On April 3, 2018, the U.S. Department of the Treasury issued recommendations to the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation regarding the modernization of the Community Reinvestment Act. The report is a follow-up to Treasury's 2017 report to the President entitled A Financial System That Creates Economic Opportunities: Banks and Credit Unions. The recommendations are intended to allow financial institutions to better serve the communities where they operate, while maintaining safe and sound operations. The report notes that since the enactment of the CRA 40 years ago, the banking industry has undergone significant organizational, operational and technological changes, and that regulatory expectations have failed to keep pace.
The Treasury report focuses on four key areas. First, Treasury recommends modernizing the definitions of geographic assessment areas to correspond to changes, including changes in technology and customer behavior. Second, the report identifies a number of perceived weaknesses in the CRA performance evaluation process, including inconsistent examination staffing, practices and procedures, and lack of clear guidance for examination criteria. In response to these perceived weaknesses, the report recommends improving the flexibility and transparency of the CRA performance evaluation process, including providing more clarity with respect to examination guidance. Third, the Treasury report recommends improvements to the CRA examination process, including standardization of CRA examination schedules and changes to promote more timely evaluations and ratings. Finally, the Treasury report recommends changes to better incentivize CRA performance, given that the CRA itself does not have explicit penalties for non-performance (although other statutes do penalize unsatisfactory performance under the CRA).
The Treasury report is available at: https://home.treasury.gov/sites/default/files/2018-04/4-3-18%20CRA%20memo.pdf.
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