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The Community Reinvestment Act
Overview Purpose of the Community ReinvestmentAct (CRA) Different CRA evaluation types How to comply with CRA Practical ideas to considerFEDERAL DEPOSIT INSURANCE CORPORATION
BackgroundCRA enacted in 1977 to: Encourage financial institutions to meet thecredit needs of their community.FEDERAL DEPOSIT INSURANCE CORPORATION
Background Focuses on serving the credit needs of: Low- and moderate-income (LMI)borrowers/geographies; Small businesses; and Small farms.FEDERAL DEPOSIT INSURANCE CORPORATION
Background Requires FDIC to evaluate each institution’s recordof meeting the credit needs of its community,consistent with safe and sound operations.FEDERAL DEPOSIT INSURANCE CORPORATION
Regulation RequirementsRequirements of CRA: Public Notice; Public File; and Data Collection and Reporting for Large Banks.FEDERAL DEPOSIT INSURANCE CORPORATION
Assessment Areas CRA regulation requires banks to delineate one ormore assessment areas within which the FDICevaluates the bank’s record of helping to meet thecredit needs of its community.FEDERAL DEPOSIT INSURANCE CORPORATION
Assessment AreasLimitations to Assessment Areas: Must consist of whole census tracts; May not reflect illegal discrimination; May not arbitrarily exclude low- or moderate-incomecensus tracts; Must include bank’s main office, branches, anddeposit-taking ATMs; and Must include areas where the bank has originated orpurchased a substantial portion of its loans.FEDERAL DEPOSIT INSURANCE CORPORATION
Performance ContextPerformance Context is the environment in which abank operates.It includes a broad range of information: Economic; Demographic; and Institution-specific and community-specific.FEDERAL DEPOSIT INSURANCE CORPORATION
Examination Types Small BankIntermediate Small Bank (ISB)Large BankCommunity Development Test for limitedpurpose/wholesale banks Strategic PlanFEDERAL DEPOSIT INSURANCE CORPORATION
Determining Examination TypesSmall Bank Assets less than 296 million as of December 31 ineither of two prior calendar yearsIntermediate Small Bank Assets of at least 296 million as of December 31 inboth of the prior two calendar years and Less than 1.186 billion as of December 31 in eitherof the prior two calendar yearsAsset thresholds effective January 1, 2013FEDERAL DEPOSIT INSURANCE CORPORATION
Determining Examination TypesLarge Bank Assets of at least 1.186 billion as of December 31 inboth of the prior two yearsAsset thresholds effective January 1, 2013FEDERAL DEPOSIT INSURANCE CORPORATION
Small BanksHow are small banks different? Staffing and Expertise Product Offerings Financial ResourcesFEDERAL DEPOSIT INSURANCE CORPORATION
Small Bank Performance CriteriaLending Test Average Net Loan to Deposit RatioAssessment Area ConcentrationBorrower Distribution (by income/revenue)Geographic DistributionResponse to written CRA complaintsFEDERAL DEPOSIT INSURANCE CORPORATION
ISB Performance CriteriaTwo Performance Tests for ISB: Lending Test – same five performancecriteria utilized for Small Banks Community Development Test – flexibleapproach that measures your bank’sresponsiveness to community developmentneeds through the combination of loans,investments, and servicesFEDERAL DEPOSIT INSURANCE CORPORATION
ISB Performance CriteriaMust achieve at least Satisfactory on both theLending and Community Development tests tobe rated Satisfactory or better overall.FEDERAL DEPOSIT INSURANCE CORPORATION
