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CRA: A brief introduction

2002 Annual Report

May 1, 2003

CRA: A brief introduction

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods. It was enacted by the Congress in 1977 and was revised in May 1995.

Evaluation of CRA performance

The CRA requires that each depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities.

Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner.

CRA examinations are conducted by the federal agencies that are responsible for supervising depository institutions: the Federal Reserve System, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Interagency information about CRA is available from the Federal Financial Institutions Examination Council.

At the end of the CRA examination process, depository institutions receive one of the following ratings of performance: Outstanding, Satisfactory, Needs to Improve, or Substantial Noncompliance.

Source: Community Reinvestment Act, The Fed's Board of Governors Web site.

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