Pub. 10 2020 Issue 1

6 www.azbankers.org J UST LIKE A CLASSIC 1977 CHRYSLER Sunbeam, all great models need an overhaul from time to time. The Community Reinvestment Act (CRA) is no exception — enacted over 40 years ago, this legislation required the Federal Reserve and other federal banking regulators to encourage financial institutions to meet the credit needs of their communities in which they did business, including low- and moderate-income (LMI) neighborhoods. Three federal banking agencies remained responsible for CRA: the FDIC, the FRB and the OCC. But a lot has changed since 1977 — technological advances have abounded, consumer needs have changed and as such, the current banking industry itself is lightyears ahead of its predecessors. Yet as groundbreaking as the CRA initiative was, it failed to change with the times. But fear not! Modernization may be coming, and soon. Banks invested nearly $500 billion last year into LMI neighborhoods. 1 But that amount fails to include additional funds banks spent to meet regulatory compliance on commu- nity reinvestment and development, and to a lesser extent, historic preservation and renewable energy. Decades worth of exam results show discretionary CRA ratings — regulators are given broad outlines on what constitutes sufficient reinvestment activity, but banks are subject to “rogue examiner” arbitrary decision-making, with little to no recourse. Although the three regula- tors follow the same CRA regulation and exam procedures, even different regions of the same regulator can provide disparate results: 6% of CRA ratings issued by the FDIC since 2014 have been “Outstanding,” compared to 18% for the OCC and 9% for all agencies. 2 Fintech redefining deposit-tak - ing facilities demands a bank’s CRA assess- ment area to be redrawn. CRA must account for a new environment dictated by customer preferences and digital progressions. Notice of Proposed Rulemaking to the Community Reinvestment Act By Elizabeth Madlem, Compliance Alliance Who Says You Can’t Teach an Old Dog New Tricks?