Federal Reserve Releases Community Reinvestment Act Reform Proposal

Dafina Williams

On September 21, the Federal Reserve Board of Governors voted unanimously to release their proposal to reform the Community Reinvestment Act (CRA) regulations.

While the Federal Reserve has indicated for months that it would move forward with its own reform proposal, the release of the Advanced Notice of Proposed Rulemaking (ANPR) is the first formal step in the process for implementing its own vision for CRA.

Of note at the Board of Governors meeting was the focus Governors gave to CRA’s role in increasing lending and investment in communities of color, especially as these communities navigate the economic impacts of COVID-19. Fed Governor Lael Brainard, who is leading the regulator’s efforts to revamp the rule, explicitly highlighted racial inequities in access to credit in her statement. In addition, Fed Chair Jerome Powell noted increased bank-CDFI partnerships as one goal of the reform efforts in his remarks.

The Fed’s proposal adds another layer to an already complex regulatory environment for CRA enforcement. The Federal Reserve notably chose not to endorse the Office of Comptroller of the Currency’s CRA reform approach, which was finalized in a rule published earlier this year. The Federal Deposit Insurance Corporation (FDIC) initially joined the OCC’s reform efforts in the Notice of Proposed Rulemaking released in late 2019 but chose not to join the OCC in the publication of the final rule.

The divergent rulemaking could create a regulatory environment where different banks will be evaluated differently for their compliance with CRA, depending on their regulator. While not unprecedented, this is very unusual. During remarks at the Urban Institute after the release of the ANPR, Governor Brainard noted that the Fed is still hoping for an interagency rule to reduce complexity for banks and community stakeholders. OFN has continued to emphasize the importance of the bank regulators operating in a joint regulatory framework to enforce CRA. 

OFN is closely reviewing the ANPR and will provide analysis in the coming weeks. We will also seek feedback from stakeholders to inform our comments on the Fed proposal. Comments are due in late January 2021. Stay tuned for more updates about how you can advocate for reforms that ensure CRA continues to provide critical capital and investment in underserved communities.

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