Federal Banking Agencies' CRA Rulemaking: Addressing Recent Developments Before Finalization.pdf

The Bank Policy Institute (BPI) and the American Bankers Association (ABA) write to the Federal Reserve, OCC, and FDIC regarding the proposed revision of Community Reinvestment Act (CRA) regulations. They highlight two critical developments that could significantly impact banks' CRA compliance:

1. Capital Rule Changes: Recent proposals to increase capital requirements for larger banks, particularly in mortgage lending, may alter banks' business strategies and CRA programs. The proposed 16% aggregate increase in common equity tier 1 capital requirements could lead to reduced mortgage lending, affecting banks' ability to serve low- and moderate-income communities.

2. CFPB Data Collection Rule Injunction: A court injunction delaying the implementation of the Consumer Financial Protection Bureau (CFPB)'s new Section 1071 small business lending data collection rule until a Supreme Court ruling on CFPB funding raises questions about how CRA compliance will be assessed using these data.

Concerns and Recommendations:

- The agencies should reassess the CRA proposal in light of the proposed capital changes, considering their potential impact on banks' CRA programs.
- Finalizing CRA rules before the capital rules are finalized would provide insufficient public comment on how banks might adapt their CRA strategies due to capital revisions.
- The agencies should not finalize the CRA rules until the Supreme Court determines the constitutionality of the CFPB's funding structure, clarifying implications for CRA data collection and reporting.
- Further analysis is needed to understand how the capital proposal could affect other CRA lending activities and bank partnerships crucial for CRA compliance.