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Carl White

Fed Releases Proposal for CRA Reform, Seeks Comments

The Community Reinvestment Act (CRA) is a federal law that requires federally insured banks to meet the credit needs of people in their communities while meeting safety and soundness standards. At the time of its 1977 passage, lawmakers were concerned about unequal access to credit and policies such as redlining, especially in low-and moderate-income communities. Bank regulators were given the task of writing, implementing and enforcing regulations to ensure banks were meeting the goals of the law.

CRA regulations were last updated in 1995, and much has changed in the banking industry in the last 25 years. Technological change—especially the move to online and mobile banking—means that a CRA focused solely on activity in brick-and-mortar branches will miss a large swath of banking activity as an increasing number of banks begin to operate online.

10/29/2020 Read more about Fed Releases Proposal for CRA Reform, Seeks Comments

The last several months have been challenging ones for all of us, both personally and professionally. We’ve all had to adjust, especially when it comes to getting essential work done. For the Federal Reserve and other bank regulators, the challenge has been to maintain close oversight of our financial institutions and to assist banks as they work to keep credit flowing to their customers. It’s been a delicate balancing act, but one that appears to be working well thus far.

Banks serving hemp producers no longer have to automatically fill out reports used to detect money laundering activities. This reduction in regulatory burden can be traced to the 2018 farm bill (officially titled the Agriculture Improvement Act of 2018), which legalized hemp by removing it as a Schedule 1 controlled substance. Properly licensed industrial hemp producers can now be treated the same as other bank commercial customers for anti-money-laundering regulatory purposes.

Since the end of the financial crisis more than a decade ago, lawmakers and regulators have worked to balance the needs of a growing, vibrant financial services sector with the regulations necessary to ensure a safe and sound one. In some ways, much has been achieved. The nation’s largest banking organizations are now subject to substantially higher capital and liquidity requirements. They are also regularly “stress tested” to understand the effects on capital should economic conditions deteriorate significantly.

At the same time, efforts are continuing to alleviate the regulatory burden faced by smaller banking organizations. Beginning this year, those that meet certain qualifications can opt into a simplified regulatory capital framework. The framework—dubbed the community bank leverage ratio (CBLR)—went into effect Jan. 1. The Federal Deposit Insurance Corp. estimates that more than three-quarters of all community banks will qualify to opt in.



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Take Five is a popular video series featuring St. Louis Fed economist Dr. Bill Emmons. In each video, Emmons provides a quick, concise synopsis of the most recent meeting of the Federal Open Market Committee (FOMC).

The Federal Reserve Board in December will co-host a research conference on bank supervision. The conference will bring together academics, supervisors, bankers, and other stakeholders to discuss the theory and practice of bank supervision.

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