The Community Reinvestment Act (CRA) was enacted to encourage banks to meet the credit needs of the neighborhoods in which they operate, including low- and moderate-income (LMI) communities. The CRA was enacted by Congress in 1977 (12 U.S.C. 2901) and is implemented by Regulation BB (12 CFR 228). The regulation was substantially revised in May 1995 and in August 2005.
The Federal Reserve System (FRS), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) evaluate how banks are fulfilling the objectives of the CRA.
Examiners conduct lending, investment and service tests to evaluate banks’ performance in their respective assessment areas.
An assessment area is determined based on where banks have branches and deposit-taking ATMs or surrounding geographies in which they have originated or purchased loans. All evaluations are customized to reflect the characteristics and asset size of depository institutions.
In order to receive credit under the CRA, loans, investments and services made by banks must have a primary purpose that generally improves the circumstances for low- and moderate-income families or individuals as well as stabilizes and/or revitalizes their neighborhoods.
Banks’ responsibilities regarding the CRA depend on their asset size. CRA categorizes banks as small, intermediate-small and large. The CRA also distinguishes limited-purpose and wholesale institutions. The Federal Financial Institution Examination Council (FFIEC) explains asset-size thresholds.
CRA classifies as low-income those geographies having a median family income of less than 50 percent of the area median income, and moderate-income those geographies having a median family income of at least 50 percent and less than 80 percent of the area median income. The Federal Financial Institution Examination Council (FFIEC) publishes annual reports on median family income.
After conducting assessments of banks’ CRA activities, studying factors such as local demographic and economic indicators and talking to community contacts, examiners issue performance ratings. Banks can receive the following ratings: Outstanding, Satisfactory, Needs to Improve and Substantial Noncompliance.
The ratings are considered when banks request to merge with other financial institutions or plan to expand to other locations. The ratings and overall performance evaluations are made available to the public.
Upon conclusion of CRA examinations, examiners must prepare a written evaluation of the institution's record of meeting the credit needs of its assessment area. This written evaluation is public information and can be obtained through the institution or its supervisory agency. While the content of the Public Evaluation might vary depending on the nature of the institution examined and the assessment method used, the public portion of the evaluation generally contains the following information:
- The institution's CRA rating
- A description of the financial institution
- A description of the financial institution's assessment area
- Conclusions regarding the financial institution's CRA performance, including the facts, data and analyses that were used to form such conclusions