trending Market Intelligence /marketintelligence/en/news-insights/trending/i_KujWiwdRPBedZNIao4rQ2 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Community bank experts respond positively to 'overdue' CRA reforms

Street Talk - Ep. 64: Coronavirus jumpstarts digital adoption

Street Talk Podcast

Street Talk - Ep. 63: Deal talks continue amid bank M&A freeze, setting up for strong Q4

Street Talk Podcast

Street Talk - Ep. 62: 'Brutal' outlook for oil demand offers banks in oil patch no relief

Amid Q1 APAC Fintech Funding Slump, Payment Companies Drove Investments

Community bank experts respond positively to 'overdue' CRA reforms

Community bank experts are reacting positively to proposed changes to the Community Reinvestment Act.

The proposal from federal bank regulators attempts to clarify activities that qualify for CRA credit, expands assessment areas for banks outside of their brick-and-mortar branch footprints and uses a ratio-based approach to determine a bank's score.

SNL Image

"Our biggest takeaway is that it's a net positive," Keefe Bruyette & Woods analyst Catherine Mealor said in an interview. The new rule decreases the confusion around CRA, making it easier to quantify and understand for banks, analysts and investors, she said.

Several analysts said the increased clarity in the proposal is a positive. "There's going to be more transparency...banks are going to be able to better understand how their CRA investments are stacking up relative to what regulators want to see," said Nathan Race, a Midwest bank analyst with Piper Jaffray.

The CRA is a 1977 law that requires banks to serve communities where they have a physical presence, striving to prevent banks from excluding low- and moderate-income neighborhoods and businesses from accessing financial services. It has not been updated since the 1990s, leaving many parts of the exam and how to fulfill requirements "opaque," said Race.

The banking industry also responded positively to the proposed changes, which some said are needed in an era when banks increasingly use technology to serve customers outside their traditional footprints.

"It really looks like the regulators have made every effort here," said Susan Janson, chief risk officer at Wilmington, N.C.-based Live Oak Bancshares Inc.

Live Oak operates throughout the United States on a digital platform and focuses on Small Business Administration loans. The bank stands to benefit from the increased assessment areas.

"It extends our community to where our small business customers are, without limit across the country, and we feel that this is a real positive step for us," Janson said.

The new proposal will provide more credit for small business lending, which most consider to be positive for community banks. "We've always supported providing small business loans and small farm loans and advocated that they receive additional CRA credit," said Lilly Thomas, senior regulatory counsel at the Independent Community Bankers of America, a trade group.

Community banks and rural markets also stand to benefit from the proposal’s increased emphasis on serving rural areas, KBW’s Mealor said. Banks can get CRA credit for expanding into adjacent rural markets that do not currently have a branch, which may be easier for local lenders that are familiar with the area than for larger competitors.

"This will give some communities in more rural markets an opportunity to qualify for CRA credit, which should help lending," said Mealor.

The proposal did raise concerns for some. Sandler O'Neill analyst Stephen Scouten warned that the changes could have unintended consequences for mergers. He also noted that under the new rule banks could expand into new lending types or new geographic areas to get higher-quality CRA loans than are available in their current footprint.

"There's a lot of bad economic decisions that have be to made to fill these requirements sometimes. If they can find ways around making what they would consider a 'sub-optimal loan' just to meet a regulatory guideline, I'm sure that they will," said Scouten.

Still, many in the industry view the proposal as a positive step toward modernizing CRA.

"The time for CRA reform is really overdue," said Janson.