Updating CRA Geography: It’s Not Just About Assessment Areas
October 01, 2019 by This commentary proposes a method to evaluate the Community Reinvestment Act (CRA) performance of large retail internet banks, both with and without physical branches, without increasing or decreasing their Assessment Areas (AAs). By moving beyond a system focused solely on AAs, the suggested approach allows banks to pursue CRA activities with the greatest impact, irrespective of geography, while providing clarity and predictability in evaluations both within and outside their AAs. The method addresses the issue of CRA hotspots, where banks excessively concentrate efforts in limited areas. It involves separately assessing a bank’s CRA performance within its AAs and beyond through a retail products test and a community development test, combining the results for an overall rating. This aims to enhance the effective use of CRA resources, especially by banks serving customers outside their AAs via the internet. The proposal emphasizes that reforms should increase the overall impact of the CRA rather than merely redistributing existing community development efforts. In this context, “Assessment Areas (AAs)” refer to geographic regions where banks have physical, deposit-taking facilities and are evaluated for their CRA activities. The “Community Reinvestment Act (CRA)” is a law encouraging banks to help meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods.