WASHINGTON Regulators on Friday announced they had finalized guidelines proposed in March that attempt to encourage banks' community development activities beyond their immediate markets.
The initial proposal, which followed 2010 public hearings over how to improve Community Reinvestment Act enforcement, had met with concerns from consumer groups that the new guidelines did not go far enough. Some commenters urged more wholesale changes, while others argued the proposed incentives for expanded community development efforts were not clear.
The final changes, which revise a key questions-and-answers document used to interpret CRA policies, appeared aimed at addressing those concerns. The new revisions scrap language from the proposal that commenters argued would lead to more confusion. The proposal would have allowed CRA credit for community development activities in the bank's broader regional or statewide area - even if it was outside the immediate assessment - as long as those broader activities were not "in lieu of, or to the detriment of" activities insider the assessment area.
But commenters argued the proposed language was less clear than in the previous guidelines, and could even be read as restricting community development efforts outside the assessment area, which was the opposite of regulators' aim. Instead, the final revisions say that broader statewide or regional activities will be considered for CRA credit "even if they will not benefit the institution's assessment area(s), as long as the institution has been responsive to community development needs and opportunities in its assessment area(s)."
The guidelines - which were released by the Federal Deposit Insurance Corp., Federal Reserve Board and Office of the Comptroller of the Currency - are part of a broader effort to update application of the CRA to keep pace with changes in financial services.
In addition to clarifying when CRA credit is available for out-of-market activities, the revisions also provide guidance on CRA consideration for institutions investments in certain nationwide funds, as well as when a bank official serves on the board of directors for community development organization.