Community Reinvestment Act - Key Points, Regulatory Requirements & Enforcement

  • By: Staff Editor
  • Date: July 11, 2009
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The Community Reinvestment Act of 1977 (CRA) provides a framework for financial institutions, state and local governments, and community organizations to jointly promote banking services to all members of a community. The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations. 

In a nutshell, the CRA

  • Prohibits redlining (denying or increasing the cost of banking to residents of racially defined neighborhoods), and
  • Encourages efforts to meet the credit needs of all community members especially from the lower economic stratum.

Key Points

  • The Community Reinvestment Act was enacted by the Congress in 1977 and is implemented by Regulations 12 CFR parts 25, 228, 345, and 563e.
  • The CRA requires periodical evaluation of each insured depository institution's record, in helping meet the credit needs of its entire community.
  • That record is taken into account in considering an institution's application for deposit facilities, including mergers and acquisitions.
  • CRA examinations are conducted by the federal agencies that are responsible for supervising depository institutions: the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).


  • The Community Reinvestment Act of 1977 seeks to address discrimination in loans made to individuals and businesses from low and moderate-income neighborhoods.
  • The Act mandates that all banking institutions that receive FDIC insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operation as per Section 802(b) and Section 804(1)) .
  • The law directs that the evaluation process should accommodate the situation and context of each individual institution.
  • Federal regulations dictate agency conduct in evaluating a bank's compliance in five performance areas, comprising twelve assessment factors. This examination culminates in a rating and a written report that becomes part of the supervisory record for that bank.
  • The law, however, emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner, and does not require institutions to make high-risk loans that may bring losses to the institution.
  • An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching.
  • The law does not mandate any other penalties for non-compliance with the CRA.


  • The same Federal banking agencies that are responsible for supervising depository institutions are also the agencies that conduct examinations for CRA compliance. These agencies are the
  1. Federal Reserve System (FRB),
  2. The Federal Deposit Insurance Corporation (FDIC),
  3. The Office of the Comptroller of the Currency (OCC), and
  4. The Office of Thrift Supervision (OTS).
  • Implementation of the CRA by these financial supervisory agencies is enacted by Title 12 of the Code of Federal Regulations (CFR); Parts 25, 228, 345, and 563e with the addition of Part 203 as it relates to sections of the Home Mortgage Disclosure Act (HMDA).
  • The Federal Financial Institutions Examination Council (FFIEC) coordinates inter-agency information about the CRA.
  • In addition to the regulatory framework in place, each federal financial supervisory agency's Inspector General, performs regular audits on any regulatory changes made to see if the intended goals are actually being fulfilled.

Major Legislative Changes

Legislative changes 1989 The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) added section 807 to the existing CRA statutes to improve the area concerning insured depository institution examinations. The new language now required the appropriate Federal regulatory agency to prepare a written evaluation after completing the examination of an institution's record in meeting the credit needs of its entire community. These evaluation reports were divided into separate sections –
  • one confidential; allowing the evaluated institution to retain its proprietary and personal information integrity, and
  • the other made public; intended to increase access and oversight of the CRS examination process.
Legislative changes 1991

The existing CRA statute was amended once again upon the enactment of the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991.

Upon the addition of section 808 to the existing CRA statutes by the Act, any depository institution which donated, sold with favorable terms or made available on a rent-free basis any branch of such institutions, the amount of the contribution or the amount of the loss incurred in connection with such activity would go towards meeting the credit needs of the institution's community. This would be taken into consideration when CRA examinations were evaluated.

Regulatory changes 1995 By early 1995, the proposed CRA regulations were substantially revised to address criticisms that the regulations, and the agencies' implementation of them through the examination process to date, were too process-oriented, burdensome, and not sufficiently focused on actual results.
  • The CRA examination process itself was reformed to incorporate the pending changes.
  • Information about banking institutions' CRA ratings was made available via web page for public review as well.
  • The Office of the Comptroller of the Currency (OCC) also moved to revise its regulation structure allowing lenders subject to the CRA to claim community development loan credits for loans made to help finance the environmental cleanup or redevelopment of industrial sites when it was part of an effort to revitalize the low- and moderate-income community where the site was located.
Regulatory changes 2007 The Office of Thrift Supervision (OTS) proposed revising and started to solicit public comment regarding the complete alignment of its CRA rule with the CRA rules of the other three federal banking agencies in November 2006.
This OTS rule revision aligned with that of the other agencies by:
  1. eliminating the option of alternative weights for lending, investment, and service under the large, retail savings association test;
  2. defining institutions with assets between $250 million and $1 billion as "intermediate small savings associations" subject to a new community development test;
  3. indexing the asset threshold for "small" and "intermediate small" savings associations annually based on changes to the Consumer Price Index (CPI); and
  4. clarifying the adverse impact on a savings association's CRA rating where the OTS finds evidence of discrimination or other illegal credit practices.


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