Ceres submitted comments to the Fed, the FDIC, and the OCC urging the agencies to modernize the Community Reinvestment Act (CRA) by explicitly incorporating racial equity and strengthening environmental and climate provisions. This NPR represents the most significant changes to the CRA regulations in over 20 years.
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The CRA requires federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, with a focus on low- and moderate-income (LMI) neighborhoods. Ceres’ submission is in response to requests for comments on the interagency notice of proposed rulemaking (NPR) on updating the CRA.
“Climate change exacerbates racial and economic inequality and frustrates the purpose of the CRA to end the nation’s long and painful history of lending discrimination against and the resulting disinvestment in communities of color and other financially vulnerable communities,” Ceres wrote in its comments.
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Ceres recommends the rule contains the following provisions:
- Explicitly including the race of the borrower and community as a metric to ensure historically redlined communities, and those vulnerable to climate change, have improved access to credit and services.
- Having banks leverage available data tools to understand where climate vulnerable communities are found within assessment areas and work towards driving investment to those communities.
- A revised definition of community development activities to more effectively target activities to communities in need. Ceres supports the NPR’s addition of the disaster preparedness and climate resiliency definition under community development (CD) activities and an expanded, though non-exhaustive, list of eligible climate-related activities.
- Measuring the impact of community development activities as well as establishing benchmarks and metrics to assess the strength of community development financing.
- Encouraging banks to increase community engagement and relationship-building with climate and environmental justice organizations.
- Avoiding adverse impacts to LMI communities from community development activities receiving CRA credit. Any activities that contribute to demonstrable adverse impacts or disproportionate consequences, such as displacement, predatory lending, and increased environmental hazards, should not receive credit, and should result in ratings downgrades.
- Ensuring changes to assessment areas sufficiently capture online lending and deposit activity, particularly in smaller metropolitan areas and rural counties.
- No changes to the asset threshold for small and intermediate small banks. This would decrease CRA responsibility for 20% of all banks, reducing community development financing and branching in LMI communities.
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