Leveraging the Community Reinvestment Act (CRA) in Response to Covid-19: Highlights from the Federal Reserve’s Seventh District

Federal bank regulators have issued statements and guidance throughout the Covid-19 pandemic encouraging financial institutions to “meet the financial needs of their customers and members in areas affected by Covid-19.” In the past, regulators have indicated how financial institutions can prudently respond to disasters and national emergencies, and how examiners will view a financial institution’s good-faith efforts to address its communities’ and customers’ needs. The agencies more recently issued an interagency Frequently Asked Questions (FAQ) “to clarify how agencies will consider activities responsive to community needs during the Covid-19 emergency,” with regards to financial institutions’ responsibilities under the Community Reinvestment Act (CRA).  

The FAQ explains how a bank’s retail and community development activities will be considered for CRA examinations, including: 

• Guidance on agency treatment of Covid-19 designated disaster areas and the effective time period for community development-related activities in such areas. 
• CRA eligibility and reporting standards for the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) and Federal Reserve Main Street Lending Program. 

The FAQ also provides examples of qualified activities, including loans, investments, and community development services. “Activities that benefit low- or moderate-income individuals or geographies, distressed or underserved nonmetropolitan middle-income geographies, or small businesses and small farms will be considered particularly responsive.” 

Separate from the Q&A, in a recent scan of publically available information, the Federal Reserve Bank of Chicago found examples of how some banks in the Seventh Federal Reserve District have worked to “revitalize or stabilize Covid-19 designated disaster areas…particularly for low- or moderate-income individuals, low- or moderate-income geographies, or distressed or underserved nonmetropolitan middle-income geographies.” 

• One bank polled customers on how it could help address current needs in its communities caused by Covid-19. Responses informed bank donations and service hours to nonprofit organizations and local businesses to help mitigate financial duress. 
• Another bank began offering a new six-month line of credit at favorable terms to help customers through the emergency. At the end of the six-month period, customers will be able to pay down the line or have it converted to an amortizing 36-month loan. 
• Another institution brought all negative balance deposit accounts back to zero, thereby enabling their customers to receive the full balance of their federal stimulus payment. 

These examples illustrate how financial institutions can offset some of the challenges of Covid-19, while meeting their CRA mandate. Community members interested in partnering with financial institutions to provide relief services to essential workers, or expand health care services to underserved populations, or enhance the food supply chain (or other activities) may want to consider how those activities align with CRA objectives in order to garner support. 

If Federal Reserve supervised financial institutions have questions about the guidance set forth in the FAQs, they are encouraged to contact Federal Reserve Bank of Chicago supervision manager Michael Austin. Questions from nonbanks can be directed to community and economic development senior advisor Jason Keller.