Concluding Observations on CRA Reform

The CRA should be strengthened and modernized to address current challenges and leverage new opportunities in the financial services sector. The CRA's assessment areas should be expanded to reflect the digital and nationwide reach of modern financial services. This includes incorporating the activities of non-bank financial institutions and fintech companies to ensure a level playing field and prevent a race to the bottom in sales practices and products. Improving access to financial services is essential, and regulators should ensure that LMI households have access to safe and affordable banking services. Evaluations should consider how banks provide financial products and services that meet the needs of LMI customers, rewarding innovative and consumer-friendly practices.

Supporting entrepreneurship and business growth in LMI communities is another critical area for CRA reform. This involves better data collection on race, ethnicity, and gender of business owners and incorporating small business lending into CRA evaluations. Additionally, community development initiatives, including loans, grants, and equity investments, are vital for building strong, vibrant communities. CRA evaluations should focus on the substance and impact of community development activities, rather than just the quantity or dollar size.

Finally, CRA evaluations should consider the local context, including economic and market factors, to ensure that community needs drive CRA activities. A one-size-fits-all metric would not adequately capture the diverse needs of different communities and could lead to unintended consequences. CRA reform should aim to broaden geographical and institutional coverage, reward quality and innovation, and adopt a holistic approach to financial inclusion. This includes maintaining strong consumer protection measures and leveraging a broad set of regulatory tools to advance financial inclusion and economic opportunity for all communities.