The joint agencies finally issued the final CRA rule to modernize regulations implementing the community reinvestment act. To bankers, the most important aspect of this rule might be that it solidified consistency between the agencies. As background, in 2020 the OCC released its own CRA rule, which it rescinded in December, 2021 to the relief of many. On May 5, 2022, the joint agencies released a notice of proposed rulemaking (NPR) to strengthen and modernize the Community Reinvestment Act (CRA) regulations to better achieve the purpose of the CRA. We saw the results of that rulemaking yesterday.

Messaging leading up to the final rule was consistent — regulators expected more investment in low-to-moderate income communities. The final rule upheld this messaging and clarified eligible CRA activities. The final rule also addressed digital banking with updated regulations to review lending outside of traditional assessment areas, for banks of $10 billion or greater. This is perhaps the most challenging aspect of the final rule for bankers and consultants alike as it will greatly influence the CRA risk assessment and testing processes. Change can bring challenges, and it can also bring complexities.

Other challenges and complexities will include four new performance tests for large banks (assets of $2 billion or more) — the Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, and Community Development Services Test. Banks that are between $600 million and $2 billion will also be evaluated via the Retail Lending Test, but they’ll also have the option of being evaluated using the current Community Development Test or the new Community Development Financing Test. Small banks will also have an option – they can opt into the new Retail Lending test.

Over the next few weeks, bankers should expect further clarification (and perhaps a webinar or two) on the Retail Lending Test and the Community Development Financing Test since those seem to impact a large portion of banks.