Community Reinvestment Act Regulations

Federal RegisterAug 12, 2026

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 5, 24, 25, and 35

[Docket ID OCC-2026-0694]

RIN 1557-AF57

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 345 and 346

RIN 3064-AG31

Community Reinvestment Act Regulations

AGENCY:

The Office of the Comptroller of the Currency, Treasury, and the Federal Deposit Insurance Corporation.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) are proposing to amend their Community Reinvestment Act rules by making certain substantive, technical, and process-oriented changes to refocus on the statutory objective of encouraging banks to meet the credit needs of their communities; to better ensure that community development grants reach the communities they are intended to benefit; to reduce unnecessary burden, particularly for community banks; and to provide greater clarity for how to obtain CRA consideration. The OCC and the FDIC are also proposing certain technical changes to their rules implementing the Community Reinvestment Act sunshine requirements of the Federal Deposit Insurance Act. In addition, the OCC is proposing similar technical changes to its Public Welfare Investments rule and its Rules, Policies, and Procedures for Corporate Activities.

DATES:

Comments must be received on or before October 13, 2026.

ADDRESSES:

Comments should be directed to the agencies as follows:

OCC:

Commenters are encouraged to submit comments through the Federal eRulemaking Portal. Please use the title “Community Reinvestment Act Regulations” to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods:

•

Federal eRulemaking Portal—Regulations.gov:

Go to

https://regulations.gov/.

Enter Docket ID “OCC-2026-0694” in the Search Box and click “Search.” Public comments can be submitted via the “Comment” box below the displayed document information or by clicking on the document title and then clicking the “Comment” box on the top-left side of the screen. For help with submitting effective comments, please click on “Commenter's Checklist.” For assistance with the

Regulations.gov

site, please call 1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. EST, or email

regulationshelpdesk@gsa.gov.

•

Mail:

Chief Counsel's Office, Attention: Comment Processing, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 1E-216, Washington, DC 20219.

•

Hand Delivery/Courier:

400 7th Street SW, Suite 1E-216, Washington, DC 20219.

Instructions:

You must include “OCC” as the agency name and Docket ID “OCC-2026-0694” in your comment. In general, the OCC will enter all comments received into the docket and publish the comments on the

Regulations.gov

website without change, including any business or personal information provided such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.

You may review comments and other related materials that pertain to this action by the following method:

•

Viewing Comments Electronically—Regulations.gov:

Go to

https://regulations.gov/.

Enter Docket ID “OCC-2026-0694” in the Search Box and click “Search.” Click on the “Dockets” tab and then the document's title. After clicking the document's title, click the “Browse All Comments” tab. Comments can be viewed and filtered by clicking on the “Sort By” drop-down on the right side of the screen or the “Refine Comments Results” options on the left side of the screen. Supporting materials can be viewed by clicking on the “Browse Documents” tab. Click on the “Sort By” drop-down on the right side of the screen or the “Refine Results” options on the left side of the screen checking the “Supporting & Related Material” checkbox. For assistance with the

Regulations.gov

site, please call 1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. EST, or email

regulationshelpdesk@gsa.gov.

The docket may be viewed after the close of the comment period in the same manner as during the comment period.

FDIC:

Comments should be directed to the FDIC, identified by RIN 3064-AG31, by any of the following methods:

•

Agency Website: https://www.fdic.gov/resources/regulations/federal-register-publications/.

Follow instructions for submitting comments on the FDIC website.

•

Mail:

Jennifer M. Jones, Deputy Executive Secretary, Attention: Comments—RIN 3064-AG31, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.

•

Hand Delivered/Courier:

Comments may be hand-delivered to the guard station at the rear of the 550 17th Street NW building (located on F Street NW) on business days between 7 a.m. and 5 p.m.

•

Email: comments@FDIC.gov.

Include RIN 3064-AG31 on the subject line of the message.

•

Public Inspection:

Comments received, including any personal information provided, may be posted without change to

https://www.fdic.gov/federal-register-publications.

Commenters should submit only information that the commenter wishes to make available publicly. The FDIC may review, redact, or refrain from posting all or any portion of any comment that it may deem to be inappropriate for publication, such as irrelevant or obscene material. The FDIC may post only a single representative example of identical or substantially identical comments, and in such cases will generally identify the number of identical or substantially identical comments represented by the posted example. All comments that have been redacted, as well as those that have not been posted, that contain comments on the merits of this notice will be retained in the public comment file and will be considered as required under all applicable laws. All comments may be accessible under the Freedom of Information Act.

FOR FURTHER INFORMATION CONTACT:

OCC:

Emily Boyes, Special Counsel; Marjorie Dieter, Special Counsel; or Kevin Behne, Counsel, Chief Counsel's Office, (202) 649-5490; Michelle Newell, Lead Expert; Cassandra Remmenga, CRA Modernization Program Manager; Chief National Bank Examiner's Office (202) 649-5470, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services.

FDIC:

Stephanie M. Baroody, Senior Examination Specialist, Compliance and CRA Examinations Branch, Division of

Depositor and Consumer Protection, (571) 858-8311; Kristopher M. Rengert, Senior Policy Analyst, Supervisory Policy Branch, Division of Depositor and Consumer Protection, (202) 898-3593; Cassandra Duhaney, Counsel, Legal Division, (202) 898-6804; Alys V. Brown, Senior Attorney, Legal Division, (202) 898-3565, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Introduction

The OCC and the FDIC (together, the agencies) are proposing targeted changes to their regulations implementing the Community Reinvestment Act (CRA) in order to better align with the statutory mandate, reduce unnecessary burden, and improve clarity.

Because these rules generally date back to 1995,

the agencies have decades of experience applying them to the insured depository institutions they supervise (hereinafter, banks).

Based on this experience, as well as feedback the agencies have received through various initiatives described below, these targeted changes are designed to retain the key elements of the current regulatory framework to provide continuity and minimize disruptions while making revisions to accomplish the goals listed above.

Public Law 95-128, 91 Stat. 1147 (1977) (codified at 12 U.S.C. 2901

et seq.

(as amended) and implemented by the OCC at 12 CFR part 25, subparts A through D, and by the FDIC at 12 CFR part 345). For reasons explained below, the currently applicable rules, promulgated in 1995, can be found on the website for the Electronic Code of Federal Regulation at

https://www.ecfr.gov/on/2024-03-29/title-12/chapter-I/part-25

and

https://www.ecfr.gov/on/2024-03-29/title-12/chapter-III/subchapter-B/part-345. See

12 CFR part 25 (version effective as of Mar. 29, 2024); 12 CFR part 345 (version effective as of Mar. 29, 2024). References to “current rule” or “current rules” in this

SUPPLEMENTARY INFORMATION

refers to these rules.

The agencies, along with the Board of Governors of the Federal Reserve System (Board) and the Office of Thrift Supervision (OTS), first promulgated CRA rules in 1978 and established the standards for evaluating a bank's CRA performance. 43 FR 47144 (Oct. 12, 1978). In 1995, the four agencies significantly revised and clarified the 1978 rules (1995 CRA rules).

See

60 FR 22156 (May 4, 1995). As discussed below, the substance and structure of the agencies current rules are primarily based on the 1995 CRA rules.

For purposes of the CRA, “insured depository institution” is defined by cross-reference to 12 U.S.C. 1813(c)(2) as “any bank or savings association the deposits of which are insured” by the FDIC pursuant to the Federal Deposit Insurance Act (FDIA). 12 U.S.C. 2902(2). The FDIA defines “bank” as “any national bank and State bank, and any Federal branch and insured branch.” 12 U.S.C. 1813(a)(1). It defines “savings association” to include any Federal or State savings association. 12 U.S.C. 1813(b)(1). As used in this

SUPPLEMENTARY INFORMATION

, the term “bank” or “banks” includes uninsured Federal branches that result from an acquisition described in the International Banking Act of 1978 (12 U.S.C. 3103(a)(8)). The CRA defines “appropriate Federal financial supervisory agency” as the OCC, FDIC, and Board. 12 U.S.C. 2902(1). Pursuant to the CRA, the OCC is the appropriate Federal financial supervisory agency for national banks and Federal savings associations. 12 U.S.C. 2902(1)(A). The FDIC is the appropriate Federal financial supervisory agency for state-chartered non-member banks and savings associations. 12 U.S.C. 2902(1)(C). For purposes of this

SUPPLEMENTARY INFORMATION

, the agencies use the term “appropriate agency” instead of “appropriate Federal financial supervisory agency.”

Congress enacted the CRA in 1977 based on its express findings that: “(1) regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business; (2) the convenience and needs of communities include the need for credit services as well as deposit services; and (3) regulated financial institutions have continuing and affirmative obligation[s] to help meet the credit needs of the local communities in which they are chartered.”

Congress codified its intent in enacting the statute, stating that its purpose “is to require each appropriate Federal financial supervisory agency . . . to encourage [the institutions that each agency regulates] to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of the institutions.”

12 U.S.C. 2901(a). The CRA defines “regulated financial institution” as an insured depository institution as defined in 12 U.S.C. 1813(c)(2). 12 U.S.C. 2902(2).

12 U.S.C. 2901(b).

To achieve this purpose, the CRA requires each agency to “assess [an] institution's record of meeting the credit needs of its entire community, including low- and moderate-income [(LMI)] neighborhoods, consistent with the safe and sound operation of such institution.”

Upon completing this assessment, the statute requires the agency to “prepare a written evaluation of the institution's record of meeting the credit needs of its entire community, including [LMI] neighborhoods.”

The statute further provides that the agency must “take such record into account in its evaluation of an application for a deposit facility by such institution.”

The CRA also directs each agency to publish a rule to carry out the statute's purposes.

12 U.S.C. 2903(a)(1).

12 U.S.C. 2906(a).

12 U.S.C. 2903(a)(2).

12 U.S.C. 2905. Pursuant to Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376, 1522 (2010) (Dodd-Frank Act), Congress transferred the OTS's rulemaking authority for all savings associations to the OCC and its supervisory authority for State savings associations to the FDIC. As a result, the OCC's CRA regulation applies to both State and Federal savings associations (in addition to national banks), and the FDIC enforces the OCC's CRA regulation with respect to State savings associations.

In recent years, the agencies have undertaken numerous initiatives, on an interagency basis and individually, to revise and modernize their CRA rules. As a result of these efforts, they have received significant public feedback. For example, from 2013 to 2016, the agencies solicited feedback on their CRA regulatory framework as part of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) review process.

In 2018, the OCC published an advance notice of proposed rulemaking to solicit ideas for a new CRA regulatory framework and received more than 1,500 comment letters.

In 2019, the agencies issued a joint notice of proposed rulemaking to update their CRA rules and received over 7,500 comment letters,

and in 2020, the OCC finalized that rule (2020 CRA rule).

In 2021, the OCC rescinded the 2020 CRA rule and replaced it with a rule based largely on the 1995 CRA rules.

See

82 FR 15900 (Mar. 30, 2017) (EGRPRA report to Congress). The Board and the National Credit Union Association joined this report.

83 FR 45053 (Sept. 5, 2018).

85 FR 1204 (Jan. 9, 2020).

85 FR 34734 (June 5, 2020).

86 FR 71328 (Dec. 15, 2021).

In 2022, the agencies, along with the Board (together with the agencies, the Federal banking agencies), issued a joint notice of proposed rulemaking to modernize their CRA rules.

Approximately 950 unique comment letters were submitted in response. After considering public comments received, the Federal banking agencies issued final rules (2023 CRA rules) on October 24, 2023.

On February 5, 2024, several trade association plaintiffs jointly sued the Federal banking agencies in the U.S. District Court for the Northern District of Texas, challenging the 2023 CRA rules.

On February 9, 2024, these trade associations sought preliminary injunctive relief,

which the court granted on March 29, 2024, preliminarily enjoining the Federal banking agencies from enforcing the 2023 CRA rules against the plaintiffs

pending resolution of the litigation.

The District Court also extended the effective date of and all implementation dates for the 2023 CRA rules for each day that its preliminary injunction would remain in place.

As a result of these actions, the Federal banking agencies have been continuing to apply the rules that were in effect when the District Court issued its order (the current rules).

87 FR 33884 (June 3, 2022).

89 FR 6574 (Feb. 1, 2024).

Complaint for Declaratory and Injunctive Relief,

Tex. Bankers Ass'n

Office of the Comptroller of the Currency,

Civ. A. No. 2:24-cv-00025-Z (N.D. Tex. Feb. 5, 2024), ECF No. 4.

Plaintiffs' Motion for a Preliminary Injunction,

Tex. Bankers Ass'n

Office of the Comptroller of the Currency,

Civ. A. No. 2:24-cv-00025-Z (N.D. Tex. Feb. 9, 2024), ECF No. 19.

Tex. Bankers Ass'n

Office of the Comptroller of the Currency,

728 F. Supp.3d 412, 429-30 (N.D. Tex. 2024). The District Court issued the injunction just days before April 1, 2024, when the 2023 CRA rules would have become effective and certain parts of those rules would have applied to banks.

See

89 FR at 6574, 7137.

Tex. Bankers Ass'n,

728 F. Supp.3d at 430.

See id.

at 429-30 and

supra

note 1. The proposal would recodify the text of the current rules, revised as discussed in this

SUPPLEMENTARY INFORMATION

In its memorandum opinion and order, the District Court concluded that the plaintiffs had demonstrated a substantial likelihood of success on the merits of their claim that the Federal banking agencies exceeded their authority in issuing the 2023 CRA rules.

For example, the District Court determined that the Federal banking agencies' interpretation of “entire community” in the 2023 CRA rules clashed with the statutory text.

It also concluded that the plaintiffs' argument about the required nexus between a bank's “community” and its physical location was stronger than the Federal banking agencies' contrary argument.

Additionally, the District Court considered the Major Questions Doctrine and rejected the Federal banking agencies' assertion that Congress granted the authority to assess a bank CRA performance wherever the bank makes loans.

Tex. Bankers Ass'n,

728 F. Supp.3d at 420-25.

See id.

at 420-23.

See id.

at 421.

See id.

at 425.

On April 18, 2024, the Federal banking agencies appealed the District Court's preliminary injunction to the U.S. Court of Appeals for the Fifth Circuit.

On March 28, 2025, during the pendency of the appeal, the Federal banking agencies filed an unopposed motion to stay the appeal pending completion of new rulemakings that would propose to rescind the enjoined 2023 CRA rules and reinstate the prior CRA framework.

On April 1, 2025, the Fifth Circuit granted the Federal banking agencies' motion.

