OCC And FDIC Propose Targeted Amendments To Community Reinvestment Act Regulations: What Banks Need To Know

Introduction

On July 31, 2026, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) published a joint Notice of Proposed Rulemaking (NPRM) proposing targeted amendments to their Community Reinvestment Act (CRA) regulations. The proposal, issued under Docket ID OCC-2026-0694, RIN 1557-AF57 (OCC) and RIN 3064-AG31 (FDIC), represents a significant pivot in the agencies’ approach to CRA modernization following years of litigation and regulatory uncertainty.

This blog post analyzes the NPRM’s key provisions, identifies which changes appear to favor the banking industry, discusses the notable absence of the Federal Reserve Board from this rulemaking, examines the proposal’s impact on community banks (particularly in the context of rural and smaller institutions), and offers key takeaways for banking clients. All analysis is grounded exclusively in the text of the uploaded NPRM document.

1. Overview of the NPRM

Background and Regulatory History

The Community Reinvestment Act was enacted in 1977 to encourage depository institutions to meet the credit needs of their local communities, including low- and moderate-income neighborhoods. The OCC and FDIC have administered CRA regulations since 1995 under a framework that also involved the Federal Reserve Board and the former Office of Thrift Supervision.

In 2022, the OCC, FDIC, and the Board of Governors of the Federal Reserve System (the three “Federal banking agencies”) jointly proposed to modernize the CRA rules. That proposal was finalized on October 24, 2023 as the “2023 CRA rules.” However, trade associations challenged the 2023 rules in February 2024 (Texas Bankers Association v. OCC), and the U.S. District Court for the Northern District of Texas issued a preliminary injunction on March 29, 2024, finding the agencies likely exceeded their statutory authority—particularly regarding the “entire community” standard and extraterritorial credit needs assessments—and raising concerns under the Major Questions Doctrine.

The agencies appealed to the Fifth Circuit but subsequently moved to stay the appeal pending a new rulemaking. On July 16, 2025, they published a proposal to rescind the 2023 rules and reinstate the 1995-based framework (the “rescission proposal”). After receiving approximately 47 comments, the OCC and FDIC elected not to finalize the rescission proposal and instead issued this new NPRM with substantive amendments. On July 1, 2026, the OCC and FDIC filed an unopposed motion to dismiss their appeal; the Fifth Circuit dismissed the appeal on July 9, 2026. The agencies are now moving the District Court for entry of final judgment against them.

Key Objectives and Framing

The agencies frame this proposal as an effort to:

• Refocus CRA supervision on the statutory mandate to meet credit needs of local communities;
• Increase the focus on lending activities;
• Ensure community development (CD) grants reach intended communities;
• Reduce regulatory burden, “particularly for community banks”; and
• Increase clarity and certainty in CRA compliance.

The Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) determined this is an “economically significant regulatory action” under Executive Order 12866, and the agencies expect the rule to be a deregulatory action under Executive Order 14192, with total costs expected to be less than zero.

The comment period runs 60 days after Federal Register publication.

Major Substantive Changes

Asset-Size Threshold Increases. The NPRM proposes to dramatically raise the asset thresholds that determine which CRA performance test framework applies to a bank:

• Small bank threshold: raised from under $412 million to under $1 billion in assets.
• Intermediate bank threshold (replacing “intermediate small bank”): raised from $412 million–$1.649 billion to $1 billion–$10 billion.
• Large bank threshold: raised from over $1.649 billion to over $10 billion.

The agencies are also seeking comment on an alternative approach using SBA-aligned thresholds of $850 million (small bank cap) and $3.252 billion (intermediate bank cap), and separately ask whether the intermediate bank threshold should align with the $30 billion figure some agencies use to define “community banks.”

Lending Test: Major Product Line Approach. Banks would be evaluated only on “major” retail lending product lines (home mortgage, small business, small farm, and consumer lending), reducing the burden of monitoring non-major product lines.

Community Development (CD) Activity Reforms. The NPRM revises the CD definition, adds a “community development grant” definition, codifies a publicly available illustrative list of qualifying CD activities, establishes a formal CD activity confirmation process (banks can request agency confirmation that a particular activity qualifies), and imposes a 15% cap on indirect administrative costs for CD grant recipients at large banks to ensure grants directly benefit communities. Prior-period CD loans held on balance sheet and binding commitments to lend or invest would also count.

Intermediate Bank Ratings Change. The proposal removes the current limitation requiring a “satisfactory” CD test rating for an overall “satisfactory” rating at intermediate banks. Under the proposal, strong lending test performance could offset a weaker CD test rating.

