By NALCAB, Public Policy

Roughly 814 banks would no longer be evaluated on community development lending under a rule the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) proposed on July 31. Another 417 would lose separate reviews of their community development investments and branch services. The proposed changes to the Community Reinvestment Act (CRA) would also narrow the kinds of grants that earn banks CRA credit, restricting the flexible operating support that keeps staff and programs running at CDFIs and other community lenders. Comments are due October 13, 2026. 

The proposal, which regulators say is needed to “better ensure that community development grants reach the communities they are intended to benefit” and “reduce burden for banks, particularly for community banks” would change the asset size thresholds that determine how banks are scrutinized by regulators for their community lending. It would also drop the requirement that economic development activities create or preserve jobs for low- and moderate-income (LMI) people and communities. The Federal Reserve did not join the proposal, so banks it supervises would remain under the current rule unless the Board acts separately. 

The stakes of this change are high; the CRA is one of the key mechanisms encouraging banks to direct credit and investment toward LMI communities. Since 1996, CRA-covered banks have made over $2.5 trillion small business and community development loans in LMI tracts. Any weakening of incentives could mean a massive reduction in capital flowing to historically disinvested communities through affordable housing, small business, and economic development funding.  

The Community Reinvestment Act is a vital tool for community investment 

Congress passed the Community Reinvestment Act (CRA) in 1977 as a tool to fight redlining, a discriminatory lending practice by banks that limited credit available to LMI communities. The law sets the standard that banks must provide credit in all areas where they operate and is a powerful tool for ensuring that LMI and underserved communities benefit from the banks in their area.  

Under the CRA, bank regulators including the OCC, FDIC, and Federal Reserve, assess how banks are serving LMI communities. Regulators consider a bank’s CRA performance when reviewing certain bank applications (for example, applications for mergers), creating an incentive for banks to comply with CRA lending rules and to meaningfully invest in LMI communities.  

Why the CRA matters for NALCAB members 

Banks are major partners and investors in CDFIs and other community-based lenders, in part because of the CRA. CRA incentives can encourage banks to provide capital to organizations, including NALCAB members, that serve communities and borrowers who face barriers to accessing financing. Community lenders then use that capital to make loans directly in their community. For NALCAB members, the CRA is a powerful tool for maintaining those bank partnerships and driving capital into Latino small businesses, affordable housing loans, and other economic development activities.  

What’s at risk with the new rule?

Less capital for CDFIs and community lenders: Under the proposal, CRA-eligible grants from banks would need to be tied to a specific community development project or program. For larger banks, no more than 15% of a grant could be used for administrative or indirect costs for the grant to receive CRA consideration. The proposal also considers removing CRA credit for grants and donations completely. This risks discouraging banks from providing operating support to CDFIs and other nonprofits, which use that support for important work like maintaining staffing and administrative capacity to serve LMI communities. 

Less accountability for banks: The proposed rule changes asset size thresholds for what is considered a small or large bank. Banks with less than $1 billion in assets would be classified as small banks under the proposal, up from the current threshold of $412 million. The new threshold for a large bank will increase significantly from $1.6 billion to $10 billion, meaning that fewer banks will be held to large bank standards. Importantly, small banks are not subject to a community development evaluation, and this change in asset threshold would result in 813 banks no longer being evaluated on these criteria. Another 416 banks between $1 billion and $10 billion would no longer be considered large banks and would instead receive a combined community development assessment rather than separate lending, investment, and service tests. In summation, this change alone could result in significantly less bank capital flowing into LMI and Latino neighborhoods.  

Small and rural communities could be hit hardest: Changes to assessment areas could leave some communities with less access to capital, especially states with fewer large banks and more small banks. Raising the small-bank threshold to $1 billion would eliminate community development evaluations for hundreds of banks. According to NCRC’s analysis of the proposal, this would reduce the share of banks with community development responsibilities from roughly half to less than one-third and could put more than half a billion dollars in annual community development loans and investments at risk. For smaller and rural communities that rely heavily on local and regional banks, fewer CRA requirements could mean fewer incentives for banks to invest locally.  

Take action to protect the CRA 

It is important that regulators hear from as many community voices as possible during the current comment period. If your organization benefits from bank partnerships or CRA-backed investments, speak out and share your stories now.  

Not sure where to begin?  

• Reach out to your members of Congress and let them know how this rule change will impact your organization.  

• Reach out to NALCAB’s policy team if you would like more information or support in your advocacy at [email protected].  

NALCAB encourages our members to detail how the proposed changes would impact their organizations and urge federal regulators to maintain a strong CRA to support LMI and Latino communities. Submit your comments opposing this rule change by October 13, 2026.