OCC, Federal Reserve, and FDIC Issue Final Community Reinvestment Act Rule
The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) have jointly issued a final rule amending their regulations implementing the Community Reinvestment Act (CRA). This new rule outlines compliance changes that aim to strengthen fair lending practices and promote community development.
The Effective Date and Compliance Timeline
The final rule will be effective on April 1, 2024. However, the compliance date for the majority of the provisions is set for January 1, 2026. This gives financial institutions sufficient time to adjust their operations and systems to meet the new requirements.
Key Changes and Highlights
The new final rule introduces several important changes to the Community Reinvestment Act, aiming to modernize and improve its effectiveness. Here are some of the key highlights:
1. Expanding the Definition of Assessment Areas: The final rule expands the definition of assessment areas to include not only physical locations but also areas where the institution receives a significant amount of its deposits and lending activity. This change ensures that banks are evaluated based on their actual service areas.
2. Updating the Evaluation Criteria: The final rule revises the evaluation criteria for evaluating an institution’s performance under the CRA. It places a greater emphasis on a bank’s lending, investments, and services to low- and moderate-income individuals and communities, as well as to small businesses and communities of color.
3. Minority Depository Institutions (MDIs) Focus: The new rule recognizes the unique role and importance of MDIs in meeting the credit needs of low- and moderate-income individuals and communities. It establishes a separate performance metric to evaluate MDIs, taking into account their assets, deposits, and community development activities.
4. Performance Measures: The final rule introduces new, clearer performance measures that are designed to provide a more objective evaluation of a bank’s CRA performance. These performance measures will help regulators and the public assess a bank’s commitment to meeting the credit needs of its community.
5. Data Collection and Reporting: The final rule requires banks to collect and report more detailed data on their lending, investments, and services. This increased transparency will help regulators identify any disparities or gaps in lending practices and encourage banks to address them.
6. Performance Context: The final rule requires regulators to consider the impact of external factors, such as natural disasters or economic downturns, when evaluating a bank’s CRA performance. This recognizes that external circumstances can affect a bank’s ability to meet the credit needs of its community.
FAQs: What You Need to Know
Q: When will the final rule go into effect?
A: The final rule will be effective on April 1, 2024.
Q: What is the compliance date for the majority of the provisions?
A: The compliance date for the majority of the rule’s provisions is set for January 1, 2026.
Q: What are the key changes introduced by the final rule?
A: The key changes include expanding the definition of assessment areas, updating the evaluation criteria, recognizing the importance of MDIs, introducing new performance measures, enhancing data collection and reporting, and considering performance context.
Q: How will the final rule benefit communities?
A: The final rule aims to promote fair lending practices and community development by encouraging banks to serve low- and moderate-income individuals and communities, small businesses, communities of color, and those affected by external factors.
Q: Will the final rule affect how banks are evaluated under the CRA?
A: Yes, the final rule introduces changes to the evaluation criteria and performance measures, aiming to provide a more objective evaluation of a bank’s CRA performance.
For more information about the final Community Reinvestment Act rule and its compliance changes, please visit visbanking.com.
To learn more about banking solutions and how they can streamline your operations, visit visbanking.com/pricing.
If you are interested in a demo of our banking software, please request one at visbanking.com/request-demo.
0 Comments