The 2023 Community Reinvestment Act (CRA) final rule aimed to modernize the way financial institutions serve low- and moderate-income (LMI) communities. With goals to expand digital-era assessment areas, clarify qualifying activities and standardize performance evaluations, the rule represented a significant shift in community reinvestment compliance.
But regulators made a surprise pivot in late March and announced their intent to both rescind the final rule and reinstate the previous CRA framework. This reversal leaves banks facing renewed uncertainty and a return to a fragmented regulatory landscape.
Why the CRA rule was rescinded
Despite its modernizing intentions, the 2023 rule was ultimately undone by practical and political challenges including:
Implementation burden: The operational and technological demands of complying with the new rule—particularly around expanded data collection and digital assessment areas—raised significant cost and complexity concerns among banks of all sizes.
Lack of consensus: The rule failed to gain unified support across the industry. Smaller community banks and large national institutions alike voiced concerns about unclear requirements and uneven regulatory alignment.
Shifting regulatory priorities: With changes in leadership and agency direction, priorities have shifted to broader issues such as financial stability, fair lending enforcement and M&A oversight—further diluting momentum behind the CRA overhaul.
What it means for financial institutions
Financial institutions must now revert to the legacy CRA frameworks, which differ slightly depending on whether they are regulated by the OCC, Federal Reserve or FDIC. This regulatory rollback introduces a period of uncertainty that many banks are now experiencing:
Ongoing exams: It’s not yet clear how CRA evaluations in progress will be handled, particularly for institutions that began preparing under the rescinded rule.
Regulatory coordination: With each agency reverting to its previous standards, banks may find themselves navigating inconsistent expectations depending on their chartering authority.
Future rulemaking: There is no official timeline or consensus for a new approach, and it remains to be seen whether future efforts will consolidate or further fragment CRA oversight.
Moreover, this pivot has occurred at a time when banks are under pressure to show tangible community impact. M&A activity is accelerating, and regulators and community groups alike are scrutinizing performance. For banks contemplating growth or acquisitions, CRA ratings sometimes act as a critical gatekeeper: A “needs to improve” rating can delay or derail mergers.
Strategic actions for CRA leaders
While the pending rescission may ease some near-term compliance burdens, it also introduces the potential for strategic risks. CRA officers and executives should consider the following actions to remain proactive:
Review your CRA program: Ensure your policies and documentation align with pre-2023 rules. Don’t assume prior work is irrelevant; legacy standards still demand clarity, rigor and evidence of impact.
Evaluate ongoing and upcoming CRA activities: Reassess lending, investments and services targeting LMI communities. Confirm these activities meet legacy standards and clearly document their impact.
Engage proactively with regulators: If your bank is in the middle of a CRA exam or preparing for one, especially in the context of an acquisition or restructuring, open and early dialogue with examiners is critical.
Monitor for regulatory updates: Agencies may still issue interim guidance or propose future updates. Keeping a pulse on evolving standards will position your institution to adapt quickly.
Benchmark current practices: Use this time to benchmark your current practices against each regulator’s expectations. Identify any misalignments and correct course before they become liabilities. We have experience conducting self-assessments in this area for banks that lack the time or resources to conduct such an evaluation.
Why prior CRA investments still matter
Although the 2023 CRA rule is no longer in force, the investments many banks made in preparation for its rollout remain valuable.
Take the case of a regional bank that proactively implemented Kadince to replace Excel spreadsheets for CRA data tracking.
Even though the rule was ultimately rescinded, that move streamlined their workflow, improved data integrity and positioned them for more agile compliance in the future.
Similarly, process redesign efforts—such as mapping old versus new CRA requirements or piloting performance scenarios with historical data—are not wasted. They provide a foundation for continuous improvement and demonstrate a strong commitment to community reinvestment strategies.
Bottom line
The recission announcement isn’t a free pass, but more of a regulatory detour. Financial institutions that continue investing in smart, sustainable CRA strategies will be better positioned to adapt to future changes, withstand scrutiny and seize growth opportunities. So rather than pausing your compliance efforts, it may be a better idea to review and refine your strategy.
Get in touch if you’d like to discuss the status of your compliance initiatives or other operational challenges you may be facing.
About the Author
Kevin Rubin
Principal, Banking & Financial Services
Kevin is a solutions-oriented project manager who brings a strong balance between business savvy and technical capabilities. With 25-plus years of experience in financial services, he works with clients to drive organizational growth, deliver cost savings and implements process improvement strategies.
