What's Happening?
The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have jointly proposed amendments to the Community Reinvestment Act (CRA) regulations. This proposal, issued on July 31, 2026, aims to modernize the CRA framework,
which has been subject to litigation and regulatory uncertainty. Key changes include raising asset-size thresholds for banks, revising community development activity definitions, and reducing data collection burdens. The proposal also introduces a 'major product line' approach for lending evaluations and strategic plan reforms. Notably, the Federal Reserve Board is absent from this rulemaking, which could lead to a divided CRA framework.
Why It's Important?
The proposed amendments are significant as they aim to reduce compliance costs for banks, particularly smaller community banks, by reclassifying them into less burdensome testing categories. This deregulatory shift aligns with Executive Order 14192's mandate to reduce regulatory costs. However, the absence of the Federal Reserve Board from this rulemaking raises concerns about potential regulatory divergence, which could result in different CRA compliance frameworks depending on a bank's primary federal supervisor. The changes could also impact community development activities and data transparency.
What's Next?
The proposal is open for public comment, and banks are encouraged to assess their reclassification status and engage in the comment process. The Federal Reserve Board's next steps remain uncertain, and banks supervised by the Federal Reserve should monitor any parallel actions or distinct proposals. The outcome of this rulemaking could lead to a bifurcated CRA framework, affecting how banks are evaluated based on their primary federal supervisor.
