In a recent development, key regulators have claimed that the new Community Reinvestment Act (CRA) rule was designed purposefully to elevate the expectations for CRA performance. However, this may bring management woes to the banking industry, with some projecting it as a potential disaster. Thus, the new CRA rule is under scrutiny not just for its ramifications on existing banking practices but also for the groundwork of its conception.
The explanation surrounding the motivation for amplifying the standards of CRA performance can be found in a recent article published by JD Supra. However, the analysis of this intensification in standards demonstrates a grim picture for the percentage of banks witnessing a staggering decline in CRA performance rating.
The figures presented in Table 32 of the new rule indicate a potentially significant overlap of the rule’s implementation and a drastic surge in low CRA performance ratings. Had the new rule been implemented between the period of 2018-2020, industry data suggests a nearly 900% incline in banks receiving less than satisfactory CRA performance rating.
Therefore, while the new CRA rule intends to “raise the bar” for CRA performance, it has massively influenced the industry assessment, causing serious concerns for the management of various banking institutions.