On October 24, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation issued a final rule amending their regulations implementing the Community Reinvestment Act.  Although the final rule is effective April 1, 2024, the compliance date for the majority of the rule’s provisions is January 1, 2026. 

We are currently reviewing the nearly 1500-page final rule and will provide further information and analysis in subsequent blog posts.  

The agencies also issued a Fact Sheet and an Interagency Overview in which they highlight key elements of the final rule and changes from the proposal.  Those key elements and changes include:

Bank Asset Size Categories.  Banks are classified as large banks (assets of at least $2 billion as of December 31 in both of the two prior calendar years), intermediate banks (assets of at least $600 million as of December 31 in both of the two prior calendar years and less than $2 billion as of December 31 in either of the two prior calendar years), and small banks (assets of less than $600 million as of December 31 in either of the two prior calendar years).  The asset-size thresholds will be adjusted annually for inflation.

Performance Tests, Standards, and Ratings.  The evaluation framework for banks other than limited purpose banks includes six tests: Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, Community Development Services Test, Intermediate Bank Community Development Test, and Small Bank Lending Test.  The six tests apply as follows:

• Large banks will be evaluated under the Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, and Community Development Services Test.

• Intermediate banks will be evaluated under the Retail Lending Test and Intermediate Bank Community Development Test or, at the bank’s option, the Community Development Financing Test

• Small banks will be evaluated under the Small Bank Lending Test or, at the bank’s option, the Retail Lending Test.

Banks of all sizes retain the option to request approval to be evaluated under an approved strategic plan.  For large banks, the final rule reduces the proposed weight assigned to the Retail Lending Test and increases the proposed weight assigned to the Community Development Financing Test so that each test is weighted equally. 

The final rule also (1) reduces the proposed Retail Lending Test multipliers used to calculate performance thresholds to make “Outstanding,” “High Satisfactory,” and “Low Satisfactory” more achievable; (2) reduces the proposed number of loan products evaluated under the Retail Lending Test from six to four (closed-end home mortgage loans, small business loans, small farm loans, and automobile loans); (3) only evaluates the automobile lending of large and intermediate banks for which such loans represent a majority of the bank’s lending or of other banks that opt to have their automobile lending evaluated; and (4) for large banks with assets greater than $10 billion, adopts an additional metric for purposes of the Community Development Financing Test to enable examiners to evaluate at the institution level bank investments under the Low Income Housing Tax Credit and the New Markets Tax Credit programs.  While the final rule provides that a bank’s CRA rating can be downgraded based on evidence of  discriminatory or other illegal credit practices, the final rule does not, as proposed, allow a downgrade to be based on evidence of discriminatory or other illegal practices that do not involve credit practices.

• Assessment areas.  The final rule exempts large banks that conduct more than 80 percent of their retail lending in facility-based assessment areas from the retail lending assessment area requirement.  It also (1) increases the proposed loan count thresholds for triggering retail lending assessment areas to at least 150 closed-end home mortgage loans and least 400 small business loans; and (2) modifies the proposed evaluation of a large bank’s retail lending performance in retail lending assessment areas so that only closed-end home mortgage loans and small business loans are evaluated, and only if they exceed the applicable loan count thresholds.
• Data collection and reporting.  The final rule, in a change from the proposal, requires data collection beginning January 1, 2026, with reporting the following year, by April 1, 2027.  The final rule’s new data collection and reporting requirements do not apply to small and intermediate banks and certain of such requirements, such as the requirement to annually collect, maintain, and report deposits based on the location of the depositor, apply only to large banks with assets over $10 billion.

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