CRA Investment Test: Large Bank Edition

We’re back with the third part of our Community Reinvestment Act (CRA) series, which provides an overview of intermediate small bank and large bank CRA procedures and best practices to assist your financial institution. When we started the series earlier this year, we emphasized the CRA framework prior to the one introduced in October 2023. Subsequently, on July 16, 2025, the agencies issued a proposal to rescind the 2023 CRA Final Rule and replace it with the 1995 CRA regulation. Our approach to examinations remains consistent with the framework in place since 1995.

For some banks, this series serves as a refresher on the components that are assessed during the bank’s CRA performance evaluation, while for other banks it serves as a supplemental guide as your bank transitions to intermediate small bank (ISB) or large bank CRA procedures. As outlined in the first two articles in this series, there are key differences between ISB and large bank CRA procedures, particularly in how community development (CD) activities are evaluated.

For ISBs, all CD activities—including loans, investments and services— are evaluated under a single comprehensive community development test. This structure allows flexibility—a bank can compensate for fewer activities in one category by increasing efforts in another. In contrast, large bank CRA evaluations separate these activities across three distinct tests: CD loans are evaluated under the lending test, which carries 50% of the CRA rating, and the investment and service tests each account for 25%.

This article focuses on the investment test, which assesses a bank’s performance supporting community development through qualified investments and donations.

Core Expectations

Under both ISB and large bank procedures, banks must ensure that their CD investments:

• Meet the definition of community development
• Are well-documented and tracked with supporting data and files (as discussed in our first article)

For large banks, innovation and responsiveness are additional factors considered under the investment test.

Innovation Not Required, But Favorably Considered

While innovation is not mandatory, it can enhance a bank’s performance on the investment test.   Innovative CD investments:

• Use new or flexible approaches to address CD needs
• Are not routine or standard in the bank’s market
• Demonstrate creativity, risk-taking or the ability to catalyze additional funding or partnerships

Examples of Innovative CD investments include:

• Equity or subordinated debt investments instead of traditional loans
• Activities that address emerging needs like disaster recovery or broadband access
• Investments that spur public or private capital, or new collaborations with nonprofits, CDFIs or public agencies

It’s important to note that an investment considered standard in one market may still be innovative in another, depending on local conditions.

Responsiveness: A Key Qualitative Measure

Responsiveness is a critical evaluation factor, as to whether an investment is also innovative.  Responsive investments are those that directly address identified CD needs, particularly those that are urgent, underserved or unmet, such as:

• Affordable housing for very low-income households
• Small business financing in rural or low-income areas
• Infrastructure like healthcare, childcare or broadband in underserved communities

Responsive investments are generally targeted and/or tailored rather than generic and should align with the bank’s business strategy and the specific needs of its assessment areas. Examples of responsive CD investments include:

• A low-income housing tax credit equity investment in a rural community lacking affordable housing
• A bond purchase to fund the expansion of a federally qualified health center in a medically underserved area

Even relatively small investments may receive strong consideration if they are highly responsive.  Examiners assess responsiveness qualitatively, not just by dollar volume—a small, well-targeted investment may be more impactful than a larger, generic one.

Final Takeaways

For large banks, the investment test rewards not only the volume of community development investments but also the quality, relevance and impact of those investments. Innovative and responsive investments demonstrate a bank’s leadership and commitment to meeting the evolving credit and community development needs of its assessment areas.

Banks should proactively seek investment opportunities that align with local priorities, leverage partnerships, and document both their financial commitment and community impact to ensure CRA success.

In the next and final article of this series, we’ll cover the CRA large bank service test framework and how it differs from how service activities are evaluated under the ISB community development test.

If you have any questions about the differences between the ISB and large bank evaluation procedures or community development activities, please reach out to your Federal Reserve Bank of Richmond consumer compliance point of contact.