Magazine article American Banker

Flexible Boundaries and Exams: How Treasury Would Modernize CRA

Magazine article American Banker

Flexible Boundaries and Exams: How Treasury Would Modernize CRA

Article excerpt

Byline: Rachel Witkowski

WASHINGTON -- The Treasury Department released long-awaited recommendations Tuesday of reforms for enforcing the nearly 40-year-old Community Reinvestment Act.

The CRA, which grades financial institutions on their lending and other activities in low- and moderate-income neighborhoods associated with their market, has not been significantly updated since the Clinton administration.

The report calls for updates to how banks are examined for compliance, including the definition of geographic boundaries used for CRA exams. Treasury's recommendations come as federal bank regulators have indicated they will soon release a proposal to reform CRA policy.

"Forty years since the passage of CRA, it is time for modernization to fit today's banking landscape and community needs," Treasury Secretary Steven Mnuchin said in a press release. "Our recommendations will improve the effectiveness of CRA by enhancing the assessment and examination process, enhancing the ability of banks to deliver services in the communities they serve while considering technological advances in the financial industry."

The Treasury's main recommendations are:

* Updating the definitions for how banks are assessed based on geographic areas. The current law, which only looks at lending around a bank's physical location, does not take into consideration changes in banking like online lending and consumer behaviors. The Treasury recommends the assessments now reflect those advancements and go beyond the surrounding area of branch locations. …

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