In a recent broadcast, Dean Stockford discussed with Len Suzio the impetus behind the spike in adverse Community Reinvestment Act (CRA) ratings for banks in the first half of 2023. Given that new reports indicate a significant increase in banks receiving less than satisfactory performance ratings, this discussion is more poignant than ever. This newly observed trend has left several in the banking and financial sectors questioning its origin.
A parallel discernable from this development is a report from Standard & Poor, with data affirming that 12 banks received subpar performance ratings in the first half of the year. This statistic, when compared to the 14 banks acknowledged for the entire 2022, indicates a significant uptick. Suzio proposes that the increasing stringency in performance standards might be the primary contributor to this rise.
The advent of such unfavourable bank ratings coincides with stricter performance standards enforced by regulators. A pivotal part of this transformation is the newly proposed CRA Rule, aiming to firmly establish these more rigorous standards.
Bearing this in mind, it is essential for banking and financial institutions to reassess their performance in relation to heightened CRA standards. They must strive for dynamism and adaptability regarding regulatory changes, to not only safeguard their standing in CRA ratings but, more importantly, to ensure they are meeting the societal responsibilities that these legislations were drafted to enforce.