Community Reinvestment Act

ABA Banking Journal, December 1999 | Go to article overview

Community Reinvestment Act


Disagreement between the pro-CRA Administration and anti-CRA Sen. Gramm nearly did in Gramm-Leach-Bliley. The threat of a veto had been hanging over the entire package for months and grew stronger until a compromise cleared this obstacle from the path.

Here are the key CRA provisions:

* If you want to expand, get your CRA ducks in a row. Financial holding companies cannot expand into new powers areas if, at the time the company is formed, any insured depository subsidiary doesn't have at least a "Satisfactory" CRA rating. Further, if such subsidiaries fall below a "Satisfactory" anywhere along the way, no further expansion--either on its own or by merger or acquisition with another firm--in new powers is permitted until things are restored. However, the company would not have to roll back existing activity. The same rules apply to national banks that expand into the new areas through an operating subsidiary.

* CRA sunshine: Agreements with--and any associated payments to--community organizations regarding CRA must be disclosed by both the bank or bank affiliate involved and the community organization or person. The recipient must account, in detail, for the uses of the funds (in the words of the law itself: "...a detailed, itemized list of the uses to which such funds have been made, including compensation, administrative expenses, travel, entertainment, consulting and professional fees paid...").

This must be done by filing, at least annually, a report with the financial institution's federal regulator. The only persons or groups affected are those that specifically become involved in CRA discussions with the bank. Federal Reserve regulations are expected to clarify this further. Also, the reporting requirements include an exemption for amounts below thresholds set out at length in the law. …

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