FDIC and OCC Propose to Refocus CRA Examinations on Lending

08/05/26

The Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency have jointly proposed substantial changes to their Community Reinvestment Act regulations. The proposal would retain much of the examination framework that banks have operated under since 1995 while placing greater emphasis on lending, substantially increasing the asset thresholds used to determine how a bank is examined and creating clearer standards for community development activities.

For community banks, the most significant change may be the proposed increase in the threshold for receiving the more flexible small- and intermediate-bank examinations. Banks with up to $10 billion in assets generally would avoid the data collection, reporting requirements and more extensive performance tests currently associated with large-bank status. For all banks, the proposal would also change which services and charitable activities receive CRA consideration.

A Return to the 1995 Framework-With Targeted Changes

The proposal follows several years of uncertainty surrounding CRA modernization. The Federal Reserve, FDIC and OCC adopted a sweeping new CRA rule in 2023, but a federal court prevented that rule from taking effect. The three agencies subsequently proposed rescinding it and returning to the rules based on the 1995 framework, which regulators continue to apply today.

Rather than attempting another complete rewrite, the FDIC and OCC are now proposing targeted changes to that existing framework. Large banks would continue to be evaluated under lending, investment and service tests. Smaller banks would continue to receive tailored lending examinations, while intermediate banks would be evaluated under a lending test and a separate community development test. Banks also could continue to seek evaluation under an approved strategic plan when appropriate.

The proposal would leave the existing assessment-area framework largely intact. CRA examinations would remain primarily tied to the communities surrounding a bank's branches and other physical facilities rather than creating the additional retail lending assessment areas contemplated by the 2023 rule for online and mobile lending.

More Banks Would Receive Community Bank Treatment

The proposal would establish three new asset categories:

The current 2026 thresholds classify banks below $412 million as small banks and banks between $412 million and approximately $1.65 billion as intermediate small banks. Raising the large-bank threshold to more than $10 billion would move many institutions currently subject to the full lending, investment and service tests into the more flexible intermediate-bank framework.

Banks with $10 billion or less in assets would generally not be subject to CRA-specific data collection, maintenance and reporting requirements. Intermediate banks would remain subject to a lending test and a community development test, but they would avoid the more comprehensive testing and reporting framework applicable to large banks.

The FDIC and OCC also ask whether the large-bank threshold should be raised further to $30 billion, consistent with other recent agency efforts to redefine which institutions should be treated as community banks. That alternative is not part of the primary proposal, but its inclusion presents an important opportunity for banks between $10 billion and $30 billion to explain how the large-bank CRA framework affects their operations.

Examiners Would Concentrate on a Bank's Major Lending Products

Under the proposal, examiners would focus their retail lending analysis on the bank's major product lines rather than attempting to evaluate every category in which the bank makes loans. Major product lines could include home mortgage, small business, small farm or consumer lending, depending on the bank's business model and loan volume. (OCC.gov)

This should allow a bank to devote more attention to the lending activities that actually define how it serves its community. A bank that makes only a limited number of loans in a particular category would be less likely to have an isolated or statistically insignificant product line drive its CRA results.

The proposal generally identifies 30 loans as a sufficient number for a meaningful analysis, although examiners could use fewer loans when the available data still support a reliable evaluation. When there is not enough lending activity to conduct a meaningful analysis, examiners would rely on other available performance criteria and the bank's performance context rather than drawing broad conclusions from a very small number of loans.

For intermediate banks, the lending test would become even more important. The current framework generally requires an intermediate small bank to receive at least a satisfactory rating on both its lending and community development tests to receive an overall satisfactory rating. Under the proposal, an intermediate bank would need a satisfactory lending rating, but stronger lending performance could compensate for weaker community development performance when determining the overall rating.

Deposit Products Would No Longer Receive the Same Direct CRA Consideration

The proposal would narrow the services considered directly under the large-bank service test. Examiners would evaluate the range and availability of the bank's credit services, rather than the broader range of loan and deposit products currently considered. Deposit account features, transaction fees and similar deposit services therefore would no longer receive direct consideration under this portion of the service test.

This does not mean branches would become irrelevant. Examiners would continue considering the distribution and availability of branches and other retail banking facilities, including their accessibility to low- and moderate-income communities. Retail banking services that are not directly evaluated under another test also could continue to inform the bank's overall performance context.

The practical effect is that a bank should not assume a low-cost checking account, deposit product or account feature will carry the same CRA weight that it receives today. Banks may need to place greater emphasis on demonstrating how their credit products, underwriting programs and lending partnerships respond to identified community needs.

