CRA Relief, With Three Asterisks
By: Paul Schaus
August 12, 2026
The OCC and FDIC have proposed the most significant Community Reinvestment Act rewrite in a generation — (1) thresholds that re-sort the industry, (2) exams refocused on lending, and (3) real burden relief for everything under $10 billion. But read the whole document before deciding what you think. Deposits vanish from the exam at the exact moment deposits became the fight of the decade, a burden-reduction rule deputizes large banks as auditors of their grantees, and the Federal Reserve's absence leaves one statute with two rulebooks. Whether that nets out as progress or rollback depends on which provision you are reading and which bank you are. You have sixty days to say so on the record.
On July 31, the OCC and FDIC issued a joint proposal to rewrite the CRA regulations — and before anyone files this under "modernization, round three," understand what it actually is. It is a reversal. The 2023 interagency CRA rule never took effect; a federal court in Texas enjoined it, and the agencies have now walked back to the 1995 framework and recalibrated it instead. After a decade of whiplash — the OCC's solo 2020 rule, rescinded in 2021; the 2023 rule, enjoined in 2024; now this — the industry is being offered something it has not had in years: a CRA framework that might actually stick. So the question worth asking is not whether this is modernization. It is what it actually does to banking, and the honest answer is that it depends on which provision you are reading, and which bank you are.
Start with the thresholds, because that is where the real money is. The small bank line rises from $412 million to $1 billion; the intermediate line from $1.65 billion to $10 billion. That is not a tweak — it re-sorts the industry. A $900 million bank that today carries intermediate bank obligations becomes a small bank, evaluated on lending alone. A $5 billion bank drops out of the large-bank regime entirely, shedding the data collection and reporting apparatus that came with it. The full large-bank framework would apply only above $10 billion — which is to say, to the institutions that actually have compliance departments built for it.
Two more changes define the proposal. The exam refocuses on credit: the agencies propose to evaluate retail banking services in terms of credit services only, excluding deposit services, on the theory that the statute's purpose is meeting community credit needs. And community development grants get tightened: for banks over $10 billion, a grant counts only if it goes directly to a qualifying plan, project, or initiative and no more than 15 percent of the grant may go to the recipient's administrative and indirect costs, with the bank documenting it.
The proportionality case is the proposal's strongest ground. The $412 million small-bank line was set for an industry that no longer exists. Decades of consolidation have made a billion-dollar bank a community bank by any honest definition, and the CRA's compliance economics never caught up. For the hundreds of institutions between the old lines and the new ones, this proposal converts fixed compliance cost back into lending capacity — which is, after all, what the statute says communities need. The refocus on credit also gives banks something scarcer than relief: clarity. A lending-centered exam is one a community bank can understand, staff for, and also defend. When we responded to the OCC's RFI on community banks earlier this year, the through-line of our submission was proportionality — rules scaled to the institution, not to the industry's largest members — and on that dimension, this proposal moves in the direction the industry has been asking for.
The first is deposits. I understand the statutory logic — CRA speaks in the language of credit needs. But step back and look at the timing. I have spent much of the past two years writing about the battle for the deposit — stablecoins pulling at funding bases, digital dollars, rewards programs interest by another name. Deposits are the strategic story of this banking decade, and this proposal removes deposit services from the exam entirely — examiners would no longer look at whether basic accounts are accessible or affordable. Community advocates call the whole package a rollback largely on this point, and banks should not dismiss the critique reflexively. The industry has spent a decade arguing that the bank's branches, its low-cost accounts, and its products are proof it serves its communities. The proposal deletes the exam category where that proof counted.
The second is the grant test. Inside a rule sold as burden reduction sits a brand new burden — banks over $10 billion must verify and document that a grant recipient's administrative overhead does not exceed 15 percent of the grant amount. Think about what that means operationally. The bank becomes the auditor of its grantee's cost structures. A job nobody asked for, aimed at community organizations least equipped to produce the documentation. The predictable result is that large banks concentrate their giving on big, established nonprofits with accountants, and the small neighborhood organizations the CRA was written for get priced out of the grant pipeline by their own overhead ratios. If the concern is grant dollars funding overhead instead of communities, there are lighter instruments than deputizing banks as examiners of soup kitchens.
The third is the missing agency. The Federal Reserve did not join this proposal, which means state member banks would continue under the existing framework while national banks and state nonmember banks move to the new one. One statute, two rulebooks, sorted by charter. I have written before about how charter choice is becoming a strategic decision rather than a historical accident; a bifurcated CRA adds one more variable to that calculus, and not a trivial one. It also raises the durability question that should haunt every CRA conversation since 2020 — a rule owned by two agencies instead of three is a rule the next set of appointees can fracture further. The industry does not just need a better CRA framework. It needs one that survives an administration change, and two-out-of-three is a weaker foundation than unanimity. Let's hope we get a three-ring concurrence.
I am not going to tell you whether this proposal is good or bad for your institution, because the honest answer is that it depends on your size, your charter, and your community strategy — a $700 million bank shedding data obligations and a $15 billion bank inheriting a grant-documentation regime are reading two different proposals. What I will tell you is that the conclusion belongs on the docket, not the boardroom. Comments are due 60 days after Federal Register publication. If the threshold relief matters to your institution, say so with numbers — use the hours and dollars the proposed rules will cost you. Comments will fill quickly with parties framing this as pure rollback, and regulators weigh both stacks. If the grant test or the deposit exclusion concerns you, be specific about the operational consequence, not the principle. And every bank, on every side, should ask the agencies the durability question: what is the path to bringing the Federal Reserve in, so the industry gets one rulebook instead of a charter-shaped fork? The mechanics could not be simpler: file at regulations.gov under Docket ID OCC-2026-0694, or email the FDIC at comments@fdic.gov with RIN 3064-AG31 in the subject line. Sixty days is not long. The banks that show up in the docket will recognize the rule that comes out of it. The ones that do not will simply comply with it.
CCG Catalyst advises community and regional banks, credit unions, and fintech companies on regulatory strategy, technology, and growth. If your institution is assessing what the proposed CRA framework changes for its compliance program — or preparing a comment letter before the deadline — reach out to our team at www.ccgcatalyst.com, or see the full library at CCG Insights.
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By: Paul Schaus | Founder & Managing Partner, CCG Catalyst Consulting
Disclaimer: The views expressed in this article represent the perspective of CCG Catalyst Consulting based on our direct experience advising financial institutions. This commentary is intended to stimulate industry discussion and does not constitute legal, accounting, or regulatory advice.
