Board to Withdraw Proposed Amendments to CRA Regulations
July 19, 2004
Circular No. 11623

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

In a press release, the Federal Reserve Board announced its intention to withdraw proposed amendments to its Community Reinvestment Act (CRA) regulations.

In February 2004, the Board, along with other bank and thrift regulatory agencies, proposed revisions to the agencies’ CRA regulations (see Circular No. 11573). The key aspects of the proposal were:

  • to raise the small-bank asset threshold from $250 million to $500 million thereby allowing more banks to benefit from streamlined CRA evaluations; and
  • to allow examiners to reduce a depository institution’s CRA rating if the institution engaged in a pattern or practice of abusive asset-based lending.

While community banks strongly favor raising the threshold, it is uncertain that the cost savings to the average community bank of being “small” rather than “large” under the proposal would be significant. On the other hand, the proposal’s cost in the form of a potential reduction in the community development capital in a significant number of rural communities is also uncertain, but potentially large in at least some communities. On balance, the Board does not believe that the cost savings of the proposal clearly justify the potential adverse effects on certain rural communities.

The commentators were united in their opposition to the proposal to define a single abusive lending practice in the CRA regulations (abusive asset-based lending) to the exclusion of other abusive practices.

For these reasons, the Board is withdrawing the entire proposal.

Press release OFFSITE
Agencies Seek Comment on Proposal to Revise CRA Regulations ››
Circular No. 11573

Robert Gutierrez
Examining Officer
Legal and Compliance Risk Function