CRA/Community Affairs
CRA Frequently Asked Questions
Q. What is a "CRA
rating"?
On a biennial basis, New York State bank examiners conduct
an evaluation, pursuant to the Community Reinvestment Act (CRA), of an institution’s
performance, pursuant to CRA, in helping to meet the credit needs of communities,
including those of low or moderate income within its assessment area. An
institution’s assessment area reflects those areas in which it operates branches,
accepts deposits and/or does a significant amount of lending. Based on the evaluation, a
rating of 1-4 is assigned.
A "1" indicates an Outstanding record of helping
to meet community credit needs.
A "2" indicates a Satisfactory record of helping to meet community credit needs.
A "3" indicates that the bank Needs to Improve its record of helping to meet
community credit needs.
A "4" indicates Substantial Non-compliance in helping to meet the credit needs
of its community.
These ratings, along with the
Performance Evaluation (see next question) provide the bank and the public an
understanding of how well the bank is performing under CRA.
Q: I’d like to know more
about what the banks in my area are doing. How do I find this out?
The best way to research the CRA activities of a bank is
to contact the institution and request a copy of the Performance Evaluation. It is
mandatory that banks make their Performance Evaluations available to the public at each
branch office and the institution’s headquarters. Performance Evaluations can also be
requested from the bank’s supervisory agency. The Performance Evaluation is designed
to show the bank’s CRA rating. Most banks have at least one staff member who serves
the role of CRA Officer (sometimes referred to as a Compliance Officer). Call the bank for
more information.
Q: What is the relationship
between the Banking Department and the federal bank supervisory agencies?
The New York State Banking Department regulates only New
York State-chartered financial institutions. Some banks choose to operate under a state
charter, and some elect to operate under a federal charter.
Federal regulators include the Office of the Comptroller
of the Currency (OCC), which regulates all nationally chartered financial institutions.
For example, banks that have N.A. (National Association) in their title are nationally
chartered financial institutions. The Federal Reserve Bank (FRB) regulates those
state-chartered institutions that are members of the Federal Reserve System. The Federal
Deposit Insurance Corporation (FDIC) regulates non-FRB member state-chartered banks and
state-chartered thrift institutions, and the Office of Thrift Supervision (OTS) regulates
federally chartered Thrift institutions, as well as all Savings and Loan Associations.
All state-chartered banks are regulated simultaneously by
the Banking Department and one of the above agencies, and the Department maintains a close
working relationship with each of them. When possible, the Department examines
institutions simultaneously, to maximize efficiency and minimize the financial and
resource burdens on the institution. This minimization of regulatory burdens has been an
ongoing objective of the Pataki administration.
Q. What is community development?
Among other things, in a CRA Performance Evaluation,
examiners evaluate the institution’s "community development" activity. All
institutions, with the exception of small banks, are required to engage in some community
development activity; although not required to do so, if a small bank elects to engage in community development activities, it may receive favorable consideration for
them, as well.
Community development is defined as:
- Affordable housing (including multifamily rental housing)
for low- or moderate-income individuals;
- Community services targeted to low- or moderate-income
individuals;
- Activities that promote economic development by financing
businesses or farms that meet the size eligibility standards of the Small Business
Administration's Development Company or Small Business Investment Company programs or have
gross annual revenues of $1 million or less;
- Activities that revitalize or stabilize low- or
moderate-income geographies.; or
- Activities that prevent defaults and/or foreclosures in
loans made pursuant to (1) and (3), of this subdivision (See Part 76 of the General
Regulations of the Banking Board).
An institution receives favorable consideration for those
activities that have a primary purpose of community development. Although primary
purpose is not defined in the regulation, it is presumed to mean that a majority of
the activities engaged in by the beneficiary of the bank’s support, meet the
regulatory definition of community development. Community development support may
take the form of community development loans, qualified investments (including grants), or
community development services
Q. What does all of this really
mean for organizations that are seeking loans, grants or services from banks?
If an organization’s activities meet the community
development definition set forth above, a bank can receive favorable consideration for
supporting the organization, in a CRA Performance Evaluation.
Q. How can an organization
establish that its activities meet the regulatory definition of community development?
Low or moderate income census tracts are considered to be
those in which the median family income is below 80% of the median family income for the
Metropolitan Statistical Area (MSA) or Primary Metropolitan Area (PMSA) in which they are
located. The Banking Department utilizes figures from the most recent U.S. Census (1990)
for purposes of determining census tract income. Low or moderate income individuals are
considered to be those from families with incomes below 80% of the median family income
for the Metropolitan Statistical Area (MSA) or Primary Metropolitan Area (PMSA) in which
they reside. The Banking Department utilizes income figures that are updated annually by
the U.S. Department of Housing and Urban Development. Accordingly, if more than 50% of an
organization’s activities (i.e., measured by resource allocation) target families or
census tracts with incomes of less than 80% of the area median income, then a bank may
receive favorable consideration for its support to that organization.
In the case of an organization that does not meet the
standards set forth above, although a bank cannot receive CRA consideration for a general
operating grant or other assistance that is directed to the organization, as a whole,
(since by definition, they would not have a primary purpose of community
development), the organization may designate a special restricted fund to help its low or
moderate income constituents. An institution may receive favorable consideration for this
type of targeted support.
Q. What types of
activities have the Banking Department found to be eligible for CRA
credit?
The Banking
Department has received numerous inquiries from banking institutions and
community development organizations, regarding the applicability of CRA to a
bank’s support for one or another type of organization, program or
activity. Here is a link to a brief summary of issues and opinions regarding
CRA eligibility. (Summary of CRA Opinion Letters)
Q: Can I get a grant for my
organization through the Banking Department?
It’s not surprising that we receive many phone calls
from groups or individuals who have heard about CRA and think that it is a program through
which they can apply for funding. However, the Banking Department does not make grants; it
regulates state-chartered financial institutions but cannot offer financial assistance.
The Banking Department may, however, offer a different
type of assistance to community groups and banks alike. Through its authority to
administer and enforce CRA, the Banking Department plays an active role in facilitating
partnerships between banks and communities. Staff of the Department’s Community
Affairs Unit are available to work with groups to address specific problems in the
community that affect access to capital. Community members are encouraged to inform the
Department about local issues that may be relevant to a bank’s CRA performance or
which may benefit from the Department’s involvement. Staff are also available to
provide information and assistance to banks seeking additional lending and investment
opportunities.
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