Defendants' Notice of Appeal,

Tex. Bankers Ass'n

Office of the Comptroller of the Currency,

Civ. A. No. 2:24-cv-00025-Z (N.D. Tex. Apr. 18, 2024), ECF No. 79.

Defendants-Appellants' Unopposed Motion to Stay Pending Completion of New Rulemaking Proceedings,

Tex. Bankers Ass'n

Bd. of Governors of the Fed. Reserve Sys.,

No. 24-10367 (5th Cir. Mar. 28, 2025), ECF No. 165. As discussed above, the prior CRA framework refers to the agencies' current rules.

Order,

Tex. Bankers Ass'n

Bd. of Governors of the Fed. Reserve Sys.,

Civ. A. No. 24-10367 (5th Cir. Apr. 1, 2025), ECF No. 174.

On July 16, 2025, the Federal banking agencies published a notice of proposed rulemaking to rescind the 2023 CRA rules (rescission proposal) and, with minor conforming and technical edits, to replace it with the rules in effect on March 29, 2024 (the date on which the District Court enjoined the 2023 CRA rules).

The Federal banking agencies explained that this approach aligned with their shared objectives of restoring certainty to the CRA regulatory framework and limiting regulatory burden on banks.

90 FR 34086 (July 18, 2025).

90 FR at 34089.

The Federal banking agencies received approximately 47 comments on the rescission proposal. After considering these comments, as well as public feedback from the initiatives outlined above, the litigation related to the 2023 CRA rules, and their extensive supervisory experience with the current rules, the OCC and the FDIC have decided not to finalize the rescission proposal but to issue this new proposal instead.

This notice of proposed rulemaking is being issued jointly by the agencies. Any decisions about the Board's next steps with respect to the rescission proposal rest exclusively with its Governors.

On July 1, 2026, the OCC and FDIC filed an unopposed motion with the Fifth Circuit to dismiss their appeal of the District Court's injunction against their 2023 CRA rules.

The Fifth Circuit dismissed the agencies' appeal on July 9, 2026.

Motion to Voluntarily Dismiss Appeal in Part,

Tex. Bankers Ass'n

Bd. of Governors of the Fed. Reserve Sys.,

Civ. A. No. 24-10367 (5th Cir. July 1, 2026), ECF No. 197.

Clerk Order,

Tex. Bankers Ass'n

Bd. of Governors of the Fed. Reserve Sys.,

Civ. A. No. 24-10367 (5th Cir. July 9, 2026), ECF No. 201-1.

The OCC and FDIC are now moving the District Court for the entry of a final judgment against them. The language of the OCC's and FDIC's proposed judgment would, if entered by the Court, declare that future amendments to the OCC's and FDIC's CRA regulations could neither be based on (1) an expansive view of “entire community” that provides for or permits the assessment of regulated institutions' retail lending activities outside the geographic areas where they operate and maintain deposit-taking facilities; nor (2) an expansive view of “credit needs” that provides for or permits the assessment of regulated institutions' deposit products.

II. Summary of the Current Rules

As noted above, the current rules are the rules in effect when the 2023 CRA rules were enjoined on March 29, 2024.

The agencies' current rules address a variety of components intended to implement the statute. They set out a performance assessment framework, which includes performance tests or standards the agencies use to evaluate a bank's CRA performance depending on its asset size or business strategy. They also explain CRA assigned ratings; data collection, maintenance, and disclosure requirements; the public's right to access information about how a bank meets the credit needs of its community; and the effect of a CRA rating on certain bank applications. To provide guidance on the current rules, the Federal banking agencies have periodically published the Interagency Questions and Answers Regarding Community Reinvestment (Interagency Questions and Answers).

The components of the current rules, as well as certain applicable guidance, are described below.

See

81 FR 48506 (July 25, 2016). “Interagency Questions and Answers” refers to the “Interagency Questions and Answers Regarding Community Reinvestment” guidance in its entirety. “Q&A” refers to an individual question and answer within the Interagency Questions and Answers.

A. CRA Regulatory Framework

Small banks, including intermediate small banks.

Under the current rules, a bank that meets the definition of a “small bank”—currently, those with assets of less than $1.649 billion as of December 31 of either of the prior two calendar years—is evaluated under a lending test for small banks.

A subset of small banks that are “intermediate small banks”—currently, those with assets of at least $412 million as of December 31 of both of the prior two calendar years—are also evaluated under a community development (CD) test.

See

current 12 CFR __.12(u), __.21(a)(3), and __.26(b). As discussed below, the OCC has recently performed its annual asset size threshold adjustments through a bulletin process. While the FDIC often makes the same adjustments through a final rule, the FDIC has also used

Federal Register

announcements that do not revise the regulatory text of its current rule.

See

current 12 CFR __.12(u) and __.26(c).

Large banks.

Under the current rules, a bank with assets that exceed the small bank asset size threshold—currently, those with assets greater than $1.649 billion as of December 31 of both of the prior two calendar years (commonly referred to as a “large bank”)—is evaluated under separate lending, investment, and service tests.

The

lending and service tests consider both retail and CD activities,

and the investment test focuses on qualified investments. To facilitate the agencies' CRA examinations, a large bank is required to collect, maintain, and report annually certain data on CD loans, small business loans, and small farm loans; these banks are also required to report annually the census tracts included in their assessment area(s).

In contrast, small banks, including intermediate small banks, are not required to report these data unless they opt to be evaluated under the large bank lending test.

See

current 12 CFR __.21(a)(1) and __.22 through__.24 (lending, investment, and service

tests). The current rules do not define “large bank,” but their existence is implied for banks that exceed the asset-size threshold for the intermediate small bank definition.

Throughout this

SUPPLEMENTARY INFORMATION

, the term “activity” refers to a loan, investment, grant, or service, as applicable.

See

current 12 CFR __.42(a), (b), and (g).

See

current 12 CFR __.42(f).

Wholesale and limited purpose banks.

A bank that is designated as either a wholesale bank (

i.e.,

a bank that is not in the business of extending retail loans to retail customers)

or a limited purpose bank (

i.e.,

a bank that offers only a narrow product line to a regional or broader market)

is evaluated under a standalone CD test.

In order for an agency to designate a bank as a wholesale bank or limited purpose bank, the bank must file a request with and receive approval from the appropriate agency.

See

current 12 CFR __.12(x).

See

current 12 CFR __.12(n).

See

current 12 CFR __.21(a)(2) and __.25.

See

current 12 CFR __.25(b).

Strategic plans.

Any bank may elect to be evaluated under a tailored strategic plan in lieu of one of the otherwise applicable tests or standards discussed above.

A bank that elects to be evaluated under a strategic plan must develop that plan with community input and receive plan approval from the appropriate agency.

See

current 12 CFR __.21(a)(4) and __.27.

See

current 12 CFR __.27(g).

Retail and CD activities.

Under the current rule, the appropriate agency evaluates a bank's record of meeting the credit needs of its community by assessing its retail and CD activities under the applicable performance tests or standards. The retail activities considered under the current rules are (1) consumer, home mortgage, small business, and small farm lending, as applicable; and (2) retail banking services and delivery systems. The current rules also consider as CD activities a bank's loans, investments, and services that have a primary purpose of community development.

The current rules define “community development” to mean: (1) affordable housing; (2) community services targeted to LMI individuals; (3) economic development that finances small businesses and small farms; and (4) activities that revitalize or stabilize LMI geographies, designated disaster areas, and distressed or underserved nonmetropolitan middle-income geographies.

Qualified investments are defined to include investments, grants, deposits, and membership shares.

CD services are generally volunteer services provided by a bank that, in addition to having a primary purpose of community development, also are related to the provision of financial services.

See

current 12 CFR __.12(h), (i), and (t).

See

current 12 CFR __.12(g).

See

current 12 CFR __.12(t).

See

current 12 CFR __.12(i).

Assessment areas.

A bank is required to delineate one or more assessment areas in which the appropriate agency evaluates its record of helping to meet the credit needs of its community through the provision of retail and CD activities.

An assessment area must include the geographies (

i.e.,

census tracts) in which the bank's main office, branches, and deposit-taking automated teller machines (ATMs) are located, as well as the surrounding census tracts where a substantial portion of its loans are originated or purchased.

A bank may adjust the boundaries of its assessment areas to include only the portion of a political subdivision that it reasonably can be expected to serve, subject to certain limitations.

See

current 12 CFR __.41(a).

See

current 12 CFR __.41(b) and (c).

See

current 12 CFR __.41(d) and (e).

B. Performance Tests

Lending test.

Under the current lending test, the appropriate agency evaluates a bank's record of helping to meet the credit needs of its assessment area(s) through its lending activities by considering (1) its retail lending (

i.e.,

consumer, home mortgage, small business, and small farm lending, as applicable); and (2) its CD lending.

The agency evaluates consumer lending in one or more specific product lines (

i.e.,

motor vehicle, credit card, other secured, and other unsecured loans) either at a bank's option or if consumer lending constitutes a substantial majority of the bank's business. If a bank opts to have the appropriate agency evaluate its consumer lending, the bank must collect and maintain the data required by 12 CFR __.42 for each category of consumer lending that it elects to have the agency evaluate. In considering a bank's CD lending, the agency considers the number and amount of the bank's CD loans, as well as the complexity and innovativeness of the lending.

See

current 12 CFR __.22(a).

Investment test.

Under the current investment test, the appropriate agency evaluates a bank's record of helping to meet the credit needs of its assessment area(s) through qualified investments that benefit (1) the assessment area(s); or (2) a broader statewide or regional area that includes the assessment area(s).

The agency considers the dollar amount of the qualified investments, as well as their complexity, innovativeness, and responsiveness and the extent to which they are not routinely provided by private investors.

Generally, an activity considered under the lending or service tests may not be considered under the investment test.

See

current 12 CFR __.23(a).

See

current 12 CFR __.23(e).

See

current 12 CFR __.23(b).

Service test.

Under the current service test, the appropriate agency evaluates a bank's record of helping to meet the credit needs of its assessment area(s) by analyzing (1) the availability and effectiveness of the bank's systems for delivering retail banking services; and (2) the extent, innovativeness, and responsiveness of the CD services that benefit the bank's assessment area(s) or the broader statewide or regional area(s) that includes the bank's assessment area(s).

In evaluating a bank's retail banking services, the agency considers its (1) distribution and record of opening and closing branches; (2) alternative systems for delivering retail banking services; and (3) the range of services that the bank provides.

See

current 12 CFR __.24(a) and (b).

See

current 12 CFR __.24(d).

Small bank performance standards.

The current rules include small bank performance standards, which include a small bank lending test. Under that test, the appropriate agency assesses a small bank's (including an intermediate small bank's) lending and other lending-related activities, as applicable, under several performance criteria, including (1) its loan-to-deposit ratio and the percentage of loans in its assessment area(s); (2) the borrower distribution and geographic distribution of its loans; and (3) its record of taking action in response to written complaints.

For a small bank that is not an intermediate small bank, the agency may also consider its CD lending under the lending test. For an intermediate small

bank, the agency also assesses its performance under a CD test that considers: (1) the number and amount of CD loans and investments; (2) the extent to which the bank provides CD services; and (3) the responsiveness of a bank's CD activities to community needs.

See

current 12 CFR __.26(b).

See

current 12 CFR __.26(c).

Wholesale and limited purpose bank tests.

Under the current CD test for wholesale and limited purpose banks, the appropriate agency assesses (1) the number and amount of a wholesale or limited purpose bank's CD activities; (2) its use of innovative or complex CD activities; and (3) the responsiveness of its CD activities.

The agency considers CD activities that benefit: (1) the bank's assessment area(s); and (2) if the bank has adequately addressed the needs of its assessment area(s), then areas outside of its assessment area(s).

See

current 12 CFR __.25(c).

See

current 12 CFR __.25(e).

Strategic plan.

For a bank of any size or business strategy that elects to be evaluated under a strategic plan under the current rule, the appropriate agency assesses the bank's strategic plan under measurable goals that the bank establishes for lending, investments, and services, as applicable.

A bank must establish measurable goals for a “satisfactory” rating and may establish measurable goals for an “outstanding” rating.

The approval of a plan does not affect a bank's obligation, if any, to report required data.

See

current 12 CFR __.27(f) and (g).

See

current 12 CFR __.27(f)(3).

See

current 12 CFR __.27(b).

Performance context.

Under the current rules, the appropriate agency also considers applicable performance context information to inform its analysis and conclusions regarding a bank's CRA performance when conducting a CRA examination or approving a strategic plan.

Performance context is comprised of a broad range of economic, demographic, bank-specific, and community-specific information that the agencies consider to inform their assessment of a bank's efforts to meet the needs of and understand the opportunities in its local communities.

See

current 12 CFR __.21(b).

C. Ratings, Data and the Public File, and the Effect of CRA Performance on Applications

Ratings.

Consistent with the statute, the appropriate agency assigns each bank a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial noncompliance” following a CRA examination.

The agencies rate a bank's overall record of performance and the bank's record of performance in applicable States and multistate metropolitan statistical areas (multistate MSA), as provided in the statute.

12 U.S.C. 2906(b)(2), implemented by current 12 CFR __.28(a). The narrative descriptions of the ratings for performance under each evaluation method are in appendix A to the current rules.

see also

Interagency Large Institution CRA Examination Procedures.

See

Q&A appendix A to part __—1.

In addition, an intermediate small bank may not receive an overall “satisfactory” rating unless it receives at least a “satisfactory” rating on both the lending test and the CD test.

An intermediate small bank that receives an “outstanding” on one test and at least “satisfactory” rating on the other test may receive an overall rating of “outstanding.”

A small bank that is not an intermediate small bank may receive an “outstanding” rating based on its performance only under the lending test.

The appropriate agency may consider qualified investments, services, and delivery systems that enhance the availability of credit in a bank's assessment areas for an “outstanding” rating, but only if the bank meets or exceeds the standards for a “satisfactory” rating under the lending test in the small bank performance standards.

In assigning a bank's ratings, the appropriate agency considers any evidence of discriminatory or other illegal credit practices in connection with home mortgage, small business, small farm, consumer, and CD lending.

See

current 12 CFR __, appendix A, paragraph (d)(3)(i).

See

current 12 CFR __, appendix A, paragraph (d)(3)(ii)(A).

See

current 12 CFR __, appendix A, paragraph (d)(3)(ii)(B).

See

Q&As §§ __. 26—1, __.26(b)—1, and __.26(b)—2.

See

current 12 CFR __.28(c).

Data and public file requirements.

Under the current rules, a bank other than a small bank, is generally required to collect, maintain, and report certain data related to small business loans, small farm loans, CD loans, and assessment areas.

