To: All Member Banks and Others Concerned in the Third Federal Reserve District

Attention: Chief Executive Officer and Chief Compliance Officer



The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have jointly approved final Community Reinvestment Act (CRA) rules that are intended to reduce regulatory burden on community banks while making CRA evaluations more effective in encouraging banks to meet community development needs. The final rules are essentially as the agencies proposed them in March.

The final rules raise the small bank asset size threshold to assets of less than $1 billion without regard to holding company affiliation. Accordingly, the new rules reduce data collection and reporting burden for “intermediate small banks” (banks with assets between $250 million and less than $1 billion ) and, at the same time, encourage meaningful community development lending, investment and services by these banks.

Under the new rules:

(i) Intermediate small banks will no longer need to collect and report CRA loan data. Nevertheless, examiners will continue to evaluate bank lending activity in the CRA examinations of intermediate small banks and disclose results in the public evaluation; and

(ii) Intermediate small banks will be evaluated under two separately rated tests: the small bank lending test; and a flexible new community development test that includes an evaluation of community development loans, investments, and services in light of community needs and the capacity of the bank. Satisfactory ratings are required on both tests to obtain an overall satisfactory CRA rating.

In addition, for banks of any size:

(i) The new rules expand the definition of community development to include activities that revitalize or stabilize designated disaster areas and distressed or underserved rural areas. By including designated distressed or underserved rural areas, the agencies intend to recognize and encourage community development in more rural areas. (Designated distressed or underserved rural areas are to be listed by the agencies on the Federal Financial Institutions Examination Council website, .)

(ii) The regulations also clarify when discrimination or other illegal credit practices by a bank or its affiliate will adversely affect an evaluation of the bank’s CRA performance.

The agencies will have interim CRA examination procedures for intermediate small banks in place by August 1, 2005 .


The Federal Register notice, published August 2, 2005.

Date: The final rules are effective September 1, 2005.

For Further Information: Anjanette M. Kichline, Oversight Senior Review Examiner, (202) 785-6054; Catherine M.J. Gates, Oversight Team Leader, (202) 452-3946; Kathleen C. Ryan, Counsel, (202) 452-3667; or Dan S. Sokolov, Senior Attorney, (202) 452-2412, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC 20551; for users of Telecommunications Device for the Deaf (“TDD”) only, contact (202) 263-4869.