in a multistate MSA, facility-based assessment areas may not extend beyond an MSA boundary or state boundary.  Large banks must delineate whole county facility-based assessment areas.

Retail Lending Assessment Areas

Under the Final Rule, only large banks are subject to the retail lending assessment requirements, which must include the surrounding counties where the bank has originated a substantial portion of its loans and may include Loan Production Offices.  Large banks that have at least 150 closed-end home mortgage loans or 400 small business loans in a particular area must delineate such area in each of the prior two calendar years.

The CRA Tests

The Final Rule now applies the following four new tests for evaluating a large bank’s performance: (1) the Retail Lending Test; (2) the Retail Services and Products Test; (3) the Community Development Financing Test; and (4) the Community Development Services Test.  Under the Retail Lending Test, large banks will be evaluated against two sets of metrics (the Retail Lending Volume Screen and Geographic Bank and Borrower Bank Metrics) in its assessment areas and compared against market and community benchmarks.  Under the Retail Services and Products Test, examiners will qualitatively evaluate the availability and accessibility of a large bank’s retail banking services and retail banking products to low- and moderate-income individuals and communities.  Under the Community Development Financing Test, examiners will qualitatively review large banks using standardized metrics and benchmarks to evaluate both community development loans and investments in its facility-based assessment areas, states, and multistate MSAs.  Under the Community Development Services Test, examiners will qualitatively evaluate a large bank’s record of helping meet the community development needs of, and the impact and responsiveness of those services in, the bank’s facility-based assessment areas, state, multistate MSA, and the nationwide area.

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