The current rules also include optional data collection requirements for: (1) a bank that elects to be evaluated based on consumer lending; and (2) a small bank (including an intermediate small bank) that elects to be evaluated under the lending, investment, and services tests.

In addition, the current rules require a bank to maintain a public file with information related to its CRA performance

and to provide a copy of this information in response to a request.

Finally, the current rules require a bank to post a CRA public notice in the public lobby of its main office and in each of its branches.

See

current 12 CFR __.42(a) and (b).

See

current 12 CFR __.42(c) and (f).

See

current 12 CFR __.43.

See

current 12 CFR __.43(d). The copy can be either in paper form or another form that is acceptable to the requestor.

See

current 12 CFR __.44 and appendix B.

Effect of CRA performance on applications.

Under the current rules, the appropriate agency is required to take into account a bank's CRA performance when considering certain applications from the bank, including an application for: (1) the establishment of a domestic branch or other facility with the ability to take deposits; (2) a merger, consolidation, acquisition of assets, or assumption of liabilities; (3) the relocation of its main office or branch; (4) deposit insurance; (5) a transaction subject to the Bank Merger Act or the Home Owners' Loan Act; and (6) a charter application.

The bank's CRA performance may be the basis for denying or conditioning approval of an application.

These provisions implement the CRA statutory

requirement that, in evaluating a bank's “application for a deposit facility,” an agency must take into account its record of meeting the credit needs of its entire community, including LMI neighborhoods, consistent with the bank's safe and sound operation.

See

current 12 CFR __.29(a) and (b).

See

current 12 CFR __.29(d).

See

12 U.S.C. 2902(3) and 2903(a).

III. Overview of the Proposal

Based on the extensive feedback the agencies have received on the current rules, the results of the litigation regarding the 2023 CRA rules, and the agencies' supervisory experience examining banks for compliance with the CRA, the agencies are proposing targeted changes to their current rules. These changes seek to refocus the agencies' CRA supervision on their statutory mandate to encourage the banks under their supervision to meet the credit needs of their local communities, including by increasing the focus on lending and by better ensuring the community development grants benefit communities. These changes are also intended to address specific and known challenges associated with the current rules by improving clarity and reducing unnecessary burden, especially for community banks, and to better ensure that, when banks receive credit for providing certain types of community development funding, the funds reach the communities they are intended to benefit instead of being diverted to other activities or excessive operating costs.

Before describing the proposed changes, however, it is important to note that as a general matter, the proposal leaves much of the current framework unchanged. For example, large banks would remain subject to lending, investment, and service tests that evaluate their retail lending and services, as well as their CD activities. Small banks and a new category—intermediate banks (which would replace the current rule's intermediate small bank category)—would remain subject to a tailored lending test, with a tailored CD test for intermediate banks. Banks would retain the option to be evaluated, as appropriate: (1) as a wholesale or limited purpose bank based on their CD activities; or (2) under a strategic plan based on specified measurable goals.

Notably, the proposal would also leave the current assessment area framework largely unchanged.

While the agencies recognize that banks' customer bases are increasingly geographically dispersed, the CRA statute focuses on the geographic area(s) surrounding a bank's physical facilities. For this reason, the agencies are not proposing significant changes to the current assessment area framework, which is largely tied to a bank's physical location(s).

The CRA statute instructs the agencies to assess a bank's record of meeting the credit needs of its “entire community, including [LMI] neighborhoods, consistent with the safe and sound operation of such institution, and to take such record into account in its evaluation of an application for a deposit facility by such institution.” 12 U.S.C. 2903(a). While the statute does not prescribe the delineation of assessment areas, the assessment area framework in the current rules requires banks to identify areas around their physical locations within which the agencies evaluate the bank's record of helping to meet the credit needs of its community.

A. Increase Focus on Lending

As discussed above, 12 U.S.C. 2903(a) requires an agency to assess a bank's record of meeting the credit needs of its entire community, including LMI neighborhoods. In the agencies' judgment, a community's credit needs are best and most directly met through activities that involve lending.

To further encourage this lending, the agencies are proposing several targeted revisions to the current rules.

Retail and CD lending are not the only ways that a bank can meet the credit needs of its community under CRA. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) added a section to the CRA entitled “Written Evaluations,” which requires that the written evaluation of a bank's overall CRA performance and its performance in each evaluation area must: “state the appropriate [agency's] conclusions for each assessment factor identified in the regulations prescribed . . . to implement this chapter.” 12 U.S.C. 2906(b)(1)(A) (emphasis added). The CRA rules in place in 1989, which the agencies adopted in 1978, included 12 “assessment factors,” which included the bank's “record of . . . providing services at offices” and “participation, including investments, in local community development and redevelopment projects or programs.” 12 CFR 25.7 and 345.7 (1978). Although the current rules do not use the term “assessment factors,” it continues to consider the 12 items included in the 1978 assessment factors (referenced by Congress in the FIRREA), including investments and services. As discussed below, this proposal would enhance the focus of these activities on meeting community credit needs.

The proposal would modify how the agencies consider bank services.

Specifically, the proposal would narrow the range of services considered as retail banking services under the current rules to limit them to the range and availability of an institution's “credit services”—thereby excluding deposit services—as well as the distribution and availability of an institution's retail banking facilities.

See id.

Additionally, the proposal would clarify the concept of “responsiveness,” a qualitative consideration that would apply to the evaluation of retail and CD activities under the proposal, and would define the term of “complexity,” one component of responsiveness to encourage a focus on lending. Under the proposed definition, CD investments, grants, or services that are a necessary or otherwise beneficial component of a multicomponent financing transaction involving a loan would be considered complex, as would CD lending and certain CD investments that require specialized lending expertise.

B. Ensure That Community Development Grants Benefit Communities

The proposal would modify the treatment of grants and donations for purposes of qualifying grants and donations as CD activities. Currently, grants and donations are considered qualified investments, but they differ from other types of qualified investments that involve more structured financing and are more akin to lending, such as securities that are the functional equivalent of a loan, or securities backed by loans, bonds, and other equity investments. Under the proposal, a bank would only be permitted to receive CRA consideration for grants and donations directly used by the recipient for a program, project, or initiative with a primary purpose of community development in the bank's local community. For large banks, the proposed rules would also impose a 15 percent cap on the indirect costs that recipients could incur as a part of administering a grant or donation. The proposal would also require more transparency regarding a bank's CD activities. The agencies intend that these modifications would ensure that CD grants, like CD loans and CD investments, would provide direct financing to banks' communities, consistent with the CRA's focus. For example, a bank recently received CRA consideration for a grant to a community development organization engaged in directly providing homeownership counseling to LMI individuals and health care services to individuals experiencing homelessness. Approximately 25 percent of this grant was reported to be used for the organization's internal expenses, with the remaining share expended for direct service costs. Under the proposed rules, this grant would not qualify as a CD grant for a large bank due to the recipient using over 15 percent of its proceeds for indirect expenses.

C. Reduce Burden

As discussed in greater detail below, the agencies propose three categories of changes to the current rules to reduce burden, especially for community

banks. First, the agencies propose three general asset size thresholds: (1) below $1 billion for a small bank; (2) $1 billion to $10 billion for an intermediate bank; and (3) above $10 billion for a large bank. These changes would reflect the significant growth in the asset sizes of banks since the agencies set the current asset size thresholds.

As a result of these changes, banks with $10 billion or less in assets (proposed small banks and proposed intermediate banks) would be subject to fewer data collection, maintenance, and reporting requirements.

See

60 FR at 22180, 22202 (setting the small bank asset size threshold at $250 million in 1995); 70 FR 44256, 44266, 44269 (Aug. 2, 2005) (setting the large bank asset size threshold at $1 billion and introducing annual inflation adjustments).

Second, the agencies propose that under both the large bank lending test and the small and intermediate bank lending test, they would consider only a bank's major product line(s) when assessing its retail lending (

i.e.,

consumer, home mortgage, small business, and small farm loans). These changes would reduce regulatory burden for banks by tailoring the lending test to focus on the product lines that make up most of a bank's record of serving community credit needs, thus enabling banks to better focus their resources to more effectively manage their CRA programs.

Finally, the agencies also propose to revise the public file and public notice requirements by: (1) no longer requiring a bank to provide a paper copy of the information in its public file; (2) permitting a bank to make the information in its public file available on its public website; and (3) allowing a bank to satisfy its public notice requirement by identifying the website on which the bank posts information about its CRA performance. These changes would reduce burden on banks by allowing them to use readily accessible technology to satisfy these requirements, while continuing to ensure that the public can easily access important information about a bank's CRA performance.

D. Increase Clarity and Objectivity

The proposal would also make a number of changes to the implementation of the current rules that would increase the clarity, transparency, and objectivity associated with evaluating a bank's CRA performance. These changes are in response to public feedback that the agencies have received about the provisions addressed below.

First, the agencies propose several changes with respect to CD activities. Specifically, they propose to revise the current principles-based definition of community development by clarifying when loans, investments, grants, and services qualify as CD activities. This change would largely codify and clarify current guidance on this topic. In addition, the agencies propose to codify a process under which a bank could seek agency confirmation that a CD activity (

i.e.,

a loan, investment, grant, or service with a primary purpose of community development) would receive CRA consideration. Further, they propose to clarify when an agency would provide CRA consideration for a CD activity that benefits an area other than a bank's assessment area(s) (assuming the bank has already demonstrated that it is helping to meet the credit needs of its assessment area(s)). Lastly, as discussed above, the proposal would clarify the information a bank must collect from the recipients of CD grants to ensure that the bank receives consideration.

Second, the agencies propose to make the strategic plan option a more viable and less burdensome option for banks by: (1) clarifying how to submit, amend, and implement a strategic plan; and (2) providing additional information regarding a plan's contents, particularly the measurable goals. These proposed changes also respond to public feedback, namely that the current strategic plan provisions are inaccessible, complex, and burdensome, particularly for community banks.

IV. Detailed Description of the Proposal

Set forth below is a detailed description of the proposed changes referenced above, as well as a description of other proposed conforming, technical, and clarifying changes.

A. Asset Size Thresholds

As described above, the performance tests or standards under which an agency evaluates a bank's CRA performance are generally determined by virtue of the bank's asset size.

The current asset size thresholds have not, however, evolved with changes in the banking industry over the past few decades, including bank consolidations. Although the CRA statute does not require the agencies to tailor the performance tests by asset size, the agencies first established a small bank category in the 1995 CRA rules and set the asset size threshold at $250 million.

At that time, small banks represented approximately 80.4 percent of all banks and held approximately 13.8 percent of the total industry assets.

Large banks represented approximately 19.6 percent of all banks and held approximately 86.2 of total industry assets.

This is, however, not always the case. For some banks, the applicable test or standard is a function of the bank's business strategy (

e.g.,

wholesale or limited purpose banks or banks that elect to be evaluated under a strategic plan). Banks that are evaluated as a wholesale or limited purpose bank or under a strategic plan are also considered a small, intermediate, or large bank, as applicable, and requirements other than performance tests or standards apply to a wholesale, limited purpose, or strategic plan bank based on the bank's asset size-based category. For example, a wholesale, limited purpose, or strategic plan bank that is a large bank is subject to data collection, maintenance, and reporting requirements.

Specifically, the 1995 CRA rules set the small bank threshold at $250 million in assets with an additional requirement that a small bank must also be independent or an affiliate of a holding company with less than $1 billion in total banking assets. 60 FR at 22180, 22202. The agencies removed these requirements related to a holding company's asset size from their CRA regulations in 2005.

See

70 FR at 44256, 44264. Also in 2005, the agencies raised the asset size threshold for small banks to $1 billion, added intermediate small banks as a subset of small banks assets between $250 million and $1 billion, and provided for future indexing for inflation of both the $250 million and $1 billion threshold.

See id.

at 44266, 44269.

See

69 FR 51611, 51612 (Aug. 20, 2004) (FDIC proposed rule).

See id.

In contrast, using year-end 2024 and 2025 Consolidated Reports of Condition and Income (Call Report) data about the banks with CRA obligations that the agencies supervise (a total of approximately 3,577 banks), small banks that were not intermediate small banks

represented approximately 57.0 percent of these banks (2,040 banks) and held approximately 2.0 percent of total industry assets.

Comparing the 1995 data to the 2024 and 2025 data, small banks represent a significantly smaller percentage of the total number of banks and a significantly smaller percentage of total assets. The nature and degree of the change in the distribution of small banks sizes demonstrate how the banking industry has changed and why the agencies are proposing asset size threshold changes.

Although, under the current rules, intermediate small banks are a subset of small banks, it is appropriate to look only to small banks for purposes of comparison to the 1995 CRA rules, because small banks at that time were subject to similar performance standards (

i.e.,

a lending test without CD obligations) as small banks other than intermediate small banks under the current rules.

Using year-end 2024 and 2025 Call Report data, intermediate small banks represented approximately 30.0 percent of these banks (1,060 banks) and held approximately 4.6 percent of total industry assets.

The agencies have adjusted the thresholds annually since 2005 based on an inflation index, but these adjustments have not been sufficient to keep up with changes in the industry, including its overall growth and consolidation. For the most recent inflation adjustments,

see

FDIC change at 91

FR 509 (Jan. 7, 2026) and OCC change at OCC Bulletin 2025-48, “Community Reinvestment Act: Revision of Small and Intermediate Small Bank and Savings Association Asset Thresholds” (Dec. 23, 2025),

https://www.occ.gov/news-issuances/bulletins/2025/bulletin-2025-48.html.

To address the mismatch that has emerged between the current thresholds and a dynamic industry, the agencies propose to adjust the asset size thresholds for all of the banks they supervise. Specifically, the proposal would define “small bank” as a bank with less than $1 billion in total assets, reflecting an increase from the current small bank asset threshold of less than $412 million. The proposal would replace the “intermediate small bank” category with a new “intermediate bank” category for a bank with at least $1 billion and up to and including $10 billion in assets, reflecting an increase from the current intermediate small bank threshold range of between $412 million and $1.649 billion.

Finally, the proposal would define “large bank” as a bank with assets of more than $10 billion, reflecting an increase from the current large bank threshold of over $1.649 billion. Asset size will continue to be calculated based on a bank's assets included in Call Report data as of December 31 of a calendar year, for two consecutive calendar years, with the bank belonging to the lower asset size category that applied during either of these two calendar years.

See id.

