Writing a dynamic CRA context report can show examiners not only that your financial institution understands the community demonstrate why your CRA program qualifies for a “Satisfactory” or possibly “Outstanding” rating credit needs, but that you are effectively meeting the needs in the assessment areas you serve. We will review the steps required to establish your case and PASS THE EXAM!
A primary goal of 1977’s Community Reinvestment Act (CRA) was to reverse the effects of redlining, a practice by which the federal government and banks actively avoided lending to borrowers from lower-income and minority neighborhoods. CRA ratings are important for two reasons – they are available to the public, and a satisfactory rating is required to approve expansions and acquisitions. Learning what “counts” in the various CRA tests is critical. The OCC has taken a solo lead in proposing that a new CRA rule will strengthen and modernize the exam process; this rule was made final in June, 2020 with compliance dates based on performance standards by January 1, 2023. The Federal Reserve issued notice of rulemaking in October, 2020 that the FDIC has not yet joined. The American Bankers Association has urged the three banking regulators to “craft a modern regulatory framework that can be adopted by all three agencies.” Regardless of potential FUTURE changes by the regulators, it’s important to understand the five steps that will help you in 2021 to achieve a satisfactory rating.
- Five steps for managing a CRA exam and the importance of developing a CRA strategy.
- Tips for banks that are ISB (intermediate small banks of $330 million in the prior two calendar years and the transition to CRA reporting when the large bank threshold of $1.322 billion is reached.
- Learn how to document lending activity in designated disaster areas.
- What’s included in a performance context? Learn how to describe your institution, quantify the ability and capacity of the bank to meet credit needs based on financial data. Learn how to highlight the positive outcomes of your lending focus and business strategy.
- Tips to describe your assessment area including demographic and economic data resources.
- Best practices to deal with CRA-related complaints and potential fair lending issues that can threaten a successful exam.
- Definitions of Community Development Loans and Services
- Ideas for passing the Investment Test portion of the exam