Community Reinvestment Act Compliance

COMMUNITY REINVESTMENT ACT COMPLIANCE

Background

There is more to life and to doing business than just making money and accumulating riches . Helping others - especially those who will not have access to help unless somebody intervenes and does something about their plight - is a noble thing that can be accomplished while also generating income in the process

Leaders of the country must have seen fit to make the banking industry players - most of whom would be much too concerned with numbers representing their profits , returns and dividends - realize these truths . One

potent tool for this mission is the Community Reinvestment Act or the CRA

The CRA is a United States federal law that requires banks and thrifts to offer credit throughout their entire market area without discrimination . Accordingly , it prohibits them from practicing the so-called redlining , which means targeting only wealthier neighborhoods with their services . The CRA is designed to provide credit , including home ownership opportunities , to the low- and moderate-income prospective borrowers as well as commercial loans to small businesses . These represent the underserved population in the banking scene . They ought to be provided credit services without compromising the safety and financial soundness of the banks

The CRA was enacted by the U .S . Congress in 1977 and was implemented by Regulations 12 CFR parts 25 , 228 , 345 and 563e as a result of national grassroots pressure for affordable housing and amidst considerable opposition from the mainstream banking community (FFIEC Website ) It was reported that only one banker , Ron Grzywinski from ShoreBank in Chicago , testified in favor of the act . All other banks expressed disapproval of the idea of making credit available even to borrowers that they would normally classify as risky based on the usual banking parameters (Wikipedia

Indeed , the CRA effects changes in the implemented credit rules of banks , especially those whose policies are not in accordance with CRA 's thrust . No bank is exempted and CRA is enforced by the financial regulators - this makes things complicated and difficult for banks who would attempt to get away with non-compliance

In support of the CRA , President Clinton 's administration strengthened the implementing regulations for the CRA by focusing the attention of the financial regulators on the institutions ' performance in helping to meet the credit needs in their respective communities (Wikipedia

CRA REGULATIONS FOR BANKING INSTITUTIONS

The CRA mandates that each banking institution be evaluated periodically to determine if it conforms to the stipulated requirements . Records of the specific performance of the banks are taken into account when the federal government considers the institutions ' individual applications for deposit facilities , including those related to mergers and acquisition . The government parties directly responsible for supervising depository institutions are the Board of Governors of the Federal Reserve System (FRB , the Federal Deposit Insurance Corporation (FDIC , the Office of the Comptroller of the Currency (OCC , and the Office of Thrift Supervision (OTS (FFIEC Website

The periodic evaluation to be conducted on institutions would determine whether or not they are consistently adhering to the regulations...