These changes would reduce the associated data collection, maintenance, and reporting requirements for many smaller banks and would subject smaller banks to performance standards with greater flexibility, which the agencies expect would enable these banks to meet the credit needs of their communities without the burden of regulatory requirements that have not kept pace with changes in the banking industry. In addition, under the proposal, the distribution of banks of different sizes across the performance tests and standards would be substantially similar to the proportions of their distribution in 1995. Accordingly, the changes would realign the CRA regulatory framework with the original regulatory drafters' conceptions about the CRA's application to different sizes and types of banks. The agencies invite feedback regarding the methodology and data used to set thresholds for small, intermediate, and large banks.

Set forth below is a detailed discussion of each of the proposed thresholds.

Small bank threshold.

Under the agencies' proposed small bank asset size threshold, the percentage of banks that qualify as small banks would significantly increase to about 79.8 percent of all banks subject to the CRA that the agencies supervise—a close alignment with the overall percentage of small banks at the time of the implementation of the 1995 CRA rules. While the percentage of total industry assets held by these banks would only increase to approximately 4.9 percent, when combined with the new category of intermediate banks (with asset sizes between $1 billion and $10 billion), together these banks would hold approximately 14.6 percent of total industry assets.

The agencies added the intermediate small bank category of small banks to the current rules in 2005.

See

70 FR at 44258.

One goal and effect of the proposal to raise the small bank asset threshold to up to $1 billion is to reduce the CRA regulatory burden on banks with between $412 million and $1 billion dollars. Under the current framework, these banks are considered intermediate small banks and subject to the applicable CD test which considers the number, amount, and responsiveness of their CD loans, investments and services. As a result, when small banks transition to intermediate small banks under the current framework, their CD activities are explicitly evaluated, which typically results in these banks adjusting their CRA programs. Under the proposal, banks below $1 billion in assets would no longer be subject to the CD test.

With respect to the current annual inflation adjustment for the small bank asset size threshold, the agencies are not proposing substantive changes, and it will remain keyed to Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (not seasonally adjusted). The agencies are, however, considering an alternative approach that would align the small bank threshold with the size standard that the Small Business Administration (SBA) uses to identify small banks.

Under this alternative, the agencies would define a small bank using the SBA's current standard for commercial banks of $850 million (calculated as of December 31 of either of the prior two calendar years).

100

Based on year-end Call Report data for 2024 and 2025, approximately 76.1 percent of agency supervised banks that are subject to the CRA (2,721 banks) would be small banks under the current SBA standard, representing about 4.2 percent of total industry assets.

The SBA establishes small business size definitions, usually referred to as “size standards,” for private sector industries in the United States to determine eligibility for Federal small business assistance. It adjusts size standards based on inflation at least once every five years and also adjusts based on industry structure.

See, e.g.,

90 FR 41168, 41171 (Aug. 22, 2025). The primary factors that the SBA evaluates to examine industry structure include average firm size, startup costs and entry barriers, industry competition, and distribution of firms by size.

Id.

The SBA also evaluates small business success in receiving Federal contracting assistance under the current size standards.

Id.

These are generally the five most important factors that the SBA examines when establishing, reviewing, or revising a size standard for an industry.

Id.

at 41172. However, the SBA will also consider and evaluate secondary factors that it believes are relevant to a particular industry (such as technological changes, growth trends, SBA financial assistance, other program factors).

Id.

The SBA also considers the possible impact of size standard revisions on eligibility for Federal small business assistance, current economic conditions, the Administration's policies, and suggestions from industry groups and Federal agencies.

Id.

100

See

13 CFR 121.201. On August 22, 2025, the SBA proposed to increase the size standard for commercial banks to $925 million. 90 FR at 41271.

If the agencies were to cross-reference the SBA size standard in its CRA framework, the small bank asset threshold would automatically adjust when the SBA size threshold changes, rather than yearly, based on CPI-W inflation adjustments. The historical difference between these two approaches is clear when changes based on the CPI-W are compared to adjustments by the SBA. For example, between December 2005 and January 2026, the agencies' small bank asset size threshold went from $250 million to $412 million, an increase of approximately 64.8 percent. During this same period, the SBA's small bank size standard for commercial banks increased from $150 million to $850 million, an increase of approximately 466.7 percent.

101

As discussed above, the SBA small bank size standard reflects not only inflation but other variables such as the number of institutions, total industry assets, and the distribution of those institutions and assets within the SBA's size standards. The SBA small bank size standard also considers and adjusts for secular trends in the banking industry such as the overall consolidation of industry assets.

The agencies invite comments on both the proposed small bank asset size threshold of $1 billion and the alternative proposal to align it with the SBA at $850 million, as well as other options and supporting justifications. The agencies also solicit comment on whether to continue making annual inflation-based adjustments to the small bank asset threshold based on the CPI-W or align changes with SBA adjustments to small bank size standard for commercial banks, as well as other options and supporting justifications. The agencies also intend to occasionally evaluate the proposed asset size thresholds, if adopted, to consider

whether additional adjustments are needed, beyond annual inflation-based adjustments, to better reflect changes in the banking industry and invite comment on the appropriate frequency for such evaluation (

e.g.,

every 3 years; every 5 years). In particular, the agencies invite comment on whether the proposal's predictable adjustments are preferable to the SBA's less regular asset size changes, even if the proposed adjustments are less effective at keeping pace with changes in the banking industry.

The agencies are proposing additional revisions to the small bank definition. Specifically, the agencies propose that their rules would expressly state that the annual adjustment to the small bank asset threshold (as reflected in the proposed “small bank” definition) is published on the agencies' websites. Since 2020, the OCC has announced the annual changes to asset size thresholds through OCC bulletins posted to

OCC.gov

but there is nothing in the OCC's current rule to alert a stakeholder of threshold changes. The FDIC also intends to publish the annual adjustment to the small bank asset threshold on the FDIC's website. This proposed amendment would ensure that banks and the public are informed that these asset thresholds are subject to change and direct them to the agency's website where the current thresholds are posted.

Intermediate bank threshold.

The agencies are proposing to replace the defined term “intermediate small bank” with “intermediate bank,” which they would define as any bank that is not a small bank with assets of $10 billion or less as of December 31 for either of the prior two calendar years.

102

Generally, intermediate banks would be those banks with assets between $1 billion and $10 billion. Based on 2024 and 2025 year-end Call Report data, approximately 636 out of the approximately 3,577 banks with CRA obligations that the agencies supervise fell within this asset size range. This would result in the inclusion of approximately 17.8 percent of all banks in the classification. However, the same intermediate bank asset size thresholds would result in 9.7 percent of total industry assets being classified as intermediate banks. In comparison to values for current intermediate small banks, 1,060 banks are intermediate small banks, representing about 29.6 percent of all banks in the classification and 4.6 percent of total industry assets.

102

In addition to replacing the current “intermediate small bank” definition with a proposed “intermediate bank” definition, the agencies are proposing a number of additional technical and conforming changes to the CRA framework. Among other things, these changes would subject intermediate banks to the same performance tests or standards that are currently applicable to intermediate small banks.

In setting the intermediate bank asset threshold cap at $10 billion, the agencies note that Congress has used this figure for a number of relevant thresholds. For example, in the Dodd-Frank Act, it imposed certain requirements on banks with greater than $10 billion in assets and declined to impose other requirements on banks with $10 billion or less in assets.

103

The agencies are using this same threshold in their CRA rules to differentiate between intermediate and large banks.

103

See, e.g.,

12 U.S.C. 5515(a) and 5516(a); 15 U.S.C. 1693o-2(a)(6). Congress has also referenced $10 billion in assets in subsequent legislation providing regulatory relief to certain financial institutions.

See, e.g.,

Public Law 115-174, 132 Stat. 1296 (2018).

The agencies are aware that, under the current framework, there is an increased regulatory burden and associated cost when a bank moves from one size category to a larger one (

e.g.,

from the intermediate small bank to the large bank category). Although current intermediate small banks and large banks are evaluated on many of the same CRA activities, the three tests applicable to large banks are more comprehensive in scope and, as a result, tend to impose larger compliance costs on banks seeking to maintain a similar level of performance.

104

In addition, large banks are subject to data collection, maintenance, and reporting requirements while small banks, including intermediate small banks, are not. The agencies intend that the proposed changes regarding intermediate banks would relieve regulatory burden for these banks and would better align bank categories with the historical distribution of banks subject to CRA under the 1995 CRA rules.

104

Under the current CRA rules, small banks, including intermediate small banks, may elect to be evaluated under the lending, investment, and service tests that are generally applicable to larger banks if they collect the data required under 12 CFR __.42.

See

current 12 CFR __.21(a)(3). The proposed rules would permit small banks and intermediate banks to elect to be evaluated under the lending, investment, and service tests that would generally be applicable to large banks if they collect the data required under 12 CFR __.42.

The agencies are also considering an alternative intermediate bank asset threshold cap of $3.252 billion as of December 31 of either of the prior two calendar years. This figure comes from the OCC's 2020 CRA rule in which the intermediate bank cap was $2.5 billion,

105

adjusted for inflation since June 2020 using the CPI-W, not seasonally adjusted.

106

If the agencies were to finalize rules using this alternative, they would adjust it further for any additional inflation between the proposal and issuance of any final rule.

105

85 FR at 34794.

106

This calculation is based on CPI-W data available for the month of April 2026.

The agencies invite comments on all aspects of the proposed intermediate bank definition and alternative, as well as other options, such as retaining the current asset size threshold that applies to intermediate small banks. Because the proposed intermediate bank threshold is aligned with other thresholds that do not adjust and is much higher than the current threshold for intermediate small banks, the agencies are not proposing annual adjustments but could consider adjustments as part of a future rulemaking, if warranted. The agencies invite comment on this decision as well.

Large bank threshold.

The agencies are proposing to define “large bank” as a bank with more than $10 billion in assets as of December 31 of both of the prior two calendar years. Using 2024 and 2025 year-end Call Report data, approximately 2.4 percent of banks (86 banks) would have been large banks under this definition and held 85.4 percent of total industry assets. Given that in 1995, “large banks” held approximately 86.2 percent of total industry assets, this proposed definition would align with the historical distribution.

107

It should be noted that the current rules have never actually defined “large bank.” Instead, their existence has been implied for banks that do not meet the “small bank” definition, which includes “intermediate small banks.” Likewise, the applicable low end of the asset threshold for large banks has been implicit in the threshold for intermediate small banks. In this rulemaking, the agencies propose to make express that which has, to date, been implied.

The agencies invite comments on all aspects of the proposed large bank definition, as well as other options such as retaining the current implicit concept and asset threshold for large banks.

Request for Feedback

Question 1:

To better align with agency policies that establish an asset size of less than $30 billion as a threshold for certain supervisory approaches, such as being considered a community bank or being subject to the continuous examination process,

108

should the agencies consider adjusting the intermediate bank asset size threshold to include all banks with an asset size of less than $30 billion that do not qualify as small banks? If the agencies establish $30 billion as the appropriate threshold to delineate between intermediate banks and large banks, should the agencies also adopt a larger threshold for small banks, such as the $10 billion currently proposed as the intermediate bank threshold?

108

See, e.g.,

OCC News Release 2025-89 (Sept. 18, 2025),

https://www.occ.gov/news-issuances/news-releases/2025/nr-occ-2025-89.html

(identifying “community banks” as institutions with up to $30 billion in assets); Then-Acting Chairman Travis Hill, Testimony, Committee on Financial Services, U.S. House of Representatives (Dec. 2, 2025),

https://www.fdic.gov/news/speeches/

2025/oversight-prudential-regulators

(“The FDIC recently raised the threshold for presumptive inclusion in the continuous examination process from $10 billion to $30 billion in assets, while retaining the ability to, on occasion, include a bank below $30 billion in assets if warranted.”); 91 FR 10491 (Mar. 4, 2026) (OCC Community Bank Licensing Amendments final rule).

Question 2:

Should the agencies clarify in the rules that designation as a wholesale or limited purpose bank or election of a strategic plan does not override the bank's asset-based definition (

e.g.,

a bank can be both a large bank and a wholesale bank)?

Question 3:

Should the final rules include a definition for “assets” or to be used in setting asset size thresholds and assessing a bank's position relative to these thresholds? For example, should the agencies define “assets” to mean a bank's total assets as reported in Schedule RC of the Consolidated Reports of Condition and Income (Call Report) as filed under 12 U.S.C. 161, 1464, or 1817, as applicable, or Schedule RAL of the Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks as filed under 12 U.S.C. 1817 or 3102(b) or (c)(5), as applicable?

B. Performance Tests

The current rules, as discussed above, set forth general information about the CRA performance tests and standards. For large banks, the applicable performance tests are a lending test (in § __.22), an investment test (in § __.23), and a service test (in § __.24). Small banks, including intermediate small banks, are subject to performance standards that include a lending test, and, for intermediate small banks, there is also a CD test (all in § __.26). Wholesale and limited purpose banks are subject to a specialized CD test (in § __.25).

The proposal would retain this general framework for the CRA performance tests and standards. Under the proposal, large banks would continue to be subject to the lending test, investment test, and service test and wholesale and limited purpose banks would continue to be subject to a specialized CD test. Generally, the proposal would also retain the current performance standards for small banks but would retitle § __.26 and the applicable tests, as appropriate, to refer, separately, to small banks and intermediate banks.

109

See supra

section IV.A of this

SUPPLEMENTARY INFORMATION

(describing small banks and intermediate banks under the proposal). As needed, the agencies are also proposing conforming changes throughout their CRA rules to amend current references to refer to “intermediate banks” in lieu of “intermediate small banks.”

With respect to the requirements of the performance tests and standards themselves, the agencies are proposing targeted changes that would tailor CRA examinations to: (1) focus on the statutory mandate of assessing a bank's record of meeting community credit needs; (2) more closely align with a bank's business model; and (3) reduce burden. As discussed in detail below, these targeted changes would, among other things:

• Base a bank's retail lending evaluation on its major product lines, regardless of the bank's asset size;

• Prescribe standards to ensure that the agencies conduct meaningful assessments of banks' lending activities;

• Clarify that the evaluation of a bank's CRA performance includes:

○ The range of retail credit services, as opposed to any retail deposit services;

○ CD activities and retail banking services as part of performance context, to the extent that activities and services are not considered under another performance test; and

○ The responsiveness of all retail and CD activities;

• Adjust small bank and intermediate bank performance standards regarding written complaints;

• Allow an intermediate bank to receive a “satisfactory” or “outstanding” rating overall, provided that it receives at least a “satisfactory” rating on the lending test; and

• Modify how the agencies consider CD activities, as discussed in section IV.C of this

SUPPLEMENTARY INFORMATION

Retail lending product lines.

Under the current rules, most banks are evaluated based on their retail lending, with large banks evaluated under the lending test in § __.22, and small banks, including intermediate small banks, under the small bank lending test in § __.26(b).

