The Federal Reserve is conducting a wide-ranging review of risks and opportunities associated with the evolution of financial technology, including whether the Community Reinvestment Act needs to be modernized, Fed Vice Chairman for Supervision Randal Quarles said March 26.
Quarles said the CRA, which dates back to 1977, could be bolstered to possibly encourage more types of investments and serve as a "broader catalyst" for inclusive economic growth.
"The more that we can bring everyone into a strong economy, that makes the economy stronger," he said at a HOPE Global Forum event focused on business development in underserved communities.
Minority-owned and women-owned firms, he said, remain less likely to receive financing for their needs — and if they do get funding, it is below the levels they had asked for.
Those struggles, he said, have contributed to the rise of online alternative lenders for businesses, which can now increasingly get needed funding "in a couple of days, even a couple of hours."
But Quarles said that, while those fintech companies could help address gaps in minority lending, they could also bring unknown risks.
"As regulators, we do not want to unnecessarily restrict innovations that can benefit consumers and small businesses," he said. "At the same time, our interest is in ensuring that banks understand and manage their risks when introducing new technologies or partnering with fintech companies, and that consumers and small businesses remain protected."
Quarles' comments follow early efforts from the Office of the Comptroller of the Currency to reportedly seek comments on whether reforms to the CRA are needed.