Overview
Bank regulatory agencies play a key role in enforcing the Community Reinvestment Act (CRA) and other regulations governing banks. The community needs to engage with regulators and banks routinely to help them understand and support local community needs and hold banks accountable to meeting those needs.
The Project
The CRA was passed in 1977 in response to systemic redlining and disinvestment, requiring banks to have a continuing and affirmative obligation to help meet the credit needs of the low- and moderate-income neighborhoods in which they do business, consistent with safe and sound business practices. In other words, if a bank takes deposits or does business in a neighborhood, it must provide all of its services equitably.
ANHD has a long-standing history of working closely with banks and regulators to ensure that the CRA is upheld, and that New York City’s marginalized communities are reinvested in properly. We use our original research, expertise in the CRA and other bank regulations, and our network of community groups to regularly inform and shape bank regulatory oversight.
One key moment where community input can have the greatest impact is at the time of the bank’s CRA exam every 2-4 years, or when the bank is seeking regulatory approval for a merger or expansion. Providing detailed written comments to the regulators, and meeting with the regulators and banks during these moments helps to hold banks accountable to the CRA.
Right Now
ANHD's Responsible Banking team is working on a campaign in response to the Comptroller of the Currency‘s first step in "modernizing" the CRA. This may be the first major overhaul to the CRA in over 20 years, and it has the potential to weaken the CRA significantly at a time where we need it to be preserved and strengthened. The CRA is one of the most important laws we have to hold banks accountable to local communities, and while updates are needed, we have serious concerns about some of the principles laid out.
The OCC is proposing concepts that threaten the very heart of the CRA, including to:
- Minimize or eliminate local obligations
- Cut out the role of community input
- Reduce focus on branches;
- Prioritize larger deals over smaller, but more impactful activities; and
- Take the focus away from LMI populations.
This is the wrong direction.
The ANPR makes no recommendations that are critical to strengthening the CRA. This includes:
- An affirmative obligation to equitably serve people and communities of color;
- A recognition and promotion of community benefits agreements;
- A required inclusion of affiliate lenders and evaluation of other non-bank lenders; and
- The creation of penalties for displacement or harmful behavior.
Based on this, we sent four key messages to the OCC during their open-comment period:
- Oppose the "One-ratio" approach. No one dollar amount can measure a bank’s record of lending, and one large goal will simply encourage larger and easier deals, while ignoring smaller, more impactful loans (1-4 family, small business, predevelopment, grants, lines of credit, etc). Banks must be evaluated on the quantity and quality of their activities within the local communities they serve, based on the needs of these local communities, including the equitable distribution of loans and the volume and impact of their community development activities. Banks should be downgraded for activities that harm or displace the communities they are meant to serve.
- Branches and access to affordable banking matters. We must continue to evaluate the distribution of branches, as well as how banks reduce cost and barriers to access banking.
- Local Community Matters! The OCC should not take the community out of the CRA. They should ensure that community input is at the heart of the CRA at all times. CRA agreements and CRA plans should be encouraged and supported, and community input actively solicited and taken into account throughout the process.
- We must keep the focus on historically redlined communities. The CRA must focus on access to credit and financial services and support for community development for people and communities traditionally underserved by the financial system, including lower-and moderate-income people, people of color, immigrants. The CRA should never have been color-blind.
If you have any questions, please contact, Jaime Weisberg.
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