What is Community Development? Affordable Housing for LMI Individuals/FamiliesCommunity Services Targeted to LMI Individuals/FamiliesActivities that Promote Economic DevelopmentActivities that Revitalize or Stabilize: Low- or Moderate-Income Census Tracts Designated Disaster Areas Distressed or Underserved Non-Metropolitan Middle-IncomeCensus Tracts Abandoned or Foreclosed HomesFEDERAL DEPOSIT INSURANCE CORPORATION
Large Bank Performance CriteriaLarge banks face three separate comprehensive CRAtests: Lending Test Investment Test Service TestFEDERAL DEPOSIT INSURANCE CORPORATION
Rating Comments OutstandingSatisfactoryNeeds to ImproveSubstantial NoncomplianceFEDERAL DEPOSIT INSURANCE CORPORATION
Discriminatory or Other Illegal CreditPractices Discrimination against applicants on a prohibitedbasis (Equal Credit Opportunity Act / Fair HousingAct) Substantive violations of the Home Ownership andEquity Protection Act (HOEPA) provisions of theTruth in Lending Act (TILA)FEDERAL DEPOSIT INSURANCE CORPORATION
Discriminatory or Other Illegal CreditPractices Violations of Section 5 of the Federal TradeCommission (FTC) Act (Unfair or Deceptive Acts orPractices) Violations of Section 8 of the Real Estate SettlementProcedures Act (RESPA) Violations of TILA provision regarding a consumer’sright of rescissionFEDERAL DEPOSIT INSURANCE CORPORATION
Impact of Less than SatisfactoryCRA PerformanceCRA Ratings are considered when a bankapplies for: Establishment of branches Relocation of offices and branches Mergers/acquisitionsPotential Consequences: Reputation risk – CRA rating is publicFEDERAL DEPOSIT INSURANCE CORPORATION
CRA Examination FrequencyGramm-Leach-Bliley ActExtended examination frequency for banks with totalassets of 250 million or less CRA rating Satisfactory - at least four years CRA rating Outstanding - at least five yearsFEDERAL DEPOSIT INSURANCE CORPORATION
Common Challenges My bank is transitioning from being a Small Bank tobeing an Intermediate Small Bank. What do we needto do to be prepared?FEDERAL DEPOSIT INSURANCE CORPORATION
Common Challenges My bank purchases a large volume of loans. Arethere potential CRA implications to this businessstrategy?FEDERAL DEPOSIT INSURANCE CORPORATION
Practical Ideas Develop a CRA Strategy Perform Self-Assessments Utilize FDIC ResourcesFEDERAL DEPOSIT INSURANCE CORPORATION
Practical IdeasDevelop a CRA Strategy Involve employee responsible for CRA complianceAssess community needsMatch products and services to needsConsider FDIC’s small dollar loan program and SafeaccountsFEDERAL DEPOSIT INSURANCE CORPORATION
Practical IdeasPerform Self-Assessments Review adequacy of Assessment AreaReview your bank’s dataReview your competitor’s dataTrack progress and require Board reportingFEDERAL DEPOSIT INSURANCE CORPORATION
Information to Help Banks Comply CRA Regulation (Part 06500.html#fdic2000part345 Interagency Questions and Answers Regarding 6750.html#fdic2000crainterFEDERAL DEPOSIT INSURANCE CORPORATION
Information to Help Banks Comply A Guide to CRA Data Collection and Reportinghttp://www.ffiec.gov/cra/guide.htm FDIC Regional Community Affairs es.htmlFEDERAL DEPOSIT INSURANCE CORPORATION
Resources FDIC’s National Survey of Unbanked / survey Models for small dollar loan programs and Safedeposit /www.fdic.gov/consumers/template/FEDERAL DEPOSIT INSURANCE CORPORATION
Resources Director's Resource rector/index.html Questions? - Please send email tosupervision@fdic.govFEDERAL DEPOSIT INSURANCE CORPORATION
FEDERAL DEPOSIT INSURANCE CORPORATION Assessment Areas Limitations to Assessment Areas: Must consist of whole census tracts; May not reflect illegal discrimination; May not arbitrarily exclude low- or moderate-income census tracts; Must include bank's main office, branches, and deposit-taking ATMs; and Must include areas where the bank has originated or