Strategic Plan Reforms. The NPRM clarifies the strategic plan submission, amendment, and implementation process; adds a prefiling consultation process where agencies can provide feedback on draft plans; requires posting of plans on agency websites; simplifies measurable-goals provisions; changes the submission timing from “three months” to “90 calendar days”; adds a technically-complete notice process; and extends plan denial and resubmission procedures.

Reduced Public File and Public Notice Burdens. Banks would no longer need to maintain a physical paper public file and could instead post files online. Public notices in bank lobbies would simply direct customers to the bank’s website rather than displaying the full CRA notice.

Data Collection Relief. Banks below $1 billion in assets (newly defined small banks) would no longer be subject to CD test data reporting. The proposal also introduces new data-waiver authority allowing agencies to exempt banks from specific data collection and reporting requirements when not necessary for CRA assessment.

Expanded Discriminatory/Illegal Credit Practices Provision. The NPRM explicitly adds UDAAP violations (Dodd-Frank Section 1031), Military Lending Act, and Servicemembers Civil Relief Act violations to the list of practices that may affect CRA ratings.

Provisions Favoring the Banking Industry

Although framed as burden reduction and clarification, several provisions clearly benefit banks:

• Higher asset thresholds move hundreds of banks into less-burdensome CRA testing categories, with fewer data collection and reporting obligations.
• Removal of the intermediate bank “satisfactory” rating linkage to the CD test allows banks to receive a satisfactory overall rating even with weaker community development performance, so long as lending is strong.
• Reduced data reporting obligations for reclassified banks decrease compliance costs.
• Softened strategic plan requirements and the addition of prefiling consultations lower the barriers to using strategic plans.
• Relaxed public notice and public file requirements reduce administrative burden.
• The major product line approach narrows the scope of lending evaluation.

The FDIC estimates an aggregate annual Paperwork Reduction Act burden decrease of 114,775 hours (an 86% reduction) for banks reclassified from large to intermediate, valued at approximately $10.8 million per year.

2. Agencies Involved — Notable Absence of the Federal Reserve Board

This NPRM is issued jointly and exclusively by the OCC and the FDIC. The Federal Reserve Board (the “Board”) is notably absent from this rulemaking, despite the fact that the Board was one of the three Federal banking agencies that jointly issued the 2022 proposal, jointly finalized the 2023 CRA rules, and jointly published the 2025 rescission proposal.

The NPRM provides only one textual explanation for the Board’s absence, contained in footnote 31:

“This notice of proposed rulemaking is being issued jointly by the agencies [OCC and FDIC]. Any decisions about the Board’s next steps with respect to the rescission proposal rest exclusively with its Governors.”

The document does not otherwise explain why the Board chose not to join this NPRM. No further reason is discernible from the text of the proposal, and readers should not speculate beyond what this footnote provides.

What is clear from the document is that the OCC and FDIC appear fully aligned in their approach. The two agencies jointly authored the proposal, are making near-identical parallel amendments to their respective regulations (12 CFR part 25 for the OCC and 12 CFR part 345 for the FDIC), share the same policy rationale sections, and each conducted separate but consistent regulatory impact and Regulatory Flexibility Act analyses reaching similar conclusions. This reflects close coordination between the two agencies.

This is not merely a drafting curiosity—it is flagged as a live possibility in the agencies’ own supporting materials. The FDIC’s internal memorandum recommending this proposal notes plainly that “[t]he Board of Governors of the Federal Reserve System may ultimately take an alternative course of action [t]hat decision is at the discretion of the governors.” Because the Board was a full co-author of the 2022 proposal, the 2023 CRA rules, and the 2025 rescission proposal, its decision not to join this NPRM leaves open the possibility that the Board could take a different path entirely for the state member banks it supervises—including declining to adopt these amendments, finalizing its own version, or revisiting the enjoined 2023 CRA rules on a separate track. If that happens, the CRA compliance framework again runs the risk of being split along supervisory lines (as was the case when the OCC, acting alone, issued its June 5, 2020, CRA rule before subsequently rescinding the rule on December 14, 2021), with a bank’s primary federal regulator, not its size, business model, or community, determining which set of CRA rules applies. That is a real structural risk for the Board to manage, not a hypothetical one, and it is worth watching closely regardless of how a given institution is supervised.

3. Impact on Community Banks

Where Community Banks Stand to Gain

The most significant impact on community banks comes from the proposed increase in asset-size thresholds. Using 2024–2025 Call Report data, the agencies project the following reclassifications:

• FDIC-supervised banks: Approximately 604 banks would be reclassified from intermediate-small to small bank status, meaning they would no longer be subject to the community development test. Small banks would increase by 604 to a total of 2,173, while intermediate banks would decrease by 354 to 425, and large banks would decrease by 250 to just 31.
• OCC-supervised institutions: Reclassification could reduce data reporting burdens for up to 126 OCC banks and reduce CD-activity compliance burdens for up to 194 OCC banks. The OCC supervises approximately 990 institutions, of which roughly 602 are “small entities” under the Regulatory Flexibility Act.

