On August 12, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) issued a proposed rule in the Federal Register outlining changes to regulations implementing the Community Reinvestment Act (CRA). The Federal Reserve did not participate in the proposed rulemaking.
The proposal would significantly revise the asset classifications and thresholds used to determine which CRA requirements apply to banks. Most notably, the threshold for a “large bank” would increase from $1.649 billion to $10 billion in assets. As a result, hundreds of banks that currently face the CRA investment test because they are classified as large banks could no longer be subject to that test.
Key Changes Under the Proposal
- Small banks: Banks with less than $1 billion in total assets would be classified as “small banks,” compared with the current threshold of less than $412 million. Small banks would continue to be evaluated under a lending test.
- Intermediate banks: The existing “intermediate small bank” category would be replaced with an “intermediate bank” category covering institutions with $1 billion to $10 billion in assets. These banks would be subject to both a lending test and a community development (CD) test.
- Flexibility in ratings: Under the current framework, intermediate banks must receive a “satisfactory” rating on both the lending and CD tests. The proposed rule would provide greater flexibility by allowing stronger performance on the lending test to compensate for weaker performance on the CD test.
- Alternative threshold under consideration: The agencies are also seeking feedback on an alternative upper asset threshold of $3.252 billion for intermediate banks, rather than the proposed $10 billion limit. The figure is based on the $2.5 billion intermediate bank cap established under the OCC’s 2020 CRA rule, adjusted for inflation using the CPI-W. The agencies are also requesting input on potential thresholds as high as $30 billion for intermediate banks and $10 billion for small banks. (Federal Register, Vol. 91, No. 154, p. 55122.)
- Large banks: Institutions with more than $10 billion in assets would fall into the “large bank” category. These banks would continue to undergo lending, investment, and service tests.
Banks are estimated to account for approximately 80 percent of Housing Credit investment, making CRA requirements an important component of the Housing Credit financing landscape. Strong CRA investment requirements have historically helped support a deep and efficient market for Housing Credit investments.
What Happens Next
Comments on the proposed rule are due October 13. Click here to make a comment.