Question & Answer

Question: How do examiners evaluate how much investment is enough to get a Satisfactory or Outstanding rating for the investment test?

Answer: There is no clear rule on how much is enough. The regulatory agencies have carefully avoided any such standard for all three of the CRA tests. To provide a standard would amount to credit allocation. That leaves us to guess about how much is sufficient.

The amount you should be investing may be determined by your market - both state and local. Opportunities and competition may determine how large the pie is. You should have a share of the pie that is appropriate for your general market share.

The other measurement point that you can use is to start with the bank's total investment authority. Then identify what portions of your market are low- and moderate-income. Your community development investments should comprise a proportion of your investment portfolio that approximates the proportion of low- and moderate-income residents in your community.

Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 9, 7/98