Under the proposal, approximately 79.8% of all banks would qualify as small banks (up from the current percentage), holding only about 4.9% of industry assets. Large banks would constitute just 2.4% of banks (86 institutions) but hold 85.4% of industry assets.

Under the alternative SBA-aligned thresholds ($850 million/$3.252 billion), FDIC small banks would increase by 518 to 2,087; intermediate banks would decrease by 374 to 405; and large banks would decrease by 144 to 137.

For community banks reclassified from intermediate to small status, the practical benefits are substantial:

• Elimination of the community development test obligation, meaning these banks would be evaluated solely on their lending performance.
• Elimination of associated data collection and reporting requirements for CD activities.
• The “major product line” approach further reduces the scope of lending evaluation, relieving smaller banks from monitoring and documenting lending in non-major product categories.
• The new data-waiver authority provides an additional mechanism for agencies to exempt banks from specific data requirements when not necessary for CRA assessment.

Strategic Plan Reforms: A Narrow Fit, Not a Recommended Default

The NPRM acknowledges that banks found the strategic plan process burdensome, “particularly for community banks,” and proposes reforms intended to make the option more viable, including a prefiling consultation process, clearer measurable-goals provisions, and modernized public engagement requirements. That said, strategic plans remain a niche election: only 14 OCC-supervised institutions and 45 FDIC-supervised institutions currently use one. Even under the proposal, a bank electing a strategic plan must still informally solicit public feedback, formally publish its draft plan for at least a 30-day comment period, submit the plan roughly 90 calendar days before its intended effective date, and risk denial and resubmission if the agency finds the plan’s goals inadequate. For a small or intermediate community bank that can already pass the standard lending and community development tests, this remains a meaningfully heavier administrative lift than simply being evaluated under those standard tests.

The prefiling consultation process is a genuine improvement—it allows banks to seek agency feedback on draft plans before formal submission, reducing the risk of a plan being rejected after the public comment process has already run. But it addresses the quality of the strategic plan process, not its underlying cost. We would not recommend a strategic plan election to a small or intermediate community bank that can otherwise satisfy the standard lending and, where applicable, community development tests. The option is best suited to banks with non-traditional business models or product mixes that the standard tests do not fit well, not as a general-purpose alternative for banks that can pass the default tests without difficulty.

The codification of a CD activity confirmation process—where banks can request agency confirmation that a specific activity qualifies as community development—is explicitly framed as valuable to smaller institutions with limited resources. Community banks that lack large compliance departments can obtain advance certainty about whether their CD activities will receive CRA credit, reducing the risk of investing time and money in activities that might not count.

The publicly available illustrative list of qualifying CD activities similarly reduces uncertainty and provides a practical reference for institutions without dedicated CRA research teams.

The elimination of the physical/paper public file requirement and the simplification of lobby notices to a website redirect reduce administrative costs that, while modest in absolute terms, can be proportionally significant for smaller community banks with limited back-office resources.

Where the Proposal Falls Short

The NPRM itself identifies a tension inherent in the burden-reduction approach. Reduced standardized CRA data availability for banks reclassified out of large-bank reporting could reduce transparency for community organizations, researchers, and other stakeholders who rely on CRA data to evaluate bank performance in local communities.

Additionally, the document acknowledges that reduced CRA incentives for non-major product lines could affect lending diversity, and that the 15% indirect-cost cap on CD grants, along with the direct-use requirement, could reduce support for some nonprofit and intermediary grant activities. These trade-offs are expressly recognized in the agencies’ cost-benefit analysis and represent a balancing of compliance burden reduction against information availability and community benefit.

Assessment Areas Are Still Tied to Branches, Not to Where Community Banks Actually Do Business

The NPRM leaves one of the current framework’s most consequential structural problems untouched: how a bank’s assessment area—the geography in which its CRA performance is actually evaluated—gets drawn in the first place. The agencies acknowledge the tension directly. Even though “banks’ customer bases are increasingly geographically dispersed,” the CRA statute “focuses on the geographic area(s) surrounding a bank’s physical facilities,” and for that reason “the agencies are not proposing significant changes to the current assessment area framework, which is largely tied to a bank’s physical location(s).” The FDIC’s own memorandum recommending this proposal makes the identical point.

For community banks, this matters more than it might for a large regional or national bank. Many community banks have expanded their lending and deposit-gathering well beyond their branch and ATM footprint through online and mobile channels, yet their CRA credit will continue to be measured against assessment areas anchored to physical office locations rather than their actual, technology-enabled market area. The NPRM does solicit comment on two narrower, related questions—whether large banks should be required to delineate whole counties as their smallest assessment-area unit, and whether the “substantial portion of its loans” standard for defining assessment area boundaries should be replaced with a distance-based radius concept—but both start from the same branch-centric premise, and neither is an adopted change. Community banks that have grown primarily through digital channels should not expect this rulemaking to change how, or where, that growth is credited under the CRA.

