Preparing For The New CRA

Preparing For The New C RA

Beginning in January, 1996, small banks will be examined under the new CRA regulations and larger banks may elect to be examined under the new regulation. Preparation for this type of change takes analysis, planning, training and time. Begin now to re-evaluate your CRA program from top to bottom. Study your existing CRA program and bank products. Define your assessment area, identify your program's strengths and weaknesses and decide what kind of CRA strategy your bank should follow.

Instead of delineating your community, you now define your "assessment area". Take advantage of this opportunity to evaluate your community delineation in the context of what your bank is actually doing. Analyze your program and determine your assessment area by taking the following "Assessment Area" Action Steps below.

The new approach to CRA takes commercial activity into account as well as consumer lending Take this opportunity to review your commercial portfolios to determine your CRA strengths and weaknesses. The bank's CRA program should now include strategies in commercial lending. There are many opportunities here.

Under the new CRA regulation, both the size of the business and the size of the loan will be taken into account. In addition you may find it useful to track the type of businesses your bank's lending supports and also the impact of those businesses on their neighborhoods and the employees.

"Commercial" Action Steps
Assessment Area

Identify your customers for each kind of product. Determine what types of loans are in demand in your market.
Determine which of these types of loans are your best products.
Determine which of these credit needs your bank best serves.
Identify and define your borrowers by income level, location, and, if available, by prohibited bases such as race and gender.
Determine whether you are missing any part of your community's loan market and, if so, determine why. This may reveal competition, ineffective marketing, or a need to restructure the products.
Determine what part of your market base is deposit customers.
Consider conducting a survey to find out where your depositors live and work.

Commercial

Identify your commercial customers.
Determine the location of the business and the type of the business.
If possible, determine who the commercial customers employ. Look specifically for commercial customers who employ low-income workers and/or minorities.
Get creative. Think about how your commercial customers can support your CRA program.
Send regular reports to senior management and the board. Remind them that CRA has not gone sway. The only change is in how the bank will be measured. Remind them that it is still necessary to earn a good rating The rating will be based an results and getting the results takes effort. Good luck!