A new federal banking proposal could change how thousands of banks are evaluated for lending and investing in the communities they serve—with potential consequences for affordable housing, small businesses, and access to capital in low- and moderate-income neighborhoods.

The Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) have proposed substantial revisions to regulations implementing the Community Reinvestment Act (CRA), the federal law that requires regulators to assess how well banks meet the credit needs of their communities.

The agencies say their proposal is intended to refocus CRA examinations on lending, provide greater clarity, and reduce unnecessary regulatory burdens—particularly for community banks. Critics, including the National Community Reinvestment Coalition (NCRC), argue that the changes could weaken incentives for banks to finance affordable housing, community development, small businesses, and other projects in underserved areas.

The proposal is not final. But because CRA rules influence how banks are evaluated when serving local communities, the outcome could have effects well beyond bank compliance departments.

What the Community Reinvestment Act Does

Congress enacted the Community Reinvestment Act in 1977 amid longstanding concerns about redlining and unequal access to credit.

The law directs federal banking regulators to evaluate whether covered banks are helping meet the credit needs of the communities where they operate, including low- and moderate-income neighborhoods, while maintaining safe and sound banking practices.

CRA examinations can consider activities connected to mortgage lending, small business lending and community development. Depending on the bank and applicable test, qualifying community-development activity can include financing or investment supporting affordable housing and neighborhood revitalization.

The OCC has specifically identified affordable housing rehabilitation as an example of activity that can qualify for CRA consideration when it meets the applicable requirements.

That is why changes to CRA examinations can matter to consumers even though most households will never interact directly with the regulation.

The Proposal Would Redraw Which Banks Face the Most Extensive Reviews

One of the most consequential proposed changes involves bank size.

Under the current rules, the thresholds used to determine how banks are evaluated are significantly lower. The OCC and FDIC now propose three primary categories:

• Small banks: less than $1 billion in assets

• Intermediate banks: $1 billion to $10 billion in assets

• Large banks: more than $10 billion in assets

Under the proposal, banks with $10 billion or less in assets would generally face fewer CRA data collection, maintenance, and reporting requirements than banks classified as large.

That represents a substantial change in how many institutions would fall into the large-bank category.

Using 2024 and 2025 data, the regulators estimate that only about 86 banks—or 2.4% of the institutions they supervise for CRA purposes—would meet the proposed definition of a large bank, although those institutions would hold approximately 85% of industry assets.

The agencies argue that the revised thresholds better reflect decades of growth in bank asset sizes and would reduce compliance costs for community and regional banks.

Critics see the same numbers differently. They argue that hundreds of institutions would receive less intensive evaluations even though their lending and investment decisions can still significantly affect local communities.

Smaller Banks Could Face Fewer Community Development Requirements

The proposed distinction is not limited to paperwork.

Banks with less than $1 billion in assets would no longer be subject to the community development test that currently applies to some institutions above the existing threshold. Regulators say the change would reduce regulatory burden while retaining a lending-focused examination for smaller banks.

For consumer and community groups, the concern is that reducing formal community-development obligations could weaken an important incentive for financing projects that may otherwise struggle to attract conventional investment.

That can include affordable housing projects, community facilities and lending programs supporting low- and moderate-income neighborhoods.

It does not mean banks below the threshold would suddenly stop lending in their communities, nor does the CRA require banks to fund every proposed community project. The debate is about how strongly the regulatory framework should encourage and evaluate those activities.

Community Development Grants Would Face New Restrictions

The proposal would also change how certain grants and donations receive CRA consideration.

For large banks, a community-development grant would generally need to directly support a qualifying program, project or initiative in the bank's assessment area. The proposal would also impose a 15% limit on the indirect costs a recipient could incur while administering a qualifying grant or donation.

The OCC and FDIC argue that this would help ensure that the majority of grant money directly benefits the communities the CRA is designed to serve.

Community organizations may see the restriction differently because nonprofits and development organizations often incur administrative costs in staffing, compliance, reporting, technology and program management.

How that provision ultimately affects community organizations would depend on the final rule, the organizations involved and how banks adjust their grant-making strategies.

Why Bank Mergers Make CRA Especially Important

CRA performance can also become important when banks seek regulatory approval for certain transactions, including mergers and acquisitions.

Community organizations sometimes use the merger-review process to negotiate community benefits agreements, or CBAs, in which banks make commitments involving mortgages, small-business lending, community development and philanthropy.

According to the National Community Reinvestment Coalition, community benefits agreements it has negotiated with 22 bank groups since 2016 total nearly $688 billion in commitments. That figure is NCRC's own accounting of the agreements it has helped negotiate, rather than a federal estimate of total CRA investment nationwide.