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As discussed in this section of this

SUPPLEMENTARY INFORMATION

, wholesale and limited purpose banks are not evaluated based on their retail lending activities. Further, the agencies would only evaluate a bank under a strategic plan for its retail lending activities to the extent it includes retail lending goals in its plan.

For purposes of CRA, retail lending refers to home mortgage, small business, small farm, and consumer lending (collectively, retail lending product lines). Large banks are generally evaluated on home mortgage, small business, and small farm lending and, at the bank's option or if consumer lending constitutes a substantial majority of its business, they are also evaluated on their consumer lending in one or more of the following categories: motor vehicle, credit card, other secured, and other unsecured loans.

111

Under the current large bank lending test, a bank's consumer lending is evaluated at the bank's option or if consumer lending constitutes a “substantial majority” of its business.

See

current 12 CFR __.22(a). In the CRA Interagency Questions and Answers, the agencies have interpreted “substantial majority” to be so significant a portion of a bank's lending activity, by number and dollar volume of loans, that the lending test evaluation would not meaningfully reflect its lending performance if consumer loans were excluded.

See

Q&A § __.22(a)(1)-2. Generally, the agencies have considered consumer lending to constitute a substantial majority where consumer lending makes up the majority of a bank's overall business by dollar and number of loans.

See id.

In contrast, small banks, including intermediate small banks, are evaluated only with respect to those retail lending product lines that are considered to be their major product lines. Examiners select a small bank's major product lines for evaluation based on a review of relevant information, including the retail lending product lines where the bank did the most lending by dollar amount and loan count. If consumer loans are selected, examiners may either evaluate all of a small bank's consumer loans together or select a category of consumer lending (

e.g.,

credit card or motor vehicle) if that category is deemed to constitute a major product line.

The agencies propose adopting a major product line approach for all banks and are considering two alternatives, both of which are reflected in the proposed regulatory text. Under the first alternative (Option 1), the agencies would generally use a quantitative, bank level approach to evaluate a bank's retail lending in two of the four retail lending product lines (home mortgage, small business, small farm, and consumer lending). The two product lines evaluated would be considered the bank's major product lines. Under the second alternative (Option 2), the agencies would use an assessment area level approach that is both qualitative and quantitative to determine a bank's major product lines, similar to the current rules' methodology for determining major product lines for small banks, including intermediate small banks. Under either

proposed approach, the agencies would only consider consumer lending to be a major product line if consumer lending constitutes a majority of the bank's retail lending by both dollar amount and loan count, or at the bank's option.

Under Option 1 for proposed new paragraph § __.21(g), an agency would select the two product lines based on a bank's total retail lending activity, determined at the bank level and based on both loan count and dollar volume during the evaluation period.

112

This would be the two largest product lines by dollar volume and loan count, as set forth in proposed Appendix C, provided the bank makes loans in at least two of the product lines. If a bank makes loans in only one product line, the agency would only evaluate the bank in that product line.

112

Under the proposal, “consumer loan” would mean a loan to one or more individuals for household, family, or other personal expenditures as defined in Schedule RC-C of the instructions for preparation of Call Reports, including the categories of credit cards, other revolving credit plans, automobile loans, and other consumer loans. The proposal would revise this definition to include a cross-reference to the Call Report instructions instead of including the text of those instructions.

As noted above, even if consumer lending is one of the bank's two largest product lines by dollar volume and loan count, the agencies would only evaluate consumer lending if the bank's consumer loans constitute more than 50 percent of its retail lending by both dollar volume and loan count (

i.e.,

majority consumer lender) or at the bank's option.

113

If consumer lending is among the two largest product lines but this majority consumer lender standard is not met, the agency would not evaluate the bank's consumer lending and would instead evaluate the largest two product lines of home mortgage, small business, and small farm lending. The proposal would treat major product lines in consumer lending differently than home mortgage, small business, and small farm lending because of differences in the data collection requirements for consumer lending for large banks, as discussed below.

113

This determination would not be based on averaging dollar volume and loan count, as provided in proposed appendix C.

The agencies intend that the quantitative major product line standard described in Option 1 would help ensure that a bank's CRA examination is tailored to its retail lending business model to provide a consistent and objective standard for when the agencies would assess specific product lines. To provide a consistent evaluation of lending across assessment areas, the agencies would assess a bank's major product lines at the bank level. This approach would also resolve issues that have arisen under the current rules where the requirement for the agencies to evaluate home mortgage, small business, and small farm lending has resulted in the assessment of performance in product lines that are not a meaningful component of a bank's business model. This has increased burden for banks that feel the need to manage their lending activity in each of these product lines despite the fact that they do not meet the proposed major product line standard are rarely a significant factor in the agencies' conclusions on a bank's CRA performance. Based on the agencies' supervisory experience and feedback received, this can result in banks expending resources that could otherwise have been deployed towards more impactful activities. As discussed below, proposed section § __.21(g) provides the standards the agencies would apply for determining how to assess a bank's retail lending in its major product lines at the assessment area level.

The agencies considered that reducing the product lines that they evaluate as retail lending under the applicable lending test could raise concerns that banks would no longer be incentivized to engage in those activities going forward, which could have a negative impact on communities. However, the agencies preliminarily believe the potential negative impact is unlikely to be significant because, in many instances, banks provide those loans primarily for business reasons rather than to address CRA obligations. The agencies also note that any small reduction in lending may be outweighed by the benefits of reducing burden for banks, which would allow them to focus CRA resources on other retail lending or CD activities. Further, as discussed in section IV.C of this

SUPPLEMENTARY INFORMATION

, as a result of a change in the definition of CD loan, the proposal would allow banks to receive consideration for loans in non-major product lines that meet the definition of community development. Based on other proposed changes to the definition of affordable housing and economic development, the proposed change to the definition of CD loan would mean that certain home mortgage, small business, and small farm loans that were previously considered as retail loans may now be considered as CD loans. This would modify the form of CRA consideration that these loans receive but would still provide a potential incentive for banks to engage in these activities.

Alternatively, the agencies are considering a standard that is both qualitative and quantitative to determine a bank's major product lines (Option 2). Under Option 2 for proposed new paragraph § __.21(g), the agencies would assess a bank's retail lending in major product line(s) based on certain considerations at the assessment area level. Under this approach, a bank could have more or less than two major product lines. Whether home mortgage, small business, small farm, or consumer lending would be a major product line in an assessment area would be based on: (i) the bank's overall lending volume and business strategy; (ii) the bank's capacity to lend in that assessment area; and (iii) the extent to which lending in the product line meaningfully contributes to the bank's record of meeting the credit needs of that assessment area.

Under Option 2, an agency would select major product lines in each assessment area through consideration of a bank's overall lending volume and business strategy; a bank's capacity to lend in that assessment area; and the extent to which lending in the product line meaningfully contributes to the bank's record of meeting the credit needs of that assessment area. For example, a bank that is primarily a home mortgage lender (as determined by overall lending volume and business strategy) would have home mortgage loans considered as a major product line in all assessment areas. If overall, however, the bank does not have a significant volume of small farm lending, but in the bank's nonmetropolitan assessment area the bank is a significant provider of small farm loans and the small farm loans meaningfully contribute to the bank meeting the assessment area credit needs, the agencies could factor that information into their qualitative determination of the bank's major product lines. In that instance, small farm loans would be considered as a major product line in the nonmetropolitan assessment area along with home mortgage loans. This approach would maintain flexibility in the lending test evaluation by considering different community credit needs and bank lending product emphases in different assessment areas.

As proposed, the major product line standard would apply to large, intermediate, and small banks. The agencies also are considering whether to retain the current standard for small and intermediate banks, which permits more discretion if Option 1 is adopted.

Request for Feedback

Question 4:

With respect to Option 1 for the major product line standard, should the agencies specify a de minimis amount of lending that would not count as making loans in a product line? For example, should the agencies consider whether a bank did not make 30 loans in the product line overall or 30 loans in the product line in any assessment area? Should the agencies use the proposed definition of “incidental basis” to find that a bank does not make loans in a product line if it only makes loans in that product line on an incidental basis?

Question 5:

Should the agencies consider consumer lending—

By type of consumer loans, rather than in the aggregate, when consumer loans constitute a major product line?

When consumer loans account for less than a majority of retail lending but is one of a bank's largest two product lines? In this circumstance, should the agencies permit the optional consideration of consumer lending?

At the bank's request, regardless of whether the consumer loans constitute a major product line?

Question 6:

Should the agencies rely on dollar volume, loan count, or both to determine a bank's major product line(s), and, if so, should the agencies do so consistent with the methodology in proposed appendix C?

Question 7:

If the agencies adopt Option 1, should the agencies determine a bank's major product lines by assessment area, as opposed to at the institution level as proposed?

Lending test borrower distribution.

The current lending test considers the distribution, particularly in a bank's assessment area(s), of the bank's home mortgage, small business, small farm, and consumer loans, if applicable, based on borrower characteristics, including the number and amount of retail loans to low-, moderate-, middle-, and upper-income individuals and small businesses and small farms.

114

This language suggests that the agencies may consider borrower distribution in a geographic area beyond a bank's assessment area(s). In guidance, the agencies have addressed when they will currently consider loans (other than CD loans) made outside a bank's assessment area(s) and have indicated consideration will be given for loans to low- and moderate-income persons and small business and farm loans outside of a bank's assessment area(s), provided the bank has adequately addressed the needs of borrowers within its assessment area(s).

115

114

See

current 12 CFR __.22(b)(3).

See also, e.g.,

current 12 CFR __, appendix A, paragraph (b)(1)(i)(D).

115

Q&A § __.22(b)(2) & (3)—4 (also providing this consideration to small banks, including intermediate small banks).

The proposal would modify the borrower characteristics provision of the lending test and make conforming changes in proposed appendix A to omit language that would consider borrower characteristics particularly in a bank's assessment area(s). The agencies intend that this change would mean that the agencies would only consider borrower characteristics in a bank's assessment area(s) and would supersede Q&A § __.22(b)(2) & (3)—4. The agencies find that the current rules do not adequately explain when and how the agencies may consider borrower characteristics outside of a bank's assessment area(s). Consideration of retail lending outside of a bank's assessment area(s) would exceed the agencies' statutory authority.

Limited purpose bank category.

In addition to the proposed major product line standard, the agencies are considering whether to eliminate the category of limited purpose banks. By definition, a limited purpose bank would be a consumer lender (

i.e.,

a bank that offers only a narrow product line, such as credit card or motor vehicle loans). If a bank is instead not in the business of extending retail loans to retail customers, it would be a wholesale bank. Because the current rules do not require the evaluation of consumer lending in most circumstances, and the lending test focuses on assessing home mortgage, small business, and small farm lending, banks that meet the current definition of limited purpose bank may request that designation and be examined solely on the basis of their CD activities. Under the proposal, however, banks would be evaluated based on their consumer lending if that lending was determined to be a major product line for the bank, as discussed above. Therefore, the agencies could apply the proposed lending test to banks that would be limited purpose banks under the current or proposed rules. The agencies recognize, however, that this may be a significant change for a handful of banks that the agencies currently evaluate only under the CD test for wholesale or limited purpose banks and now would be evaluated under the otherwise applicable tests or standards based on their asset size category, including on their consumer retail lending. Even if the agencies were to retain the limited purpose bank definition and designation, because seeking a limited purpose designation is optional, under the proposal, banks that meet the limited purpose bank definition could elect not to seek such a designation, in which case, the bank would be examined under the applicable test or standard based on their retail lending. The agencies invite comment on the proposed changes to the consideration of consumer lending and how those proposed changes relate to the definition of limited purpose bank.

Meaningful assessment.

The agencies are proposing a new § __.21(h) to discuss their approach to assessing a bank's major product lines in an assessment area of the applicable lending test. Proposed § __.21(h) would provide that, if possible, the agencies will evaluate a bank's lending performance under the lending test based on a number of retail loans that allows the agency to perform a meaningful analysis. This provision would apply to the agencies' consideration of a bank's major product lines, discussed above, for each performance criterion in the applicable lending test.

The agencies generally believe that using 30 or more loans, whether a sample or the entire population of loans, will result in a meaningful analysis of the bank's lending performance. In statistical analysis, at least 30 observations are a general standard for a large sample because the mean of 30 randomly drawn values from a population will have a distribution that is approximately normal.

116

Therefore, the proposal would provide that the agencies will consider 30 loans from a product line to be a sufficient number of loans to perform a meaningful analysis under any applicable performance criterion.

117

116

See

Sheldon M. Ross, Introductory Statistics 398 (4th ed. 2017); Robert V. Hogg

et al.,

Probability and Statistical Inference 303 (9th ed. 2015).

117

For some performance criteria (

e.g.,

borrower and geographic characteristics under the lending test), this applies to the number of loans in a major product line in an assessment area. For other performance criteria (

e.g.,

the percentage of loans located in a bank's assessment area(s)), this would apply to the number of loans in a product line overall.

Given that 30 loans are not always available for analysis under each performance criterion, the agencies are also including a provision in proposed § __.21(h) that would allow them to consider less than 30 loans if they determine that a smaller number of loans would allow for a meaningful assessment. This determination would be based on examiner judgment and the appropriate agency's supervisory experience. For instance, for small banks, the agencies have effectively

used samples of 20 loans in the past with meaningful results. This provision would allow the agencies to consider a smaller number of loans with the understanding that the resulting analysis may have less precision and a larger risk of random variation (

e.g.,

that one loan will cause a large change in the analysis). In addition, in the agencies' experience there is a point at which the number of loans is small enough that it does not support a meaningful analysis. For example, if a bank only made five home mortgage loans in an assessment area and one of those loans was to an LMI individual, concluding on the fact that 20 percent of the bank's home mortgage loans went to LMI individuals would not be meaningful given that 20 percent is a reference to a single loan. For that reason, the agencies are also proposing a provision that would explain how they will conclude on a bank's lending performance when a meaningful assessment of the bank's loan data cannot be performed.

If there is insufficient loan data to perform a meaningful assessment of a bank's lending performance for a particular performance criterion, the agencies are proposing that they will assess the bank's lending performance based on other performance criteria for which a meaningful assessment may be conducted or consideration of applicable performance context factors described in § __.21(b) that inform the bank's lending activity in the assessment area. This provision is intended to allow the agencies to conclude on a bank's lending test performance by: (1) only considering those performance criteria that the agencies can conduct a meaningful assessment of using the available lending data, such as the loan-to-deposit ratio and the in-out ratio; (2) only considering the performance context factors that inform the bank's lending activity in the applicable assessment area; or (3) a combination of both the performance criterion with meaningful assessments and applicable performance context.

