By William J. Showalter, CRCM; senior consultant, Young & Associates

There was a lot of talk a few years ago about the regulatory agencies updating their rules for implementing the Community Reinvestment Act (CRA). The Office of the Comptroller of the Currency (OCC) even implemented revisions to its CRA rule. But the other agencies ended up not following suit and the OCC rescinded its amendments, going back to the previous regulation.

The last time the agencies did a major overhaul of their CRA rules was during the Bill Clinton Administration in the 1990s. So, it probably is due – banking and the communities it serves have changed significantly in the past 20 or so years – but that effort will take some time. For now, we have to make sure we are serving our communities to the best of our abilities and complying with the current CRA rules.

The 1990s era CRA rules are more performance focused and objective than the previous rules, but they are not objective. The rules and examination procedures do spell out what examiners will review. However, with many subjective terms and flexible standards, how examiners will review CRA performance is not stipulated. Examiner judgement is the guiding principle here. This leaves banks not knowing whether their performance is satisfactory until after an examination is completed.

In the latest developments, the OCC and Federal Deposit Insurance Corporation (FDIC) have just (mid-August 2026) issued proposed changes to their CRA rules to streamline them somewhat, but keeping largely to the 1995 model. The Federal Reserve can probably be expected to follow suit.

Banks cannot eliminate this risk of examiner criticism entirely, but steps can be taken to reduce it significantly. The key is good strategic planning.

Why manage CRA?

Many banks feel they are doing a pretty good job of meeting the credit (and other banking) needs of their local communities. So, why should they invest a lot of time and effort into managing their CRA climate and performance?

The answer is that good CRA performance is just good business. As with any other business function, smooth operation depends on good management. Directing the CRA function also allows banks to get through the CRA examination process more easily, and can prevent unexpected and unnecessary delays in future merger, branching, and other corporate applications.

Setting the stage

A bank can set, to some extent, the framework within which its performance will be judged. A formal way to do this is to choose the formal CRA strategic plan option, where the bank writes its own lending, investment, and service goals with input from its community. The bank’s supervisory agency reviews and approves the plan, and then examines the bank’s performance against the goals in the plan.

There is a less formal way to accomplish the same ends. A bank can formulate an internal CRA strategic plan, setting out objective standards against which its performance can be gauged. An important element of such a plan is to establish realistic goals based on local community factors (economic conditions, credit needs and demand, etc.) and the bank’s situation (size, financial condition, stability, etc.). One crucial component of such a scheme is internal monitoring and reporting of results on an ongoing basis.

An informal plan should be shared with examiners, assuming plan goals are being met, to give them the objective standards the bank wants used to measure its CRA performance. This allows the bank to control its destiny to a great extent by building the gauge for rating its performance, one that takes into account its own and its community’s unique situation.

Other advantages of an informal plan over a formal one are that it does not have to be negotiated with members of the public or formally approved by regulators, and it does not have to be made public.

Drafting a plan

A CRA plan should be drawn up to mesh with the bank’s existing planning structure and culture. It should build on the strengths the bank has identified in its performance and aim to shore up any weak areas.

The team assembled to draft the plan should be diverse and represent all areas of the bank that affect and touch on CRA performance. This brings the strengths and viewpoints of a variety of bank players into the process, and helps get wide “buy in” to the plan, an important element for its success.

The plan also must be tailored to fit the CRA environment within which the bank operates – the size and CRA type of the bank (small, intermediate small, large retail, limited purpose, wholesale), past CRA performance of the bank, characteristics of the bank (culture, business lines, etc.), and local community conditions (employment and income levels, economic needs, etc.). This process will guide the bank in deciding how to address its CRA responsibilities.

Elements of the CRA planning and management process include:

• Setting clear, attainable goals for a “satisfactory” CRA rating, and more ambitious, stretch goals for an “outstanding”
• Managing the information about the bank’s CRA performance (data revolving around the three key tests in the CRA examination scheme for large retail banks and thrifts – lending, investments, and services), including analysis of that data to get a picture of the bank’s ongoing performance
• Establishing and nurturing relationships with active community partners, with a positive approach to work together for the betterment of the local community

Conclusion

Banks can control their CRA destiny. However, to do so, the entire process must be managed proactively – plans drawn up, goals set, information managed, and community partnerships nurtured. Dynamic, ongoing management of the entire CRA process, with appropriate accountability standards for all players, can lead to very positive results, not only for the banks involved but for their communities, as well.

Young & Associates: Your partner in change

Y&A is here to support financial institutions as they navigate the ever-evolving landscape of the financial industry. With our team’s extensive experience in strategic planning, we stand ready to assist you in successfully embracing, harnessing, and facilitating change.  Get in touch with us to learn how we can help.