The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation released a proposal on Thursday that would update Community Reinvestment Act regulations.

The proposed rules are intended to encourage banks to increase activity in low- and moderate-income communities “where there is significant need for credit, more responsible lending, greater access to banking services, and improvements to critical infrastructure,” according to a joint statement from the OCC and FDIC. CRA regulations were adopted in 1977, and the last substantive changes were in 1995.

If adopted, the rules would clarify what qualifies for credit under the CRA and where it qualifies. The regulators would develop and maintain a publicly available list of pre-approved activities. The list would be updated regularly, and stakeholders would be able to submit suggestions for the list.

Currently, evaluators look at CRA activity in areas surrounding headquarters, branches, certain ATMs and areas where banks conduct a significant volume of retail lending. Under the proposed regulations, banks would further be required to designate areas beyond these areas where they draw a significant portion of their deposits.

Financial institutions supervised by the FDIC and OCC, which conduct approximately 85 percent of all CRA activity, would be subject to the proposed rules. Banks with $500 million or less in total assets could continue being evaluated under the current CRA small bank test or opt in to the new framework.

Other proposed changes include:

• Changing the CRA performance measurement to include the distribution and impact of CRA activity, which the OCC said would make the performance measurement more objective.
• Making evaluations transparent and timely.
• Raising the eligible size of the loan that qualifies as a small business or small farm loan in eligible areas.
• Providing more credit to branches while supporting the evolution of banking services, including digital banking.

“Since 1977, the Community Reinvestment Act has steered trillions of dollars into neighborhoods across our country helping to reinvigorate those communities by meeting their credit needs and investing in vital community development projects,” Comptroller of the Currency Joseph Otting said in a separate statement. “Today’s joint proposal will help ensure CRA remains an effective and relevant tool to encourage more lending, investment, and services in the communities banks serve, including low- and moderate-income neighborhoods.”

Rob Nichols, president and CEO of the American Bankers Association said in a statement that the industry group welcomed the proposal to modernize CRA regulations and thanked the FDIC and OCC for updating the framework. He added that updating the rules “to reflect the reality of financial services today can enhance banks’ ability to invest in their communities and achieve the laudable goals of CRA.”

“While we have just started to review the proposal with our members, we’re encouraged that it would clarify what qualifies for CRA credit by requiring regulators to develop, publish and periodically update an illustrative list of pre-approved CRA activities that is available to the public,” Nichols said. “We also appreciate efforts to develop performance standards that will provide greater transparency and consistency as banks plan and execute CRA initiatives.”

Nichols added that the ABA would work with our members to analyze the standards and gauge their likely impact and effectiveness. He encouraged banks to provide their own input. The OCC and FDIC will accept comments for 60 days.

The Federal Reserve, the other federal bank regulator, has not yet agreed to this proposal.

“We continue to believe that the nation would be best served by a final interagency rule that also includes the Federal Reserve, which would provide a consistent regulatory framework for all banks,” Nichols said. “We remain hopeful that any final rule reflects a shared consensus that CRA rules can be modernized in thoughtful ways that promote bank investment and economic growth in the areas that need it most”