New rules modernizing the CRA bring us closer to an equitable financial system

... but there is still room for improving racial economic inclusion.

Victor Ramirez, Senior Vice President of CRA and Fair & Responsible Banking at Beneficial State Bank, releases statement after financial regulators announce finalized Community Reinvestment Act reforms.

Oct 24, 2023, Oakland, Calif. – The long-awaited new rules modernizing the Community Reinvestment Act (CRA), one of our nation’s most important financial inclusion laws, will bring us one step closer to an equitable financial system that reinvests wealth into all communities, but there is still room for improving racial economic inclusion. Beneficial State Bank has consistently voiced support for much-needed reforms to the CRA, including adapting to modern banking practices and applying a racial equity lens to financial services, products, and policies.

Since its inception, the CRA has spurred investments exceeding $6 trillion in low- and moderate-income communities, making homeownership and business ownership more accessible to millions of people. At the same time, banking has evolved significantly since the CRA regulation was changed in 1995 and even more so from when it was enacted in 1977. This includes a surge in internet banking, serving diverse geographic regions, and the emergence of non-regulated lenders operating with limited oversight. Amid these shifts, one constant remains: the persistent need to address social and economic disparities stemming from racial inequities in homeownership, wealth, and income.

I am pleased to see that the recent rulemaking has introduced several changes that have the potential to positively impact individuals and communities of color. These include encouraging banks to establish and implement Special Purpose Credit Programs tailored to meet the borrowing needs of individuals of color, including products such as home loans, small business lending, and consumer auto loans. Furthermore, the new rule acknowledges the importance of investment and lending activities that support Minority Depository Institutions, Women Depository Institutions, Low-Income Credit Unions, and Community Development Financial Institutions (CDFIs). Additionally, the changes emphasize initiatives that benefit Native communities.

Though the rule approved earlier this week includes activities that support communities with persistent poverty levels and individuals who are low-income, which could also help communities of color, there was insufficient consideration of race and ethnicity as equally important factors. It is crucial for us to recognize that lending to low-to-moderate-income borrowers and areas differs significantly from lending to borrowers of color. Without comprehensive CRA regulation that fully acknowledges the importance of race and ethnicity as critical factors, there remains a significant journey ahead in our efforts to address and close the racial wealth gap.