The proposal retains the core regulatory architecture the agencies have applied since 1995 while reversing course on the October 2023 final rules that a federal court in Texas blocked before they could take effect. Regulators said the new version is designed to better align with the statute, reduce compliance burden, and ensure community development grants reach the neighborhoods they are meant to serve.
What the Community Reinvestment Act Proposal Changes
The Community Reinvestment Act requires the FDIC and OCC to evaluate how well banks meet the credit needs of their entire communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations. The agencies said the proposal would sharpen that focus by increasing emphasis on lending activity and narrowing the range of retail banking services considered during CRA evaluations to credit services only. Deposit services would no longer factor into the assessment.
Regulators also want to stop community development grants and donations from being diverted to unrelated activities or excessive operating costs. The proposal would require that such funds reach the communities they are intended to benefit, addressing concerns that prior frameworks allowed money to flow elsewhere without sufficient oversight.
Relief for Community Banks
Banks with $10 billion or less in assets would be exempt from data collection, maintenance, and reporting requirements under the proposal and would receive more flexible supervision. The agencies framed the carve-out as a way to reduce burden on community banks while preserving accountability for larger institutions.
The rulemaking would also streamline other requirements and increase the clarity, transparency, and objectivity associated with CRA evaluations for banks of all sizes. Regulators said the changes are intended to make outcomes more predictable for examiners and institutions alike.
Court Blockade of the 2023 Rules
The agencies adopted final CRA rules on October 24, 2023, but the U.S. District Court for the Northern District of Texas issued an order enjoining those rules before they went into effect. The injunction effectively left the 1995 framework in place and prompted regulators to draft a new version rather than litigate the prior one.
The proposal released today preserves the substantive elements that have governed CRA compliance for roughly three decades while introducing what the agencies described as targeted, technical, and process-oriented changes rather than a wholesale rewrite.
What Happens Next
Comments on the proposed rule are due 60 days after publication in the Federal Register. Trade groups representing community banks are expected to weigh in heavily on the $10 billion asset threshold and the removal of deposit services from CRA evaluations, while affordable housing and community development advocates will likely scrutinize the new guardrails on grant diversion.
Once the comment period closes, the FDIC and OCC will review submissions and could issue a final rule later in the regulatory cycle. Whether the revised framework avoids the legal challenge that derailed the 2023 version may depend on how closely the agencies tie the final text to the underlying statutory mandate they cited as the basis for the proposal. FDIC contact Brian Sullivan and OCC contact Rebecca Karabus are fielding press inquiries on the release.
— Sofia Alvarez, government desk, AXO News