In Podcast #65 titled "The New CRA", Dean and Len discuss the recent changes introduced in the new Community Reinvestment Act (CRA) published just over a week ago. Len highlights three significant changes: the reclassification of bank categories based on their assets; the transformation in assessment areas which now include "facility-based assessment areas", "retail lending" assessment areas, and "outside retail lending areas"; and the modification in performance tests and standards. Particularly, the changes in bank categories mean that small banks are those with assets less than $600 million, intermediate banks have assets ranging from $600 million to less than $2 billion, and large banks have assets of $2 billion or more. The new assessment areas represent a departure from the traditional model, where every assessment area had to contain at least one branch. The performance tests and standards, especially for small banks, may see unannounced changes in benchmarks.
Len delves deeper into the impact of these changes, emphasizing the controversial nature of the new retail lending and outside retail lending areas. He details the criteria that define these areas, stressing that they might face legal challenges. Regarding performance tests, while small banks will ostensibly continue to be evaluated based on current tests, Len anticipates that they might be unofficially held to the new standards. He explains the "Retail Lending test" applied to intermediate and large banks, including a lending volume screen and distribution tests. The podcast concludes with Len's assertion that small banks, despite seemingly escaping significant changes, might still be substantially affected by these calibrated benchmarks in the new CRA.