The agencies believe that the proposed meaningful analysis provision will improve consistency in the application of the applicable performance tests and standards while still allowing for flexibility to account for bank-specific and assessment area-specific factors that influence a bank's retail lending activity. The agencies believe this provision also supports the proposed major product lines approaches (Option 1 and Option 2), by explaining how the agencies will consider variations in lending across those product lines at the assessment area level. Taken together, the agencies believe that the proposed meaningful analysis provision is consistent with the agencies supervisory experience for the best practices in assessing lending performance while clarifying consideration of retail lending under the current rules and new aspects of the proposal.

Range of retail services.

Under the current rules, the agencies assess a bank's retail banking services as part of the service test in § __.24.

118

Specifically, the service test includes a performance criterion that considers “[t]he range of services provided in low-, moderate-, middle-, and upper-income geographies and the degree to which the services are tailored to meet the needs of those geographies.”

119

Under the current Interagency Questions and Answers, the agencies have explained that this examination includes “services generally offered at [the bank's] branches, including their hours of operation; available loan and deposit products; transaction fees, as well as descriptions, where applicable, of material differences in the availability or cost of services at particular branches.”

120

The agencies also consider additional information provided by the bank, including “data regarding the costs and features of loan and deposit products.”

121

118

See

current 12 CFR __.24(d). Under the current rules, retail banking services tailored to the needs of LMI individuals may be considered as CD services in certain circumstances.

See, e.g.,

Q&A §

__.

26(c)(3)—1 (consideration of retail banking services for intermediate small banks).

119

Current 12 CFR __.24(d)(4).

120

Q&A § __.24(d)(4)—1.

121

Id.

Under the proposal, the agencies would modify the retail banking performance criterion in current § __.24(d)(4) (proposed § __.24(c)(4)) by adding the term “credit” to specify that the agencies would consider only the “[t]he range of

credit

services provided in low-, moderate-, middle-, and upper-income geographies and the degree to which the services are tailored to meet the needs of those geographies.” (emphasis added). In the agencies' view, this limitation is appropriate in light of the agencies' statutory mandate to assess a bank's “record of meeting the credit needs of its entire community.” The proposed rules would supersede the Interagency Questions and Answers to the extent they provide that the agencies' evaluation of a bank's retail banking services includes deposit products.

Responsiveness.

The proposal would add a new provision addressing the qualitative factors considered in assessing a bank's CRA performance. Specifically, the proposal would codify and clarify certain guidance in the Interagency Questions and Answers in proposed § __.14, Responsiveness. Under the current rules, responsiveness is referenced in several of the performance criteria used to assess a bank's CD activities; however, the current regulatory framework is qualitative and responsiveness and has been incorporated into the consideration of the retail components of the performance tests and standards.

122

For example, in assessing retail lending activities the agencies have considered a bank's use of flexible lending products to meet community credit needs.

122

See, e.g.,

current 12 CFR __.25 and appendix A, paragraph (b)(1); Q&As §§ __.22(a)—1 and __.22(b)(5)—1.

The agencies considered how qualitative considerations have factored into their assessment of bank's CRA performance historically and are clarifying in the proposal that responsiveness is a factor considered with respect to both retail and CD activities. As such, the performance tests and standards were revised to include a new or amended, as applicable, performance criterion regarding the responsiveness of the bank's retail loans and community development loans in meeting community credit needs. Section IV.C of this

SUPPLEMENTARY INFORMATION

provides further discussion of proposed § __.14 and related provisions, particularly as those provisions relate to CD activities.

Performance context.

As part of their current assessment of CRA performance, the agencies consider certain performance context factors in applying the applicable performance tests and standards and also when considering whether to approve a proposed strategic plan.

123

The proposal would largely retain the current rules' performance context provision in § __.21(b). The agencies are proposing, however, to add a new performance context factor to proposed § __.21(b). The new performance context factor would provide that the agencies would consider a bank's CD activities and retail banking services, to the extent not considered under another performance test. The proposed performance context factor would codify how the agencies have applied certain provisions of the current rules.

123

See

current 12 CFR __.21(b).

In practice, the agencies have considered “other lending-related activities” described in current

§ __.26(b) as performance context under the small bank lending test. The agencies are proposing to include the new performance context factor in proposed § __.21(b) to better reflect how these activities are considered in CRA examinations. Other lending-related activities inform the agencies' assessment of the retail and CD lending activities considered directly under the performance criteria in the lending test by providing context that explains a bank's lending capacity. The agencies also propose conforming revisions to remove the current references to “other lending-related activities” included in § __.26(b).

Small and intermediate bank performance standards.

The agencies are proposing to remove the consideration of a small or intermediate bank's record of taking action in response to written complaints about its performance in helping to meet the credit needs in its assessment areas (current § __.26(b)(5)). It is the agencies' view that this factor would be duplicative of considerations contemplated with respect to bank performance under new provisions in the proposal. In particular, proposed clarification regarding responsiveness (proposed § __.14), a factor that would apply across all bank performance tests, renders this aspect of small banks' performance standards redundant.

Intermediate bank ratings.

To better focus CRA examinations on lending performance for intermediate banks and to improve flexibility, the agencies are also proposing to modify a limitation in the current rules for when an intermediate bank (currently, an intermediate small bank) may receive an overall rating of “satisfactory.” Specifically, the agencies are proposing an amendment to paragraph (d)(3) of appendix A regarding ratings. In its current form, paragraph (d)(3) of appendix A requires an intermediate small bank to receive a rating of at least “satisfactory” on both the lending test and the CD test to receive an overall rating of “satisfactory.” The agencies are proposing a change so that intermediate banks must receive a rating of at least “satisfactory” on only the lending test to receive an overall rating of “satisfactory.”

In comparison to the current approach in appendix A, the proposed amendment is intended to allow stronger performance on the lending test to compensate for weaker performance on the CD test, thereby emphasizing lending performance consistent with the CRA's statutory focus on credit needs. Since intermediate banks do not know the exact performance rating they will receive before it is assigned, the agencies do not believe that it will create a strong incentive for banks to intentionally scale back their performance on either the lending test or the CD test. Instead, the agencies believe that the more likely outcome is that banks will have improved incentives to perform better on both tests because there is no longer an artificial constraint that prevents banks from receiving an overall rating of “satisfactory” without a “satisfactory” rating on both tests.

Other changes to performance tests.

The agencies are proposing several other clarifying changes regarding performances tests and appendix A—Ratings. Specifically, the agencies are proposing conforming edits throughout appendix A to account for other proposed changes to the regulations (

e.g.,

to address changes related to “responsiveness” and including considerations like innovativeness and flexibility within the consideration of responsiveness). The agencies are also proposing to remove factors that require specific consideration of serving credit needs of highly disadvantaged areas and low-income people. Highly disadvantaged areas is not a defined term and the agencies believe this factor is already considered in factors related to borrower and geographic characteristics.

C. CD Activities

Under the current rules, the agencies consider CD activities (

i.e.,

CD loans, qualifying investments, and CD services) across several tests: the lending, investment, and service tests for large banks; the CD test for wholesale or limited purpose banks; the CD test for intermediate small banks; and for banks evaluated using strategic plans to the extent a bank's plan includes goals for CD activities. Consideration of CD activities has been a component of the agencies' CRA rules since they were first promulgated in 1978.

124

Under the proposal, the agencies would revise the definitions of CD loan, qualifying investment, and CD service to improve consistency and clarity in how CD activities are treated across tests.

124

See

43 FR at 47148 (evaluating the bank's participation, including investments, in local CD and redevelopment projects or programs in § __.7(h) of the 1978 CRA rule).

The agencies would add a new definition of “community development grant.” As explained in greater detail below, grants and donations (including in-kind donations) are currently included within the definition of “qualifying investment.” Under the new definition, however, the agencies would restrict grants and donations that may be considered for CRA credit to those that a bank can demonstrate will be directly used by the recipient to deploy the funds to meet community credit needs. For large banks, the proposed rules would further require that the grant or donation be directed to a recipient whose indirect costs for administering the grant or donation would not exceed 15 percent. In the agencies' experience, inefficient use of funds is most common in grants and donations, particularly because middlemen are more frequently relied upon to indirectly deploy funds. This results in increased indirect costs and less funds directly serving LMI individuals, LMI census tracts, small businesses, and small farms.

As described below, the agencies would also add a new section to their CRA rules to identify when a CD activity would be considered responsive, a qualitative factor under applicable tests, and would make other revisions to standardize the discussion of qualitative factors in each test.

CD loans.

Under the current rules, a CD loan is a loan that has as its primary purpose community development and, except in the case of a wholesale or limited purpose bank, has not been reported or collected by the bank for its assessment as a retail loan evaluated under CRA and benefits the bank's assessments areas or the broader statewide or regional area. The proposal would generally retain this definition with certain modifications. First, the definition would clarify that a CD loan also includes a legally-binding commitment to lend. In the CRA context, the agencies regard a legally binding commitment to lend as the functional equivalent of a loan because the bank is bound to provide the funding, which limits the bank's resources available for other activities. Second, the revised definition clarifies that a CD loan must not have been considered by the appropriate Federal financial supervisory agency as a part of the bank's assessment as a home mortgage, small business, small farm, or consumer loan unless the loan is for a multifamily dwelling or for a low-cost education loan. This revision would have two effects: (1) it would allow a low-cost education loan to be considered as both a retail loan and a CD loan, akin to multifamily affordable housing under current guidance

125

and

(2) it would mean that some lending that is a retail loan but not included in a major product line could be considered as a CD loan, to the extent it otherwise met the CD definition. This revision would extend to all banks a modified form of the treatment provided to intermediate small banks under the Interagency Questions and Answers.

126

For example, if small farm lending is not considered one of a bank's major product lines, certain small farm loans may qualify as a CD loan under the economic development category of community development.

127

Finally, the definition in the proposal provides that, for all banks, a CD loan would need to benefit the bank's assessment area(s), except as provided in proposed § __.13(e). This revision would expand geographic consideration of CD activities in some instances, as explained in the CD activities outside assessment area(s) discussion in section IV.E of this

SUPPLEMENTARY INFORMATION

125

See

current 12 CFR __.12(h)(2)(i); Q&A § __.42(b)(2)-2.

126

See

Q&A § __.12(h)-3.

127

The agencies recognize that if loans currently considered as retail loans were able to be considered CD loans then banks would need to provide additional documentation during a CRA examination to demonstrate that the loans qualify as CD loans. Additionally, large banks would need to collect and maintain data for these CD loans as explained in proposed § __.42(a)(2) and would need to report data for these loans as explained in proposed § __.42(b)(2).

In addition, the agencies are proposing a new § __.21(f) to clarify that, similar to CD investments, the agencies will consider prior period CD loans. This provision would create parity with the current treatment of CD investments. The agencies believe that this provision appropriately encourages longer-term lending. By considering the amount of prior period CD loans, as well as CD investments, in addition to the new originations and purchases, the proposal would provide an incentive for banks to extend the length and type of financing needed for a project. The agencies invite comment on whether a prior period CD loan or CD investment should receive consideration based on whether it is on a bank's balance sheet at the (1) end of the year, (2) end of the evaluation period, or (3) an alternative. The agencies also invite comment on whether consideration for CD loans should be limited to one time per evaluation period even if the CD loan is renewed multiple times during an evaluation period so that renewal decisions and loan terms are not influenced by their consideration under this rule.

Request for Feedback

Question 8:

Does annual or evaluation period-based consideration better serve the goal of encouraging banks to meet the credit needs of their communities better than the other?

CD investments.

Under the current rule, a qualified investment is a lawful investment, deposit, membership share, or grant that has community developments as its primary purpose.

128

Under the proposal, the agencies would change the term “qualified investment” to “community development investment” for clarity and to create alignment with CD loans and CD services.

128

See

current 12 CFR __.12(t).

The agencies would also redefine the term “community development investment” to mean a security or a deposit or membership share in a financial institution, including a legally-binding commitment to invest, that has as its primary purpose CD; is permissible under applicable laws and rules; and, except as specified in § __.13(e), benefits the bank's assessment area(s). The agencies intend the term “security” to provide greater clarity regarding what the agencies mean by an “investment” and would broadly include equity investments as well as debt instruments like bonds.

129

The term would not include loans, which are considered for CRA purposes under applicable lending tests. The proposed definition would also clarify that, to qualify as an investment, a deposit or membership share would need to be in a financial institution, which is consistent with the agencies' intended meaning of these terms under the current rule.

130

For example, membership shares in a low-income credit union may qualify as a CD investment. This is distinct from membership fees in a community group, which would not qualify. The proposal would remove grants from the scope of the term CD investment and would add a new “community development grant” definition, discussed below.

129

See

15 U.S.C. 77b(a)(1) and 78c(a)(10) (defining “security” for the Securities Act of 1933 and the Securities Exchange Act of 1934).

130

See

60 FR at 22161.

The agencies would also replace the qualifier that a CD investment be “lawful” with the requirement that an investment be permissible under applicable laws and rules. This requirement is necessary because the CRA does not provide a separate source of investment authority for banks. As described regarding CD loans, the cross reference to § __.13(e) provides for expanded geographic consideration of CD activities in some instances.

CD grants.

Under the current rule, qualified investments include both structured equity and debt investments, such as state and municipal affordable housing bonds and certain mortgage-backed securities, and unstructured activities, such as grants and donations to non-profit entities. In their supervisory experience, the agencies have found that the latter type of activities may be susceptible to rent extraction, in which entities divert funds away from local communities, including LMI individuals, small businesses, and small farms. This may be particularly true when banks provide indirect grants (

i.e.,

grants to organizations that do not directly provide services to local communities but provide financing to other non-profit organizations) because such grants may increase the total amount of funds that go to aggregate overhead costs and thus are not available to contribute directly to community development projects or initiatives.

Accordingly, the proposal would narrow the circumstances in which banks may receive CRA consideration for grants or donations to ensure that a grant or donation would directly benefit the bank's assessment area(s). Specifically, the agencies are proposing to add a new “community development grant” definition to proposed § __.12 and define the term to mean a grant or donation that: (1) will be directly used by the recipient for a program, project, or initiative with a primary purpose of community development; (2) except as specified in § __.13(e), benefits the bank's assessment area(s); and (3) for a large bank, is provided to a recipient whose indirect costs for administering the grant or donation do not exceed 15 percent, calculated consistent with the Uniform Guidance for Federal Awards, 2 CFR part 200, or a comparable standard. The agencies believe this third requirement will help ensure the vast majority of community development grant dollars are used to benefit the large bank's assessment area, rather than the organization administering the community development program, project, or initiative. The agencies also believe this requirement would better prevent rent extraction and ensure the vast majority of grant funds are provided directly to the large bank's local communities.

