U.S. banks covered by the Community Reinvestment Act (CRA) have invested over $980 billion back into communities of color since 1996. The need for the CRA arose from financial institutions’ longstanding systematic practice of denying Black, Indigenous, people of color or BIPOC communities access to credit, banking services, and housing through the now illegal practice of redlining. 

Now, 45 years after the CRA was established and redlining was outlawed, communities of color are still grappling with redlining’s racist legacy. To make matters worse, new forms of redlining–fueled by changes to the lending environment, new technologies, and our society’s unwillingness to name how racism still persists today–continue to fall on these same communities. Faced with these compounding issues, we must ask: can communities of color still rely on the CRA as a tool to fight historical and ongoing disinvestment, as it was originally intended? 

The short answer is, yes. But, only if the federal regulators responsible for administering CRA requirements explicitly prioritize racial equity. While the CRA hasn’t seen a substantial update in over 25 years, this is about to change.

This May, the Office of the Comptroller of the Currency, the FDIC, and Federal Reserve Board proposed an overhaul to modernize the CRA. For the first time in decades, regulators have the opportunity to fill in the gaps so it can better fulfill its intended purpose. But despite their cross-agency commitment to racial equity, the proposed rulemaking to the Community Reinvestment Act still lacks any genuine consideration of race and climate equity.

Earlier this year, the Acting Comptroller of the Currency, Michael J. Hsu, identified reducing inequality as “a top priority,” while acknowledging that “significant disparities continue to exist in many LMI areas and are most prevalent for Black, Hispanic, and Native American communities and borrowers across our nation.” Greenlining is urging regulators to put this commitment into actual practice. That means explicitly addressing racial inequities in the CRA–including the disproportionate impacts of climate change communities of color face–and laying out a framework for how banks can help alleviate, rather than contribute to the problem.

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While not drastic, the interagency proposed rulemaking to the CRA is laid out in a nearly 700-page document. The proposals include, but are not limited to, the following:

  • To adapt to technological changes in the financial system, the agencies have proposed to expand assessment areas beyond a bank’s physical branch to account for the frequency of online banking. 
  • The examination and rating process will also become more difficult for large banks, raising the bar for CRA performance in order for a bank to earn an outstanding or high satisfactory rating. 
  • The proposal also includes the disclosing of additional information to the public in CRA evaluations related to the distribution by borrower race and ethnicity of the bank’s home mortgage loan originations and borrowers using the Home Mortgage Disclosure Act - this is especially important in analyzing lending data to indicate fair or unfair lending practices among communities of color. 

A truly meaningful reform requires more. It requires an equity-centered approach.

At Greenlining, we work toward a future when communities of color can build wealth, live in healthy places filled with economic opportunity, and are ready to meet the challenges posed by climate change. Advocates have until August 5th to offer comments on the regulators’ proposed rulemaking. Here is what we recommend to meaningfully modernize the CRA and center the communities of color it seeks to support.

We propose that federal regulators explicitly include race in the CRA by:

  • Assessing bank performance through percentage of home and small business lending to Black, Indigenous, and people of color borrowers.
  • Greater enforcement of, and downgrades for disparate lending and discrimination. 
  • Analyzing lending by race and ethnicity in underserved neighborhoods in all CRA exams (including community development financing and retail lending).
  • Considering a bank’s creation and deployment of Special Purpose Credit Programs.
  • Prioritizing community input and adherence to community benefit agreements on CRA exams.

These recommendations should both increase transparency of the context in which banks are doing business, and reward or penalize banks for failing to meet the needs of BIPOC communities. 

We also propose that regulators strike the proposal of raising the small and intermediate bank asset thresholds. This would effectively loosen reinvestment obligations for banks that are currently classified as large banks by reclassifying them as intermediate banks, and intermediate banks which would be reclassified as small banks. The result: 767 banks that are intermediate banks now would be reclassified as small banks, exempting them from community development finance responsibilities. Likewise, 201 banks with large bank obligations would be reclassified as intermediate banks. Based on a study by the National Community Reinvestment Coalition, this would strip communities of about $1.2 billion dollars of investment each year. These banks have been financing community development for over a decade, why should they stop now?

Lastly, we propose that the regulators hold banks accountable to supporting the resilience of communities especially vulnerable to climate change and climate disasters due to decades of disinvestment. The proposal includes a new definition of “disaster preparedness and climate resiliency” and lists eligible investments that would provide meaningful support to communities. We support this change. In addition, we recommend regulators penalize banks on their CRA exam if bank activities may be harming communities due to environmental impacts. While proactive investments for climate resilience are helpful, without addressing root causes of climate vulnerability, we risk only deepening the potential impacts communities will face in the future. The CRA exam must address both sides of the coin.

These recommendations provide a path forward for federal regulators to include explicit race-based criteria that hold banks accountable to serving communities of color, and to genuinely address decades of race-based disinvestment and discrimination. They must seize this rare and historic opportunity to finally prioritize racial equity within the financial system.

As we know, transformative changes are always facilitated by the movement of community organizations and individuals with a vision. We know regulators will require a strong push to include racial equity in the upcoming CRA rulemaking. 

We invite you to take action alongside us by checking out our Community Reinvestment Act Toolkit to submit your own comment letter using our sample letter, and consider signing on to Greenlining’s CRA comment letter.

Rami Ibrahim GLI Headshot
Rami Ibrahim is Greenlining's Program Coordinator for Economic Equity. Follow him on LinkedIn and twitter.