But there are some practical solutions large banks can use
when preparing for the CRA examination in today’s risk-based
environment. And, in many cases, those solutions can be helpful
to community banks as well. To deal with CRA challenges, banks
need to know:
■ ■ Updates on industry CRA development and what they might
expect.
■ ■ Pertinent new CRA question and answers (Q&A) and example
activities.
■ ■ Key examination strategies and common trouble spots.
Banks are already beginning to see their CRA ratings downgraded as a result of consumer compliance violations. More than
ever, it will be critical to ensure solid CRA performance to buffer
against potential violations resulting from enhanced consumer
compliance scrutiny. For financial institutions receiving less than
“satisfactory” CRA ratings, the repercussions could be bad. In
addition to suffering from regulatory limitations hindering their
strategic objectives, they could face public relations headaches,
including negative press and criticism from community groups.
On the other hand, institutions with strong CRA ratings could
enjoy a competitive advantage when fighting for government
agency business and community development loans.
understand the rules of the road—
What has impacted the regulation?
While there has been renewed interest in the CRA following the
nation’s economic downturn, it is not a new program. CRA was
enacted in 1977 with the purpose of ensuring that depository
institutions are not engaged in the illegal practice of redlining
and that they are meeting the credit needs of all segments of their
communities—with particular emphasis on low- to moderate-income (LMI) neighborhoods. The Interagency Fair Lending
Examination Procedures2 define redlining as “a form of illegal
disparate treatment in which a lender provides unequal access
to credit, or unequal terms of credit, because of the race, color,
national origin, or other prohibited characteristic(s) of the residents of the area in which the credit seeker resides or will reside
or in which the residential property to be mortgaged is located.”
While redlining is associated with the racial characteristics
of borrowers or the geographies in which they live or work, it’s
noteworthy that the CRA concentrates on the income characteristics of borrowers and geographies. The CRA emphasizes an
institution’s obligation to meet the credit needs of LMI borrowers