The agencies are proposing a 15 percent limit on indirect costs based on guidance from the Office of Management and Budget (OMB) and propose to calculate those costs using the OMB's Uniform Guidance for

Federal Awards, which is an established standard that is applied to recipients of Federal grants and awards. Under the proposal, banks could provide grants and donations to entities that directly engage in affordable housing, civic assistance, economic development, or revitalization and stabilization, as discussed in section IV.D of this

SUPPLEMENTARY INFORMATION

. For example, a bank could receive CRA consideration for a grant or donation to a non-profit organization that develops and builds owner-occupied housing for LMI individuals or provides disaster relief services in a designated disaster area. A bank could also receive CRA consideration for a grant or donation to a local non-profit organization that provides technical assistance to small businesses or that provides financial literacy programming to the community. A grant or donation to a non-profit organization made by a large bank to a recipient whose indirect costs to administer the grant or donation exceeds 15 percent of the grant or donation dollar amount, however, would not qualify for CRA consideration.

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OMB guidance guarantees a de minimis rate for indirect costs of 15 percent to “allow for a more reasonable and realistic recovery of indirect costs, particularly for new or inexperienced organizations that may not have the capacity to undergo a formal rate negotiation but still deserve to be fully compensated for their overhead costs.”

See

89 FR 30046, 30093 (Apr. 22, 2024);

see generally

2 CFR part 200, subpart E.

Under the proposal, a bank could demonstrate that a grant or donation would be directly used for a program, project, or initiative with a primary purpose of CD consistent with current guidance regarding primary purpose, discussed below. As discussed in section IV.G of this

SUPPLEMENTARY INFORMATION

, a large bank would have additional requirements to demonstrate that the definition is satisfied, specifically the recipient's written commitment to use the funds to provide specific qualifying activities in the bank's assessment area(s); the recipient's written attestation that their indirect costs for administering the grant or donation will not exceed 15 percent, calculated consistent with the Uniform Guidance for Federal Awards, 2 CFR part 200, or a comparable standard; and documentation provided by the recipient supporting the attestation, including IRS Form 990 (Return for Tax Exempt Organizations) with annual operating and program budgets. In the agencies' view, these guardrails are important to prevent banks from receiving CRA consideration for grants and donations that do not sufficiently benefit the bank's local community.

The agencies invite comment on the new proposed definition for community development grants. In particular, the agencies request comment on whether the proposed use of the indirect cost rate from the Uniform Guidance for Federal Awards is an appropriate standard for considering a CD grant recipient's indirect costs associated with grant administration.

Request for Feedback

Question 9:

Are there alternative standards the agencies should consider relying on in the context of limiting indirect costs for CD grants? Do the proposed guardrails do enough to ensure the majority of grant and donation funds go directly towards benefiting the bank's assessment area(s)?

Question 10:

As an alternative, should the agencies eliminate all grants and donations from CRA consideration?

CD services.

Under the current rule, a CD service means a service that has CD as its primary purpose, is related to the provision of financial services; and has not been considered in the evaluation of the bank's retail banking services under § __.24(d). Generally, the agencies would retain this definition, with several modifications for clarity. Specifically, consistent with current agency practices, the proposal would provide that a CD service is a volunteer service performed by a bank employee representing the bank or savings association. With this clarification that a CD service is a “volunteer service,” the requirement that the CD service has not been considered in the evaluation of the bank's retail banking services is not necessary because there would not be any overlap. This is not intended as a substantive change. The proposed definition would also add “or the employee's area of expertise at the bank” to the requirement that a CD service relate to the provision of financial services, which would incorporate guidance found in the Interagency Questions and Answers.

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This addition is intended to capture instances where bank employees utilize their expertise, whether related to the provision of financial services or not, in providing a CD service. In addition, as with CD loans and CD investments, the proposed definition would provide that the CD service must, except as specified in § __.13(e), benefit the bank's assessment area(s).

132

See

Q&A § __.12(i)—3.

Definition of CD activity.

The proposal would add a definition of “community development activity,” that would include “a community development grant, community development investment, community development loan, or community development service.” The agencies intend to use this definition throughout their CRA rules as a streamlined reference for the collective discussion of CD grants, investments, loans, and services.

Primary purpose.

Generally, all CD activities are required to have a primary purpose of community development, in addition to other requirements in the applicable definition of the CD activity.

133

Under the proposal, the agencies expect to continue to interpret the term “primary purpose” consistent with current guidance. Generally, CD loans, CD investments, CD grants or CD services have community development as their primary purpose when they are designed for the express purpose of affordable housing, civic assistance, economic development, or revitalization and stabilization. To determine whether an activity is designed for an express CD purpose, the agencies apply one of two approaches. First, if a majority of the dollars or beneficiaries of the activity are identifiable to one or more of the CD purposes in the “community development” definition, then the activity will be considered to possess the requisite primary purpose. Alternatively, where the measurable portion of any benefit bestowed or dollars applied to the CD purpose is less than a majority of the entire activity's benefits or dollar value (or cannot be specifically measured), then the activity may still be considered to possess the requisite primary purpose, and the institution may receive CRA consideration for the entire activity, if: (1) the express, bona fide intent of the activity, as stated, for example, in a prospectus, loan proposal, or community action plan, is primarily one or more CD purposes in the definition of “community development;” (2) the activity is specifically structured (given any relevant market or legal constraints or performance context factors) to achieve the expressed CD purpose; and

(3) the activity accomplishes, or is reasonably certain to accomplish, the CD purpose involved.

134

The agencies invite comment on whether the agencies should codify a definition of “primary purpose.”

133

For example, as discussed above, in addition to being directly used by the recipient for a program, project, or initiative that has as its primary purpose of community development, a grant for a large bank must be provided to a recipient whose indirect costs for administering the grant or donation do not exceed 15 percent to qualify as a CD grant. Also as discussed above, in addition to having as its primary purpose community development, a loan must not have been considered as a retail loan to qualify as a CD loan. Finally, as discussed above, in addition to having as its primary purpose community development, a service must be related to the provision of financial services or the employee's area of expertise at the bank to qualify as a CD service.

134

See

Q&A § __.12(h)-8.

Request for Feedback

Question 11:

Should the agencies provide guidance regarding how primary purpose would be determined for each CD purpose in the definition of “community development”?

Qualitative factors.

Under the current rule, the applicable performance tests and standards include certain qualitative factors that enhance the extent to which a particular CD activity factors into a bank's assigned ratings. Consideration of the qualitative aspects of a bank's CRA performance recognizes that CD activities sometimes require special expertise or effort on the part of the institution or provide a benefit to the community that would not otherwise be made available. These qualitative factors necessarily rely on examiner judgment and are informed by a bank's performance context. The qualitative factors in the current rules are complexity, innovativeness, flexibility, and responsiveness. The current rules do not define these terms. Moreover, the agencies apply these qualitative factors inconsistently (

i.e.,

different performance tests and the performance criterion within those tests use different qualitative factors without clear differentiation as to why one qualitative factor applies and not another and examiners apply varying levels of consideration to the qualitative aspects of a bank's performance).

Over time, banks, community groups, and others have provided feedback on the challenges presented by the lack of clarity in the meaning of these terms, when they apply, how they differ, and the potential impact on a bank's ratings. To provide clarity, the agencies have issued several Interagency Questions & Answers to rationalize the application of these qualitative factors

135

and clarify their meaning. In general, a bank's performance under the qualitative factors may augment the consideration given to a bank's performance under the criteria that consider quantitative factors, such as the number and dollar amount of CD activities, resulting in a higher level of performance and ratings. Complex, innovative, and flexible activities are not required to obtain a specific rating but can enhance a bank's CRA performance because these types of activities are considered more responsive to community credit needs. Despite efforts to explain the agencies' consideration of qualitative factors in the context of CRA examinations, particularly in the 2016 revisions to the Interagency Questions & Answers, questions related to these factors persist.

135

See, e.g.,

Q&As §§ __.21(a)—2, __.21(a)—3, and __.21(a)-4.

The agencies are proposing to clarify these concepts by: (1) applying uniform terminology across the performance tests and standards by explaining the concept of responsiveness in a new provision of the rule; and (2) clarifying the meaning of complexity. Specifically, the proposal would add a provision addressing responsiveness consistent with the guidance in the Interagency Questions & Answers.

136

The concept of “responsiveness” would encompass all of the qualitative factors examiners consider as a part of an assessment of a banks' CRA performance, including impact, innovativeness, flexibility, and complexity. With respect to “complexity,” the agencies are proposing to add a definition to their rules to both explain the qualitative factor and enhance the rule's focus on credit needs. The agencies are not proposing to define “innovativeness” and “flexibility” because these terms have not caused the same level of confusion as complexity and the agencies believe that the Interagency Questions & Answers provide sufficient guidance.

137

Under the proposal, the agencies' consideration of qualitative factors in assessing a bank's CRA performance would continue to function as a potential enhancement to the bank's CD performance with respect to quantitative considerations.

136

See

Q&A § __.21(a)—3.

137

See, e.g.,

Q&As §§ __.21(a)—4 and __.22(b)(5)—1.

The agencies are proposing to largely codify the guidance contained in the Interagency Questions & Answers.

138

The proposed responsiveness provision would explain that when applying the applicable performance tests or standards the agencies assess the responsiveness of a bank's CD activities in meeting CD needs. The proposed section would also provide the factors that the agencies consider in assessing the responsiveness of a CD activity. The factors would include: (1) the innovativeness,

139

flexibility,

140

complexity, or impact

141

of the CD activity, as applicable; and (2) the quality of a bank's CD activities as demonstrated, for example, by the success of the CD activity in meeting an identified credit or CD need or opportunity. In applying this provision, the agencies would consider the bank's CD activities individually and in the aggregate, as appropriate.

138

See

Q&A § __.21(a)—3.

139

The innovativeness of a bank's CD activities would continue to be considered consistent with the guidance in Q&A § __.21(a)-4.

140

In evaluating the flexibility of a bank's CD activities, the agencies consider the terms and conditions of a CD activity, as applicable, and the extent to which any flexible terms or conditions augment the success and effectiveness of the bank's CD activity in meeting credit and CD needs.

See, e.g.,

Q&A § __.22(b)(5)—1.

141

In considering the impact of a CD activity, the agencies consider not only the size of the activity but also the benefits received by a community.

See, e.g.,

Q&A § __.24(e)—2.

As noted above, the agencies are also proposing to define the term “complexity” to provide clarity and enhance the rule's focus on credit needs. Under the proposal, the term “complexity” would have two components, both of which would have a focus on lending. The first component, applicable to CD investments, grants, and services, would provide that complexity means the extent to which an activity is a necessary or otherwise beneficial component of a multicomponent financing transaction involving a loan. This component of the definition excludes CD loans, which are addressed under the second component of the definition. The second component, applicable to CD loans and CD investments that are the functional equivalent of a loan would consider the extent to which the loan or investment otherwise requires specialized expertise in order to consummate the transaction. The proposal would also provide as an example of what this component of the definition would mean “a community development activity that is not routinely provided by private investors, such as an activity that relies on public subsidies.” The agencies included this example in the proposed definition to provide clarity and incorporate an existing component of the current performance tests that the revisions to the qualitative factors would otherwise have eliminated.

The proposed “complexity” definition would capture the vast majority of the types of CD activities the agencies have considered to be complex under the current rules while also enhancing the rule's focus on lending. Under the proposal, if an examiner were to determine that a bank's CD activities demonstrate complexity, those activities would be considered responsive and thus receive greater weight in the CRA performance evaluation. Nonetheless, the agencies acknowledge that the introduction of the proposed “complexity” definition may result in

certain CD activities that would be considered complex under the current rules no longer meeting the complexity standard under the proposed definition. Some activities previously considered complex may, depending on the facts and circumstances, still be considered more responsive to community credit needs if they are innovative, flexible, or impactful. By rationalizing the use of qualitative factors across the tests through the proposed responsiveness provision, the agencies would be better able to determine if an activity is responsive even if the activity is not complex.

The agencies invite comment on the proposed approach to the consideration of qualitative factors in assessing a bank's CD activities and the impact on a bank's CRA performance.

Request for Feedback

Question 12:

Does the proposed definition of “complexity” enhance the rule's focus on meeting community credit needs by providing greater consideration to CD investments, grants, and services that are linked to CD lending activities or are otherwise the functional equivalent of loans?

Question 13:

Should the first component of the “complexity” definition apply to loans and activities that are the functional equivalent of loans?

Question 14:

Are there additional opportunities for the agencies to further enhance the rule's focus on lending, such as by requiring that CD investments and CD services be complex? If so, should complex CD activities be a requirement for all banks or only banks that exceed a certain asset size, such as banks that would be large banks under the proposal?

Question 15:

Should complex CD activities be considered more responsive than innovative, flexible, or impactful CD activities?

Question 16:

Should the agencies provide a definition of innovativeness or flexibility?

If so, should the definition of innovativeness codify the guidance in the Interagency Questions & Answers,

142

which applies a varying standard based on the size and sophistication of the bank, or should the agencies consider other definitions or concepts of innovativeness?

142

Q&A § __.21(a)—4.

If the agencies codified the guidance from the Interagency Questions & Answers, should the innovativeness standard be applied uniformly regardless of a bank's size?

If the agencies define flexibility, should the agencies define it based on the terms and conditions of the activity, the way it enhances access to credit, or based on another concept?

Question 17:

Should the rules limit the concept of responsiveness to consideration in the evaluation of a bank's CD activities?

D. Community Development Definition

As discussed above, under the current rules, the agencies' assessment of a bank's record of meeting community credit needs includes consideration of CD activities (

i.e.,

loans, investments (which include grants), and services that have CD as their primary purpose). The current definition of “community development” in § __.12 is comprised of four broad principles-based categories: (1) affordable housing, (2) community services, (3) economic development, and (4) revitalization and stabilization. To provide guidance, the agencies have issued several Q&As that clarify the CD definition and provide certain examples of qualifying CD activities.

143

The guidance, however, has not provided sufficient clarity for banks to understand whether certain activities qualify for consideration under the principles-based CD definition. For banks and other interested parties, the lack of clarity with respect to the meaning of community development has been one of the most prominent and consistent concerns with the current rules.

143

See, e.g.,

Q&As §§ __.12(g)—1, __.12(g)—2, __.12(g)(2)—1.

