CRA Investment Test

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Question:

Is there a certain percentage or ratio, such as to total assets, which are required for CRA loans and investments to achieve a Satisfactory rating?

Answer:

There is no bright line test implied or in use. While you may review peer performance by looking at their public evaluations, it isn't a "sure thing" that you can achieve the same results with the same levels. The examiners pay a lot of attention to what is new and innovative. You may get more credit for a lesser investment or loan if its purpose was more targeted to meeting a community need.

Say you had $100M to put into a qualified mutual fund or $75M to put into a micro business loan program that was targeted at revitalizing your downtown community. You may easily get more credit for the lesser investment because it is highly targeted at a definitive need.

So, peer performance may act as a quasi-benchmark, but it is not a guaranty of a good rating.

First published on BankersOnline.com 08/02/04