Inactive Financial Institution Letters
Community Reinvestment Act
February 6, 2004
CHIEF EXECUTIVE OFFICER
Federal Banking and Thrift Regulatory
Agencies Seek Comment on Proposed Amendments to the Community Reinvestment Act
The federal banking and thrift
regulatory agencies are seeking public comment on a joint proposal to amend the
Community Reinvestment Act (CRA) regulations. The proposed amendments are
intended to reduce undue regulatory burden, by changing the definition of "small
institution," and to better address abusive lending practices. The proposal also
includes several changes concerning the public disclosure of CRA loan data by
the regulatory agencies. Comments are due by April 6, 2004.
The Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve
System, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision
have conducted a joint review of the Community Reinvestment Act (CRA) regulations,
fulfilling the commitment the agencies made when adopting the joint CRA regulations in 1995.
As part of their review, the agencies published an advance notice of proposed rulemaking
(ANPR) on July 19, 2001, seeking comment on a wide range of questions. As a result of that
review, the agencies have now issued the attached joint notice of proposed rulemaking (NPR)
regarding changes to the CRA regulations. Comments are due by April 6, 2004.
The agencies are proposing changes to the regulations in two significant areas:
- To reduce undue regulatory burden, the proposal would change the definition of "small
institution" to mean an institution with total assets of less than $500 million, without
regard to holding company assets. This would increase the number of institutions that
are eligible for evaluation under the small institution performance standards, while
only slightly reducing the portion of the nation's bank and thrift assets subject to
evaluation under the large retail institution performance standards.
- To better address abusive lending practices, the proposal clarifies that, for a
financial institution, evidence of discriminatory or other illegal credit practices
would have a negative effect on a CRA evaluation, whether occurring inside or outside
assessment areas. In addition, a pattern or practice of extending secured loans based on
the foreclosure or liquidation value of the collateral, where the borrower could not be
expected to repay, would have a negative effect on the evaluation as well. Also, if a
financial institution elects to have certain product categories of an affiliate's
lending activity considered, then evidence of any such credit practices by the affiliate
in those product categories inside the financial institution's assessment area(s) would
adversely affect the financial institution's CRA evaluation.
The proposal also includes several enhancements concerning the public disclosure of CRA loan
data by the agencies.
We encourage you to review the attached notice of proposed rulemaking in its entirety and to
provide your comments. Information on how to submit comments is provided in the attached
Federal Register notice.
Michael J. Zamorski
Division of Supervision and
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Distribution: FDIC-Supervised Banks (Commercial and Savings)
NOTE: Paper copies of FDIC financial institution letters may be obtained through the
FDIC's Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434
(1-877-275-3342 or (703) 562-2200).