New Restrictions on CRA Credit for Grants and Donations

The proposal would establish a separate definition for a community development grant. To qualify, a grant or donation generally would need to be directly used for a specific program, project or initiative whose primary purpose is community development and that benefits the bank's assessment area or another qualifying geography. General organizational support, membership fees and grants that cannot be connected to a qualifying activity may become less likely to receive CRA consideration.

Banks with more than $10 billion in assets would face an additional requirement. A grant generally would not qualify if the recipient uses more than 15% of the grant for indirect administrative costs. The recipient would be expected to provide a written commitment describing the qualifying use of the funds, an attestation concerning its indirect costs and supporting information such as its IRS Form 990 and operating or program budgets.

This provision could materially change how large banks evaluate nonprofit partners. Before committing funds, a bank may need to determine not only whether the organization's mission supports community development, but also how the specific contribution will be spent and whether the nonprofit can supply the necessary documentation.

The proposed 15% standard also raises practical questions. Smaller or locally focused nonprofits may have legitimate staffing, technology, compliance and administrative expenses that exceed that level even when their programs directly benefit the community. Banks and nonprofit partners should carefully evaluate how the proposed standard would affect existing charitable relationships.

Banks Could Obtain Greater Certainty Before Committing Resources

One of the more constructive elements of the proposal is a formal process for determining whether a planned loan, investment, grant or service qualifies as a community development activity.

The FDIC and OCC would maintain public, nonexclusive lists of activities that do and do not qualify for CRA consideration. Banks also could ask their regulator to confirm the eligibility of a proposed activity, particularly when it presents a novel legal or policy issue. The lists would be updated periodically, and the agencies say they intend to coordinate even though each regulator would technically maintain its own list.

This could address a longstanding frustration for banks that commit significant time and money to a community initiative only to learn during a later examination that the activity does not qualify. Advance confirmation would allow banks to plan with greater certainty while still leaving room for innovative activities that may not yet appear on an illustrative list.

More Flexibility for Activities Outside a Bank's Assessment Areas

Banks could also elect to receive consideration for certain community development activities outside their assessment areas after demonstrating that they are helping to meet the needs within their local assessment areas.

The agencies acknowledge that the current geographic framework can produce "CRA hot spots," where many banks compete for a limited number of qualifying investments, and "CRA deserts," including rural communities with fewer banks and less community development funding. The proposal would allow optional consideration of outside-area activities without requiring banks to operate beyond their existing assessment areas to earn a satisfactory or outstanding rating.

For Ohio banks, this could provide additional opportunities to support statewide affordable housing, rural development, disaster recovery and small-business initiatives when qualifying opportunities are limited in a particular local market.

Public Files Could Move Fully Online

The proposal would modernize CRA public-file and public-notice requirements. Banks would no longer need to provide paper copies of public-file materials and could maintain the information on their public websites. A bank could also satisfy its public-notice obligation by directing the public to the website containing information about its CRA performance.

Although narrower than the substantive examination changes, this would remove an outdated administrative requirement and make CRA information more accessible to customers and community organizations.

The Federal Reserve Has Not Joined This Proposal

The proposal was issued by the FDIC and OCC and would amend the rules governing national banks, federal savings associations, state nonmember banks and state savings associations supervised by those agencies. The Federal Reserve is not an issuing agency in this rulemaking.

That distinction matters for state-chartered banks that are members of the Federal Reserve System. Unless the Federal Reserve joins the effort or issues corresponding changes to Regulation BB, banks could eventually face different CRA standards depending on their charter and primary federal regulator.

A durable CRA framework should provide consistent expectations across charters. Banks should not have materially different examination standards, qualifying activities or asset thresholds simply because one institution is supervised by the FDIC and another by the Federal Reserve.

What Banks Should Do Now

These changes remain proposed. Banks must continue operating under the currently applicable CRA regulations and should not alter their programs based on the new thresholds until final rules take effect. The 2023 rule remains blocked, and the agencies continue to conduct examinations under the framework based on the 1995 regulations.

Banks should begin evaluating how the proposal would affect:

• Their likely small-, intermediate- or large-bank classification;
• CRA data collection and reporting obligations;
• The lending products that qualify as major product lines;
• Deposit products currently included in CRA planning;
• Grants and donations to nonprofit partners;
• Documentation of nonprofit administrative costs;
• Opportunities for community development activity outside existing assessment areas; and
• The ability to seek advance confirmation of novel CRA activities.

Comments will be due 60 days after the proposal is published in the Federal Register. OBL is reviewing the proposal and welcomes feedback from members, particularly regarding the $10 billion asset threshold, the treatment of deposit services, the 15% indirect-cost limit for grants and the need for the Federal Reserve to participate in a consistent interagency framework.