The Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency have issued a series of proposed updates to the Community Reinvestment Act.
The agencies on Thursday released proposals to revamp the law, which was originally enacted in 1977 to prevent banks from engaging in discriminatory lending practices. It has been 27 years since the law was last refreshed.
The proposed changes would feature four tests that would cover retail lending, retail services and products, community development financing and community development services. Small banks can opt to be measured by existing parameters or a blend of old and new tests.
Banks that have more than $10 billion of asset would be required to collect and report additional data under each test.
Big banks would be allowed to consider nationwide community development activities as a separate metric.
Banks would receive credit for investments in childcare, education, workforce development and job training, health services and housing services programs, among other things. Financial literacy programs would also factor into the process.
The proposal also emphasizes small-dollar loans and investments with a “high impact” on lower-income neighborhoods. It would promote community engagement and financial inclusion.
The proposal would update CRA assessment areas to include activities associated with online and mobile banking, branchless banking and hybrid models.
While branch-centric “facility-based assessment areas” would still be used to measure how banks meet the law’s, big banks must also consider areas with concentrations of small-business lending and mortgages.
Large banks would also be required to disclose the racial and ethnic background of their borrowers.
Banks with more than $2 billion of assets would be considered large, while those with $600 million to $2 billion of assets would be intermediate. Banks with less than $600 million of assets would be seen as small.
The agencies set an Aug. 5 deadline to accept comments.