The Community Reinvestment Act (CRA) for Smaller Communities and Rural Regions

While visiting and working with community stakeholders in smaller and rural areas, we often hear that the Community Reinvestment Act (CRA) is overlooked or under-utilized. Smaller communities often lack the resources to best use—or even take advantage of—funding from banks seeking investment opportunities. Meaningful and productive partnerships between banks and community-based organizations (CBOs) are essential for both identifying investment opportunities and ensuring organizations secure the funding they need to best help LMI areas.

To better align banks and CBOs, in late March 2019, the Federal Reserve Bank of Cleveland, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) worked together to host an interagency workshop, “Partnering for Success: CRA for Community Based Organizations,” at the Fayette County Community Action Agency in Uniontown, Pennsylvania. The event had two parts: a panel discussion with bankers and an open discussion with participants. The overview covered

• CRA basics and purpose for CBOs
• How regulators evaluate banks for CRA, based on bank asset sizes
• The community development activities that qualify for CRA
• Performance context and factors that affect a bank’s CRA performance
• The information that is included in a bank’s CRA public evaluation report
• Key elements to developing effective partnerships with banks

The discussion portion of the event aimed at creating a dialogue and forging relationships among CRA bankers in the group. A dynamic panel of CRA bankers—two were from large banks and two were from two smaller banks—provided insights into the geographies and types of CRA projects they have invested in and explained the kinds of information from CBOs that helps them make investing decisions. CBOs shared the needs of their organizations and communities. All of the attendees do work that improves LMI areas, and the CBOs left with a better understanding of bank strategies, geographies, and the types of opportunities they prefer to invest in—specifically, CRA investments in smaller communities and rural regions.

Federal Reserve Chair Powell recently spoke in Itta Bena, Mississippi about the role of CRA in rural regions. He stressed the importance education and workforce development, entrepreneurship and small business development, access to financial services in rural communities, and the role CRA has in strengthening communities. The issues Chair Powell outlined have become increasingly difficult to address in many rural areas that have experienced bank branch closures: “To the extent that banks serve much broader areas using online or other non-branch delivery systems, or have so many assessment areas that examiners cannot do a thorough evaluation in each, the financial needs of many rural communities may be overlooked. We believe that revisions to the CRA’s implementing regulations should more effectively encourage banks to seek opportunities in underserved areas.” ¹

CRA specifics can often be complex, but starting with a basic understanding of the CRA and open communication between CBOs and CRA bankers can be extremely valuable in creating mutually beneficial long-term relationships to improve LMI areas.