The FDIC, the Federal Reserve Board and the Office of the Comptroller of the
Currency (the agencies) have issued the attached joint final rules regarding
the Community Reinvestment Act. The amendments, which become effective
September 1, 2005, provide regulatory relief for smaller community banks and
preserve the importance of community development in the CRA evaluations of
these banks.
The rules raise the small bank asset-size threshold from less than $250
million in assets to less than $1 billion, without consideration of holding
company affiliation, and include an annual inflationary adjustment based on
changes to the Consumer Price Index. “Intermediate small banks”
are defined as banks with assets of at least $250 million as of December 31
for both of the prior two calendar years and less than $1 billion as of
December 31 for either of the prior two calendar years. These banks will no
longer need to collect and report CRA loan data after September 1, 2005.
However, examiners will continue to evaluate bank lending activity in the
CRA examinations of these institutions and disclose results in the public
evaluation.
Intermediate small banks will be evaluated under two separately rated tests:
the existing lending test for small banks and a new, flexible community
development test that includes an evaluation of community development loans,
investments and services in light of community needs and the capacity of the
bank. An intermediate small bank will be required to achieve satisfactory
ratings on both the lending test and the community development test to
receive an overall CRA rating of “satisfactory.” However, the
regulations continue to allow small banks, including intermediate small
banks, to opt for an evaluation under the lending, investment and service
tests, provided that the data are collected.
For institutions of any size, the new rules expand the definition of
community development to include activities that revitalize or stabilize
distressed or underserved rural areas and designated disaster areas. In
addition to low- and moderate-income census tracts already considered under
the present rule, eligible rural tracts will now include middle-income,
non-metropolitan tracts designated by the agencies as distressed or
underserved. The agencies will publish a list of eligible rural tracts that
are distressed or underserved on the Web site of the Federal Financial
Institutions Examination Council (FFIEC) at www.ffiec.gov. Disaster areas would be
designated by federal or state government.
Finally, the regulations clarify when discrimination or other illegal credit
practices by any bank or its affiliate will adversely affect an evaluation
of the bank’s CRA performance. Reflecting current practice, these
include discrimination and other illegal credit practices by a bank inside
or outside its assessment area(s) or inside a bank assessment area by an
affiliate whose loans were considered as part of the bank’s lending
performance.
The new Interagency CRA Examination Procedures for Intermediate Small
Institutions also are published on the FFIEC Web site at www.ffiec.gov.
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Michael J.
Zamorski
Director
Division of Supervision and Consumer Protection
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