To address the issues with the current CD definition, the agencies are proposing to maintain the four categories of “community development” but further define each category to make the CD definition clearer and more objective. The proposed definition would codify several aspects of the agencies' guidance currently provided in the Interagency Questions and Answers. The proposed definition would also provide certain targeted expansions to the scope of the current criteria based on feedback the agencies have received about other areas of community need that are consistent with the agencies' view of community development, explained below. The proposed revisions to the four categories of community development are discussed below.

Affordable housing.

Under the current rules, the CD definition includes as a category “affordable housing (including multifamily rental housing) for LMI individuals.”

144

The agencies have stated in the Interagency Questions and Answers that LMI individuals must benefit or be likely to benefit from the housing in order for an activity to qualify and meet the existing primary purpose standard.

145

Currently, the agencies consider affordable housing to include activities that support both single-family (1-4 family units) and multifamily (more than 4-family units) affordable housing. Single-family home mortgage loans are generally considered as part of the lending test; however, other activities that are not home mortgage loans and that support single-family affordable housing may be considered as community development.

146

Multifamily loans are considered separately and may qualify for both retail lending and community development consideration if they meet the definition of affordable housing.

147

144

Current 12 CFR __.12(g)(1).

145

See

Q&A § __.12(g)(1)—1.

146

Single-family home mortgage loans may be included as CD under the intermediate small bank methodology.

See

Q&A § __.12(h)—3.

147

See

Q&A § __.42(b)(2)—2.

The proposal would clarify that multifamily housing qualifies under two different categories of affordable housing: subsidized or unsubsidized housing. Housing that is financed or supported by a government affordable housing program or a government set-aside is considered subsidized affordable housing. Subsidized affordable housing is generally viewed as qualifying under affordable housing criteria if the government program or set-aside

148

has a stated purpose of providing affordable housing to LMI individuals, thereby satisfying the Interagency Questions and Answers guidance that LMI individuals benefit, or are likely to benefit, from the housing.

149

The proposed rules would clarify that subsidized housing may have a mixed-income component, in which case the pro rata dollar amount of the total activity would be based on the percentage of units set aside for affordable housing to LMI individuals.

148

Under the current rules and Interagency Questions and Answers, affordable housing that is in connection with a government set-aside is eligible for partial consideration based on the portion of the activity that helps to provide affordable housing to low- or moderate-income individuals.

149

See

Q&A § __.12(g)(1)—1.

Multifamily housing with affordable rents, but that is not financed or supported by a government affordable housing program or a government set-aside, is generally considered unsubsidized affordable housing, and is also referred to as “naturally occurring affordable housing.” Although banks may receive consideration for activities that support naturally occurring

affordable housing under the current rules, the rules do not expressly reference these activities, and the Interagency Questions and Answers are not sufficiently clear about whether they qualify as community development or the standards for demonstrating that a property is naturally occurring affordable housing. The proposed rules would clarify that naturally occurring affordable housing can qualify as affordable housing if the rents are affordable to LMI individuals, and if it is clear that LMI individuals benefit, or are likely to benefit, from this housing. As discussed below, the proposal would provide a standard for determining the benefit or likely benefit to LMI individuals. Further, the proposal would also clarify that naturally occurring affordable housing in high-cost areas can qualify as affordable housing if the rents are affordable to low-, moderate-, or middle-income individuals, and if it is clear that low-, moderate-, and middle-income individuals benefit, or are likely to benefit, from this housing. This component of the proposed affordable housing definition would codify guidance in the Interagency Questions and Answers providing that the agencies may consider housing to middle-income individuals in high-cost areas.

150

Although not defined in the Interagency Questions and Answers, the agencies have considered as a high-cost area any county in which the percentage of households who have monthly housing costs greater than 30 percent of their monthly income is greater than 40 percent.

151

This housing cost burden standard is derived from certain U.S. Bureau of the Census data regarding cost-burdened households.

152

The agency seeks comment on whether the definition of affordable housing should include affordable housing for middle-income individuals residing in high-cost areas. High-cost areas generally have an inadequate supply of housing that is affordable for middle-income individuals and families and expanding the definition would provide additional flexibility for banks to identify opportunities to address community needs. However, the agencies recognize that broadening the definition could reduce the emphasis on activities that serve LMI individuals more directly and areas where the need is more acute.

150

See

Q&A § __.12(g)—3.

151

Because there is no defined standard for identifying high-cost areas, the agencies have used different methodologies in applying the guidance in the Interagency Questions and Answers. However, since issuing the 2020 CRA rule, the OCC has generally considered as a high-cost area any county in which the percentage of households who have monthly housing costs greater than 30 percent of their monthly income is greater than 40 percent. This standard is based on agency practice, analysis conducted during the 2020 rulemaking process, and consideration of the population thresholds for when housing cost burden is likely to impact middle-income individuals. The 40 percent threshold is set above the national LMI cutoff and, therefore, would capture areas where cost burdened extends beyond the LMI population, indicating that middle-income households are also experiencing housing cost pressure.

See

U.S. Census Bureau, “2016-2020 American Community Survey 5-Year Estimates” (2022),

https://data.census.gov

(American Community Survey 2016-2020 5-year estimates indicate that approximately 39 percent of families nationally are low- or moderate-income).

152

See, e.g.,

U.S. Census Bureau, “Nearly Half of Renter Households Are Cost-Burdened, Proportions Differ by Race” (Sept. 12, 2024),

https://www.census.gov/newsroom/press-releases/2024/renter-households-cost-burdened-race.html.

Under the proposal, consideration for naturally occurring affordable housing would continue to include affordable housing activities conducted in collaboration with a non-profit organization, even though non-profits are not expressly referenced. The agencies seek comment on whether it is sufficiently clear that affordable housing activities in partnership with non-profit organizations are included in the meaning of affordable housing or whether these partnership activities need to be expressly addressed in the rule.

The agencies are proposing the changes to clarify the treatment of unsubsidized affordable housing. Clarifying the standards for unsubsidized affordable housing in the CD definition would help encourage banks to engage in efforts to preserve and add to the nation's affordable housing stock. The agencies invite comment on the proposal to clarify that naturally occurring affordable housing would qualify as community development and, in particular, on the affordability standard included in the proposed rules, discussed below.

Under the proposal, affordable housing would include activities that finance or support owner-occupied housing purchased, refinanced, or improved by LMI individuals or families, except for home mortgage loans provided directly to LMI individuals or families. This aspect of the affordable housing criteria would encompass, for example, an investment provided to a non-profit organization that constructs or rehabilitates affordable housing for purchase by LMI individuals. Additionally, consistent with the current rules, this criterion would capture mortgage-backed securities (MBS) while excluding retail home mortgage loans.

Under the current rules, there is no specified standard for determining when a property or unit is considered affordable to LMI individuals. Although alternatives exist,

153

the agencies propose adopting the approach used by banks and examiners to calculate an affordable rent based on what is affordable to a moderate-income renter, assuming that 30 percent of the renter's income is spent on rent. In high-cost areas, the affordable rent calculation would be based on what is affordable to a middle-income renter, assuming that 30 percent of the renter's income is spent on rent. The agencies believe this approach would provide a clear and consistent standard for affordability. The agencies seek feedback on whether an alternative standard for affordable rent should be considered.

153

See, e.g.,

U.S. Department of Housing and Urban Development “Fair Market Rent (FMR),”

https://www.hudexchange.info/homelessness-assistance/coc-esg-virtual-binders/coc-leasing-rental-assistance-requirements/fmr/.

Request for Feedback

Question 18:

Should the definition of affordable housing be expanded to include rental housing for middle-income individuals in high-cost areas as proposed? For example, should banks be incentivized to support affordable workforce housing that would allow public servants, such as teachers, firefighters, and police officers, to live in the communities they serve?

154

See

Congressional Research Service, “Workforce or Middle-Income Housing: Analysis and Policy Considerations” (Mar. 25, 2026),

https://www.congress.gov/crs-product/R48886.

Question 19:

Should the agencies clarify what constitutes a high-cost area, for example by providing a definition? If so, should the definition be based on the standard for housing cost-burdened households referenced above? Is the 40 percent threshold appropriate or should it be set higher to ensure that the definition meaningfully captures counties where middle-income families or households are housing cost burdened, for instance should it be set at 50 percent? Are there other definitions of “high-cost areas” that the agencies should consider?

Question 20:

Should the agencies incorporate a consideration of the cost of providing housing, such as the High Opportunity Area defined and used by the Federal Housing Finance Agency,

155

either as a component of responsiveness factors or as a separate category for affordable housing, to encourage the creation or preservation of affordable housing in areas where housing is difficult to develop?

155

See

12 CFR 1282.1 (defining a “high opportunity area”).

Question 21:

Should naturally occurring affordable housing

partnerships with non-profit organizations be exempt from the requirement that median rents not exceed 30 percent of 80 percent of the area median income?

Question 22:

Should naturally occurring affordable housing partnerships with non-profit organizations be exempt from the requirement that median rents not exceed 30 percent of 120 percent of the area median income in high-cost areas?

Question 23:

Should the rules modify the definition of affordable housing such that home mortgage loans provided directly to LMI individuals or families would qualify as CD loans if not considered as a major product line for the bank?

Civic assistance.

The current CD definition includes “community services targeted to LMI individuals.” The current rules do not further define community services, but the Interagency Questions and Answers include examples of activities that qualify for consideration as community services, such as programs for LMI youth, homeless centers, soup kitchens, healthcare facilities, domestic violence shelters, and alcohol and drug recovery programs serving LMI individuals.

156

The proposed rules recategorize these same activities as “civic assistance”

157

and provide additional detail and clarity about the covered activities.

156

See

Q&As §§ __.12(g)—1 and __.12(t)—4.

157

The agencies are proposing to change the current term “community services” to “civic assistance” to minimize the potential for confusion with CD services, a term the agencies are retaining under the proposal.

First, the proposed definition would provide a non-exhaustive list of examples of activities that would be considered civic assistance. Current guidance states that community development includes support or financing for educational programs targeted to LMI persons,

158

and the proposal would further clarify that support or financing for education includes providing low-cost education loans. Next, the proposed rules incorporate the standard that civic assistance serves, or is reasonably expected to serve, LMI individuals or families. For example, services provided by a free community clinic would be reasonably expected to serve LMI individuals or families. Finally, workforce development and job training programs, which currently qualify as a component of economic development, would be reclassified as civic assistance. The current rules do not address workforce development and job training programs, but the Interagency Questions and Answers provide that these activities should be considered under the economic development definition as well as more broadly as under the CD definition.

159

However, under the current guidance, economic development activities are tied to a financing activity for a small business.

160

Although the agencies believe that the economic development definition could include workforce development and job training activities, such activities are better aligned with the focus of the proposed civic assistance definition, which does not restrict the size of the business involved. Therefore, the agencies are keeping the current treatment of these activities as CD but changing the category of CD in which they are considered.

158

See

Q&A § __.12(g)—1.

159

See

Q&As §§ __.12(g)(3)—1 and __.12(g)-1.

160

See id.

Economic development.

Under current guidance, activities qualify as economic development if they meet both a “size test” and a “purpose test.”

161

An institution's loan, investment, or service meets the size test if it finances, either directly, or through an intermediary, businesses or farms that either meet the size eligibility standards of the U.S. Small Business Administration's Development Company (SBDC) or Small Business Investment Company (SBIC) programs, or have gross annual revenues of $1 million or less.

162

In connection with the size test, the term “financing” is considered broadly and includes technical assistance that readies a business that meets the size eligibility standards to obtain financing.

163

To meet the purpose test, current guidance states that a bank's loan, investment, or service must promote economic development by creating, retaining, and/or improving permanent jobs for LMI persons, in LMI geographies, in areas targeted for redevelopment, or by financing certain intermediaries.

164

As discussed above, activities that support Federal, State, local, or Tribal economic development initiatives that create or improve access for LMI persons to jobs or job training or workforce development are also considered to meet the purpose test.

161

See

Q&A § __.12(g)(3)—1.

162

Id.

163

See id.

164

See id.

The proposed rules outline a standard for what constitutes economic development by organizing the activities into three categories. The first category would cover financing for a business or farm that meets the size requirements of the SBDC or SBIC programs or has gross annual revenues of $1 million or less, and expands, improves, or preserves the business's or farm's productive capacity, physical presence, or employment bases, excluding financing primarily used for ongoing operating liquidity. Additionally, the proposed rules provide a non-exhaustive list of examples of qualifying economic development activities. The agencies propose removing the requirement for the activity to create, improve, or retain jobs for LMI individuals or in an LMI area. However, an activity would not qualify as economic development if it is reasonably likely to result in a reduction in jobs at a business or farm. For example, the financing for the purpose of purchasing technology that would replace employee functions without simultaneously resulting in hiring new employees would not meet the proposed economic development definition. The agencies believe banks will be able to more easily implement this standard compared to the difficulties implementing the current requirements, which lack objective criteria. As discussed below, although the agencies recognize that in the interest of providing a clear and objective standard, the proposed definition would expand the activities that would qualify as economic development. The agencies believe that the proposed definition is consistent with the language in the current rules (which do not expressly reference the purpose test in the Interagency Questions and Answers) and would appropriately encourage support for businesses and farms in banks' communities that drive economic growth for those communities. The agencies seek comment on this proposal.

The second category of economic development covers technical assistance and support services for a business or farm that meets the size requirements of the SBDC or SBIC programs or has gross annual revenues of $1 million or less. These activities are not expressly referenced in the current rule, but they are considered CD activities in the Interagency Questions and Answers.

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The agencies determined that these activities also provide support for businesses and farms that drive economic growth for banks' communities. Specifically, in the agencies' supervisory experience, some small businesses and small farms may not be prepared to obtain traditional bank financing and may need technical assistance and other services to obtain

credit in the future. Supporting these activities fills a gap in needed services for small businesses and small farms and plays a critical role in helping small businesses and small farms grow and thrive. This category would be a clarifying revision to the current rules that would codify existing guidance.

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See

Q&A § __.12(g)(3)—1.

The third category of economic development would include Federal, State, local, or Tribal government programs, projects, or initiatives that serve small businesses or small farms, as defined by those programs. The current CD definition does not include stand-alone criteria for economic development activities aligned with Federal, State, local, or Tribal programs, but these activities are referenced in the Interagency Questions and Answers.

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Consistent with the guidance in the Interagency Questions and Answers, the proposed definition would highlight SBDCs, SBICs, New Markets Tax Credit-eligible Qualified Community Development Entities, U.S. Department of Agriculture Rural Business Investment Companies, and Community Development Financial Institutions that

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