Download Locations

• Open CRS (User submitted)

Summary

The Community Reinvestment Act (CRA) addresses how banking institutions meet credit needs in low- and moderate-income (LMI) neighborhoods and certain other criteria. As implemented by the four federal banking regulatory agencies, CRA requires paperwork and generates cost in reporting qualifying activities. Some regard it as government-required credit allocation, while others view it as providing justifiable community investments. The Gramm-Leach-Bliley Act (P.L. 106-102) reemphasized CRA's goals, yet relieved banks from part of the regulatory burden it imposes on banking institutions. According to several studies, CRA is the most burdensome federal regulation on banks. Others suggest that without CRA many depository institutions would not invest in LMI communities. The federal depository institutions' regulatory agencies -- the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision -- have been implementing rules governing CRA compliance. In the 2005-2007 period, they have been issuing new rules for CRA compliance, including levels of examination for different-asset-size institutions, and issuing guidance on how institutions may acquire CRA credit by engaging in specific banking activities (e.g., providing small-dollar consumer loans to LMI consumers in their communities). Regulators are also implementing a provision of the Financial Services Regulatory Relief Act of 2006, which qualifies more small depository institutions for fewer CRA on-site examinations. In the 110th Congress, the Community Reinvestment Modernization Act of 2007 (H.R. 1289) was introduced in the House of Representatives on March 1, 2007, and was referred to the House Committee on Financial Services. It would repeal the recent rules implemented by the regulatory agencies that some believe weakened the enforcement of the 1977 CRA. H.R. 1289 would amend the Bank Holding Company Act of 1956 (BHCA) to subject nonbank affiliates of bank holding companies to CRA if they engage in lending or offer banking product services. Satisfactory CRA ratings would be required of securities companies', mortgage banks', and insurance companies' affiliates of financial holding companies. H.R. 1289 directs the Secretary of Housing and Urban Development to establish requirements for insurers to submit information annually regarding noncommercial insurance, rural insurance, and investments by insurers. Under this title, the Financial Institutions Examination Council is directed to maintain a comprehensive database containing the hierarchical structure of financial holding companies, bank holding companies, depository institutions, and non-depository institutions. For mergers and acquisitions, financial institutions would be required to have (1) a public meeting and (2) a period for public comment regarding branch closures. It would also amend the CRA to subject all regulated financial institutions, regardless of size or aggregate assets, to a mandatory biennial examination. This report will be updated as developments warrant.

Related Legislation:
• H.R.1289

XML