On July 31, the FDIC and OCC jointly announced a notice of proposed rulemaking to amend the CRA regulatory framework that the agencies adopted in 1995. The agencies stated the proposal is intended to better align the CRA framework with its statutory mandate, reduce regulatory burden for banks (particularly community banks), and increase clarity and transparency for CRA evaluations. The Fed did not participate in this proposal. As previously covered by InfoBytes, the agencies issued a final rule in October 2023 to modernize the CRA regulations, which a federal court enjoined before they took effect. On July 1, the OCC and the FDIC moved to voluntarily dismiss their participation in an appeal of the preliminary injunction (previously covered by InfoBytes here). On July 31, the OCC and the FDIC also moved the U.S. District Court for the Northern District of Texas to enter a proposed final judgment vacating the 2023 final rule and related 2016 guidance as to those two agencies. If entered, the proposed judgment would resolve the claims against the OCC and the FDIC in that litigation, while the litigation would continue as to the Fed.

Among the changes in the proposed rulemaking, the agencies would raise the asset thresholds used to categorize banks under the CRA — defining a small bank as having less than $1 billion in total assets, an intermediate bank as having between $1 billion and $10 billion in assets, and a large bank as having more than $10 billion in assets — which would subject banks with $10 billion or less in assets to fewer data collection, maintenance, and reporting requirements. The agencies also proposed to limit the lending-focused portion of CRA evaluations to a bank’s major product lines, to narrow the retail banking services considered in CRA evaluations to a bank’s credit services while excluding deposit services, and to retain the current assessment area framework largely unchanged.

The agencies also proposed expanding qualifying community development activities, including additional economic development activities for small businesses and farms and revitalization activities in targeted areas. Under the proposal, a bank could receive CRA consideration for a grant or donation only if it is directly used by the recipient for a program, project, or initiative with a “primary purpose” of community development that benefits the bank’s assessment area. For large banks, the proposal would additionally require that the recipient’s indirect costs for administering the grant or donation not exceed 15 percent. Comments on the current proposal are due 60 days after the date of publication in the Federal Register.