The OCC and FDIC are jointly proposing targeted amendments to their CRA regulations (12 CFR Parts 25/345 and related provisions). The proposal largely retains the existing framework (large banks remain subject to lending, investment, and service tests; small and intermediate banks have tailored tests; wholesale/limited purpose and strategic plan options remain available; assessment area framework stays largely tied to physical facilities and is not significantly changed).
The changes focus on four main goals: increasing emphasis on lending to meet local credit needs, ensuring community development (CD) grants actually benefit intended communities, reducing burden (especially for community banks), and improving clarity/objectivity.
Here are the specific proposed changes, drawn directly from the Overview of the Proposal and the detailed description sections:
New Asset-Size Thresholds
- Small bank: Assets of less than $1 billion (as of December 31 of either of the prior two calendar years).
- Intermediate bank (new term replacing “intermediate small bank”): Banks that are not small banks and have assets of $10 billion or less.
- Large bank: Assets of more than $10 billion (as of December 31 of both prior two calendar years).
Effects: Banks with $10 billion or less in assets would face fewer data collection, maintenance, and reporting requirements. Banks under $1 billion would no longer be subject to a community development test (currently applied to intermediate small banks). The small-bank threshold would continue to be adjusted annually for inflation using the CPI-W; the agencies also solicit comment on an alternative that would align it with the SBA’s commercial-bank size standard (currently $850 million). These thresholds are intended to better reflect industry consolidation and the historical distribution of banks/assets from the 1995 rules.
Narrower Evaluation of Retail Banking Services + Stronger Lending Focus
- Retail banking services under the Service Test would be limited to the range and availability of an institution’s “credit services” (explicitly excluding deposit services) plus the distribution and availability of its retail banking facilities.
- The qualitative factor of “responsiveness” (applicable to both retail and CD activities) would be clarified.
- “Complexity” (a component of responsiveness) would be defined to encourage a lending focus: CD investments, grants, or services that are a necessary or otherwise beneficial component of a multi-component financing transaction that includes a loan would be treated as complex, as would CD lending itself and certain CD investments that require specialized lending expertise.
Stricter Rules for Community Development Grants/Donations
- CRA consideration would be available for grants and donations only if the funds are directly used by the recipient for a program, project, or initiative that has a primary purpose of community development in the bank’s local community.
- For large banks only: A hard 15% cap would apply to the indirect costs that the recipient may incur in administering the grant or donation. (The preamble gives an example of a grant that used ~25% for internal expenses; under the proposal that grant would not qualify for a large bank.)
- Banks would be required to collect more specific information from grant recipients to support CRA consideration (greater transparency).
These changes are intended to ensure grants function more like direct community financing rather than unrestricted operating support.
Lending Test Limited to “Major Product Lines” Only
Under both the large-bank lending test and the small/intermediate-bank lending tests, agencies would evaluate only a bank’s major product line(s) among the retail lending categories (home mortgage, small business, small farm, and consumer loans).
Two alternative approaches are proposed in the regulatory text:
- Option 1 (quantitative, bank-level): Generally, the two largest product lines by both dollar volume and loan count (methodology set out in proposed Appendix C). Special rules apply to consumer lending—it would be evaluated only if it constitutes more than 50% of the bank’s retail lending by both dollars and count (or at the bank’s option); otherwise, the agency would evaluate the next-largest non-consumer product lines.
- Option 2 (more qualitative, assessment-area level): Major product lines determined by considering the bank’s overall lending volume and business strategy, its capacity in that assessment area, and the extent to which the product meaningfully contributes to meeting that area’s credit needs. This could result in more or fewer than two product lines and could vary by assessment area.
The goal is to stop evaluating product lines that are not a meaningful part of a bank’s business model.
Greater Clarity and Objectivity for CD Activities and Strategic Plans
- The principles-based definition of “community development” (the four categories: affordable housing, community services, economic development, and revitalization/stabilization) would be revised by further defining each category more clearly and objectively. The proposal codifies aspects of existing Interagency Q&A guidance and includes certain targeted expansions based on feedback about community needs.
- A formal process would be codified under which a bank could seek advance agency confirmation that a specific CD activity (loan, investment, grant, or service with a primary purpose of community development) would receive CRA consideration.
- Rules would be clarified on when CRA consideration is available for a CD activity that benefits an area outside the bank’s assessment area(s) (the bank must first demonstrate that it is helping to meet the credit needs of its own assessment area(s)).
- Specific information that banks must collect from recipients of CD grants would be clarified.
- The strategic-plan option would be made more viable and less burdensome (especially for community banks) by clarifying the procedures for submitting, amending, and implementing a plan and by providing additional guidance on plan contents, particularly measurable goals.
Public File and Public Notice Requirements
- Banks would no longer be required to provide a paper copy of the information in their public file.
- Banks would be permitted to make the information in their public file available on their public website.
- A bank could satisfy its public-notice requirement simply by identifying the website on which it posts information about its CRA performance.
Technical and Conforming Changes
- Technical changes to the rules implementing the CRA sunshine (disclosure) requirements of the Federal Deposit Insurance Act.
- The OCC is proposing parallel technical changes to its Public Welfare Investments rule and its Rules, Policies, and Procedures for Corporate Activities.
- Various other conforming, technical, and clarifying amendments throughout the regulations.
Comments are due 60 days after the notice is published in the Federal Register. The document is a joint OCC–FDIC notice of proposed rule making (the Federal Reserve Board is not a joint issuer of this particular proposal).
