For nearly 50 years, the Community Reinvestment Act (CRA) has helped ensure that banks meet the credit needs of the communities where they do business. Passed in 1977 in response to redlining and discriminatory lending practices, the CRA has become an important tool for encouraging investment in affordable housing, small businesses, and community development.
That framework is now at risk — again.
The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have proposed significant changes to the CRA regulations. The Federal Reserve is not participating in this proposal. While the agencies describe the changes as reducing regulatory burden, community advocates — including PCRG and the National Community Reinvestment Coalition (NCRC) — are concerned that the proposal would substantially weaken bank accountability to low- and moderate-income communities.
Learn more about NCRC’s analysis and advocacy resources
What Would Change?
Among the most significant changes, the proposal would raise the asset thresholds used to determine which CRA requirements apply to banks. Banks of different sizes are subject to different CRA evaluations, with larger banks generally receiving the most comprehensive evaluations of their lending, investment, and community development activities.
The threshold for a "small bank" would increase from approximately $412 million to $1 billion in assets. The threshold for a "large bank" would increase from approximately $1.65 billion to $10 billion. As a result, hundreds of banks would move into categories with less comprehensive CRA evaluations and fewer community development obligations.
The proposal would also scale back certain community development and investment requirements and eliminate certain business lending data that communities currently rely upon to understand local credit patterns.
These changes may sound technical, but they have very real consequences. CRA examinations and reporting provide accountability, incentives and transparency around bank investment in communities, while giving residents, community organizations, and policymakers information they can use to assess whether financial institutions are meeting local needs.
What Does This Mean for Pittsburgh?
The CRA is particularly important in Pittsburgh, where affordable housing, neighborhood revitalization and small-business development often depend on a combination of public, nonprofit and private investment.
We can see the impact of bank investment throughout the region. For example, PNC recently announced nearly $18.5 million in tax-credit equity and a $14 million bridge loan supporting the rehabilitation of Bedford Dwellings. PNC, however, is not among the banks that would be most affected by the proposed rule changes because, with more than $10 billion in assets, it would remain subject to the large-bank CRA examination.
Many other banks would see a significant change. In the Pittsburgh MSA, six banks — or 15% of all banks currently subject to community development obligations under the CRA exam — would lose those obligations under the proposed changes. That means these banks would no longer be required to lend for affordable housing, report small-business lending, provide financial education, or invest in projects that support economic development in low- and moderate-income communities. Across the region, banks provide mortgage lending, small-business financing, community development loans, tax-credit investments, and other forms of capital that support local organizations and neighborhoods. While the CRA is not the sole reason any particular investment is made, it creates an important framework of accountability, incentives and transparency that encourages banks to invest in communities where they do business.
That matters at a time when Pittsburgh and Allegheny County are already facing significant affordable housing and community development challenges. When public resources are limited and communities are competing for capital, strong incentives for private investment become even more important.
Why We Should Pay Attention
A weaker CRA does not necessarily mean that community investment will immediately disappear. The concern is what happens over time when banks face fewer requirements, and communities have less information about where and how banks are lending and investing.
Affordable housing is a particularly important example. Banks are major investors in Low-Income Housing Tax Credits, one of the country's most important tools for financing affordable rental housing. Changes to CRA requirements could reduce incentives for this type of investment, as well as financing for small businesses, CDFIs, and other community development activities.
For communities that already struggle to attract capital, less accountability can mean fewer opportunities.
How You Can Help
The proposed rule is now going through the public comment process, and community voices are needed.
PCRG will be participating and encourages our members and partners to do the same. In addition to submitting comments to the banking regulators, contact your U.S. Representative and Senators and ask them to support a strong CRA.
When reaching out, share your local perspective. Tell policymakers about:
Bank financing or investment that has supported your organization or community.
Affordable housing or small-business projects that depended on bank capital.
The importance of CRA data in understanding local lending.
What could be lost if CRA requirements are weakened.
NCRC has developed helpful resources explaining the proposed rollbacks and providing guidance for community organizations and advocates.
Learn more and access NCRC's advocacy resources
The CRA is not simply a federal banking regulation. For Pittsburgh communities, it is one of the tools that helps connect financial resources to the neighborhoods, businesses and families that need them.
After nearly 50 years of community reinvestment, we should be looking for ways to strengthen the CRA — Not weaken it.