Our banking client sought help to proactively address the 2023 proposed rule changes to the Community Reinvestment Act (CRA), which aims to ensure financial institutions continue to serve the credit needs of all communities, particularly low- and moderate-income (LMI) areas. Our client wanted to get ahead of these changes by reassessing and updating how they managed their CRA compliance program.
Setting the stage: The new CRA rules
The updated CRA regulations—introduced jointly by the Office of the Comptroller of the Currency (OCC), the FDIC and Federal Reserve—outlined more stringent and expansive expectations for banks. This 1,500-page rule modernized assessment methods to reflect both physical branch locations and the broader reach of digital banking.
For our client this presented a dual challenge: adapting longstanding processes to meet new compliance requirements and implementing tools to effectively support this transition.
Adapting to a regulatory shift
The updated rules required the bank to overhaul how they managed their CRA compliance program. The bank’s internal teams lacked the bandwidth to manage the scope of these regulatory changes, prompting them to turn to us for support.
Our work with the client had three primary objectives:
Implementation of a new software system
The new CRA requirements necessitate a robust data management solution, requiring more automation than Excel-based tracking can provide. With our support, the bank selected and implemented a new software to streamline recordkeeping and enable the bank to manage the more complex data requirements under the updated CRA rules.
Validation testing with historical data
To prepare the bank for compliance, our team completed validation testing to evaluate how the bank would perform under the new rules. Using historical data, we simulated compliance scenarios, offering insights into areas of strength and opportunities for improvement.
Redesigning processes and procedures
Our CRA subject matter experts (SMEs) analyzed the updated rule, comparing it with the previous version to identify necessary changes. Business analysts on our team then documented these requirements, laying the groundwork for the bank’s updated compliance processes and training.
Supplying specialized compliance expertise
We initially supplied project managers to lead the engagement, but the initiative expanded to require the addition of CRA subject matter experts and business analysts. Each played a vital role in guiding the bank through the intricate compliance process, from the interpretation of regulations to hands-on project execution.
Shift in implementation timeline
Midway through the project, the American Bankers Association (ABA), along with several state banking organizations, filed a lawsuit against the regulators, arguing that the new rules were overly complex and burdensome. This led to an injunction pausing the implementation of the rules. Despite this legal uncertainty, our client decided to move forward with the CRA compliance project, taking advantage of the additional time to solidify processes and systems.
While the implementation timeline for the new CRA rules has shifted, potentially extending into 2027 due to the legal delays, the bank’s proactive stance ensures they remain ahead of the curve in achieving compliance with the act’s evolving requirements. Our ongoing work with them underscores the importance of staying ahead of regulatory changes and highlights how we can supply the expertise and resources needed to help financial institutions tackle complicated compliance challenges that are burdensome—and sometimes impossible—to execute internally.
Read more about how we helped this client overcome challenges and prepare for compliance with the updated Community Reinvestment Act.
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