The U.S. Impact Investing Alliance yesterday filed comments with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) pushing back on their proposal to revise regulations governing the Community Reinvestment Act (CRA). The proposal would sharply reduce private investment in low- and moderate-income, rural and tribal communities. Raising the bank asset-size thresholds would reduce or eliminate CRA obligations for hundreds of banks across the United States and the combined effect could lead to billions of dollars annually in lost investment and widespread closure of bank branches. The heaviest effects would land in rural and heartland states, where private capital is already hardest to attract, but they would also imperil the broader community investment ecosystem.
CRA-motivated bank capital is often the anchor that makes a community investment work, and it is a critical source of support for community-based intermediaries like community development financial institutions (CDFIs). Impact investors finance affordable housing construction and small business lending, often taking subordinate or first-loss positions to a bank’s investment.
“The CRA is one of the most effective tools this country has for bringing private capital into communities that markets overlook, and impact investors have built their strategies around it,” said Fran Seegull, President of the U.S. Impact Investing Alliance. “When banks step back, projects lose their anchor, and the investors who co-invest alongside them have to rethink their commitments or walk away. This proposal would mean fewer affordable housing developments, fewer small business loans, and less capital for the places that need it most. We urge the OCC and FDIC to preserve the CRA’s core purpose and to study what these changes would actually do to communities before finalizing them.”
In its comments, the Alliance urged the agencies to pause the rulemaking process, giving more time for stakeholders to respond and ensuring that CRA’s statutory purpose is preserved.