Community Reinvestment Act Examinations
The Community Reinvestment Act (CRA) is a federal law that was enacted in 1977. It encourages banks to meet the credit needs of the communities they serve, including low- and moderate-income (LMI) neighborhoods. The CRA addresses gaps in lending to promote access to credit, homeownership, and economic opportunity.
Every bank’s CRA performance is evaluated periodically by its primary federal regulator: the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the Office of the Comptroller of the Currency.
CRA Review Process
Examiners conduct a CRA review to determine how well a bank is meeting the credit needs of its entire community without compromising the safety and soundness of the bank's operations.
A bank defines the geographic areas with its deposit-taking facilities, such as branches or ATMs. Then the examiners’ CRA review assesses how well the bank serves these areas, with a particular focus on LMI neighborhoods.
In evaluating a bank’s CRA performance, examiners consider three main criteria including the bank’s:
- lending to LMI individuals, LMI geographies, and small businesses;
- investment in community development projects; and
- banking services (including branch locations and online banking) and community development services offered.
The number of criteria vary by bank size, for example, with smaller banks evaluated just on retail lending.
Public involvement is a key component of the CRA. During the CRA evaluation process, community organizations and individuals are encouraged to provide input to the agencies to inform the evaluations and help shape the community’s financial future.
At the conclusion of a CRA evaluation, banks receive one of four ratings:
- Outstanding,
- Satisfactory,
- Needs to Improve, or
- Substantial Noncompliance.
These ratings are made public, ensuring transparency and encouraging banks to prioritize community needs. Banks’ CRA performance is considered when the agencies analyze certain bank applications, including applications for mergers, acquisitions, and branch openings.