The continued focus on where a bank maintains its physical locations under the proposed rule also means that large banks can source deposits from locations where they might not maintain locations and will not be evaluated on their lending within those areas.

Rural and Nonmetropolitan Provisions

The NPRM contains the following provisions relevant to rural and nonmetropolitan areas:

• Distressed or underserved nonmetropolitan middle-income census tracts: The proposal codifies criteria for identifying these areas (unemployment at least 1.5 times the national average, poverty rate of 20% or more, or population loss of 10% or more/net migration loss of 5% or more).
• Indian country and Tribal/native lands: The NPRM adds a new targeted geographic category using Census Bureau definitions, State Designated Tribal Statistical Areas, and Hawaiian Home Lands for community development revitalization and stabilization provisions.

These provisions are particularly relevant for community banks operating in rural areas across the heartland where census tracts may meet distressed or underserved criteria.

4. Key Takeaways for Clients

For banking and financial services clients, particularly community bank clients, the following takeaways emerge from this NPRM:

• Net compliance-cost reduction is likely for smaller institutions. The combination of higher asset thresholds, elimination of CD testing for newly small banks, reduced data reporting, and simplified public file requirements should meaningfully reduce compliance costs for the hundreds of banks that would be reclassified. The FDIC estimates an 86% reduction in PRA burden hours for banks moving from large to intermediate status alone.
• Evaluate your institution’s reclassification status. Banks currently classified as intermediate-small or large should immediately assess whether the proposed thresholds (or the alternative SBA-aligned thresholds) would reclassify them, and what changes to CRA testing, data collection, and reporting obligations would follow.
• The 60-day comment period is critical. The agencies are actively soliciting input on several open questions, including the appropriate level for asset-size thresholds (the $1 billion/$10 billion proposal versus the $850 million/$3.252 billion alternative versus a $30 billion intermediate cap). Banks with strong views on where these lines should be drawn should engage in the comment process.
• Take advantage of the new CD activity confirmation process. Once finalized, the ability to obtain advance agency confirmation that specific activities qualify as community development represents a practical tool for reducing CRA compliance risk—particularly for community banks that invest significant resources in individual CD activities relative to their overall balance sheets.
• Approach the strategic plan option selectively. The prefiling consultation process and clearer measurable-goals provisions make strategic plans somewhat easier to use, but the underlying public-comment and agency-approval process remains substantial. We would not recommend a strategic plan election to a small or intermediate community bank that can otherwise pass the standard lending and community development tests; the option is better suited to banks whose business model or product mix does not fit well within those standard tests.
• Monitor the Federal Reserve’s posture. Only two of the three historical CRA agencies are proposing these changes. The Federal Reserve Board’s next steps “rest exclusively with its Governors,” per the NPRM. Banks supervised by the Federal Reserve should monitor whether the Board takes parallel action, issues its own distinct proposal, or finalizes the earlier rescission proposal. This regulatory divergence could create a bifurcated CRA framework depending on a bank’s primary federal supervisor.
• Assess the intermediate bank ratings change. The removal of the requirement that intermediate banks receive a “satisfactory” CD test rating to achieve an overall “satisfactory” rating is a meaningful shift. Banks in this category may be able to achieve satisfactory overall ratings through strong lending performance alone, reducing the pressure to maintain robust CD programs.

Conclusion

This NPRM represents a significant deregulatory shift in CRA policy, clearly aligned with Executive Order 14192’s mandate to reduce regulatory costs. The proposed asset-threshold increases alone would reclassify hundreds of banks into less-burdensome testing categories, delivering substantial compliance cost savings to community banking institutions across the country. At the same time, the agencies acknowledge the trade-offs: less data, less transparency, and potentially less incentive for certain community-oriented activities.

For community banks, the proposal offers real relief on testing scope, data reporting, and public file administration—but it leaves two structural issues unresolved. First, assessment areas remain tied to branch and ATM locations even as the agencies acknowledge that customer bases are increasingly dispersed, meaning banks that have grown through digital channels will not see that growth reflected in how their CRA performance is measured. Second, the Federal Reserve’s absence from this rulemaking is not just a procedural footnote—the agencies’ own supporting materials acknowledge the Board may chart its own course, raising a real risk of a divided CRA framework along supervisory lines.

We encourage clients to review the proposal carefully, evaluate their institution’s position relative to the proposed thresholds, and consider engaging in the comment process to shape the final rule.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.