NCRC argues that weakening CRA examinations could reduce the leverage communities have to secure similar commitments in the future.

The banking agencies, by contrast, say their proposed framework would better align CRA regulation with the statute's original focus on meeting local credit needs while avoiding obligations they view as unnecessarily burdensome or insufficiently connected to a bank's community.

The Federal Reserve Is Not Part of This Proposal

Another notable aspect of the rulemaking is who is—and is not—participating.

The CRA identifies three federal banking agencies with regulatory responsibilities: the OCC, FDIC and Federal Reserve. This proposal was issued by the OCC and FDIC without the Federal Reserve joining them.

That creates the possibility of differences in CRA regulation depending on which federal agency supervises a particular institution.

The current debate also follows years of legal and regulatory disputes over CRA modernization.

Federal banking regulators adopted a major CRA overhaul in 2023, but banking trade groups challenged those rules in federal court. A district court blocked implementation, and the OCC and FDIC ultimately dismissed their appeal in July 2026 before moving forward with the new proposal.

In other words, this proposal is the latest chapter in a much longer argument over how a law written nearly five decades ago should apply to today's banking system.

What Could This Mean for Affordable Housing?

The connection between bank regulation and housing affordability is easy to overlook.

Affordable housing projects frequently rely on complicated financing structures involving banks, government programs, nonprofit developers, tax incentives and other investors. CRA consideration can provide an additional reason for banks to participate in qualifying projects serving low- and moderate-income communities.

That does not mean every affordable housing development depends on the CRA, or that changing the regulation will automatically reduce the housing supply.

But a regulatory system that changes the incentives attached to community-development financing can influence where banks direct capital over time.

This matters particularly as communities across the country continue struggling with housing costs, limited affordable inventory and financing challenges for new development.

Small Businesses Could Feel the Effects Too

Housing is only part of the picture.

The CRA's focus on community credit needs also makes small-business lending an important part of the broader discussion.

Access to bank financing can affect whether local businesses can open, hire workers, purchase equipment, expand locations or survive periods of financial stress.

Changes to how regulators assess bank lending therefore matter not only to borrowers seeking mortgages but also to entrepreneurs and neighborhoods where small businesses play an important economic role.

Again, the proposed rule does not prevent banks from making these loans. The policy question is whether a different CRA examination framework would change the incentives banks face when deciding where and how aggressively to lend.

This Is a Proposal—Not a Final Rule

Consumers should also distinguish between what has been proposed and what has already changed.

The OCC and FDIC have issued a Notice of Proposed Rulemaking, meaning the agencies are soliciting public comments before determining whether to finalize the regulations.

Some provisions could change during that process.

The practical consequences would also depend on how individual banks respond. A reduction in regulatory requirements does not necessarily mean an institution will reduce community lending or investment, just as stronger regulatory requirements do not guarantee that every community will receive sufficient capital.

The final rule—and the banking industry's response to it—will determine the larger impact.

What Consumers Should Watch

The CRA can seem removed from everyday financial life because consumers do not see a "CRA charge" on a mortgage statement or a "CRA benefit" deposited into their checking account.

Its impact is more structural.

Over time, bank lending and investment decisions help influence which neighborhoods receive mortgage financing, where affordable housing gets built, which small businesses obtain capital and which community organizations can finance local projects.

That makes three developments worth watching:

The final bank-size thresholds.
The difference between a $1.6 billion and $10 billion large-bank threshold determines how many institutions face the most extensive CRA requirements.

How community-development activity is evaluated.
Changes to grants, investments and geographic requirements could influence which projects receive CRA consideration.

Whether the agencies ultimately move toward a consistent national framework.
With the Federal Reserve absent from the current proposal, regulatory differences among banks could become part of the continuing CRA debate.

The Bigger Financial Picture

The proposed CRA changes demonstrate how financial policy can influence household finances long before the effects appear on a monthly budget.

Mortgage access, affordable housing development, neighborhood investment and small-business lending all depend in part on where financial institutions choose to deploy capital.

Supporters of the proposal believe a simpler system can preserve the CRA's core lending mission while reducing unnecessary costs for banks.

Critics believe reducing the number of institutions subject to stronger community-development requirements could weaken an important mechanism for directing capital toward communities that have historically received less investment.

Both sides are ultimately debating the same question: how should the banking system balance regulatory burden with its responsibility to serve the communities where it does business?

The answer could help shape where billions of dollars in lending and investment flow in the years ahead.

Understand the Financial Forces Shaping Your Future

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