WASHINGTON — Acting Comptroller for the Currency Michael Hsu said Friday that the largest banks will bear the most significant burden of a forthcoming Community Reinvestment Act implementation rule from the Federal Deposit Insurance Corp., Federal Reserve and Comptroller of the Currency designed to expand bank lending and investments to underserved communities.
"It's a long rule — don't print it all out at one time, you're going to run out of ink" Hsu said. "But at a high level, there's got to be more, it has to be better and it's got to be faster. In very simple terms, that's it: The amount of CRA investments and lending has to go up."
Hsu said the long-awaited rule, which the FDIC board and Federal Reserve Board will vote on during an open meeting Tuesday, is designed to be more cognizant of the various challenges facing communities, and by extension permissive of having CRA activities be directed at local communities' most pressing needs. The rule will also strive to streamline the process of determining whether certain lending activities and investments qualify for CRA credit.
"It has to be better — more targeted," Hsu said. "Not every locale is equal — one size doesn't fit all. So it has to be better calibrated to those situations. And it's got to be faster. We can't be sitting around and trying to do a lot of different determinations on a bunch of different things. So we try to do that across the board."
Hsu added that the final rule takes into account the compliance burdens associated with the proposed changes and the limited capacity of smaller banks — including Minority Depository Institutions and Community Development Financial Institutions — to meet higher compliance costs.
"We got a lot of comments about this. The biggest burden for the data and changes are really on the largest banks," Hsu said. "So, for smaller banks we've really tailored our expectations. And for MDIs, CDFIs and others, we've tried to put the wind at their backs. I can't go into any details on that, stay tuned, go read it on Tuesday, but we're very excited for it."
The Community Reinvestment Act was passed in 1977, and requires banks to extend credit, investments and services to all communities within its service area — not just the most affluent and therefore profitable communities. But the CRA's definition of service area has traditionally been linked to a bank's branch network, even as more banking services are performed digitally. Banks and community groups have long agreed that various aspects of the CRA implementation rules are out of date.
Former Comptroller of the Currency Joseph Otting made CRA reform the centerpiece of his tenure during the Trump administration, but faced opposition from community advocacy organizations and fellow regulators. The Fed, FDIC and OCC issued a revised CRA implementation rule in May 2022 that initially met with positive feedback from banks and community organizations, though banks have since cooled on the measure.
