BY KORBETT MOSESLY for WEEKLY VOLCANO | 8/14/2026
Federal regulators proposed a rule July 31 that would stop grading most banks on whether they lend in working-class neighborhoods.
Nothing becomes illegal. The scorekeeping just stops. The public gets 60 days to comment once the rule is published, and for the people who finance housing, small businesses and jobs in Washington state, that window is the leverage.
Money leaves your neighborhood every day. Paychecks get deposited. Rent gets paid. Savings accumulate. All of it flows into the banking system and out of the blocks where it was earned. The question a community always faces is whether any of it comes back, as a mortgage, a construction loan or a line of credit for the shop on the corner.
For almost 50 years, one federal law has asked banks that question directly.
On July 31, two federal regulators proposed to stop asking most of them: www.occ.gov/news-issuances/news-releases/2026/nr-ia-2026-64.html.
$688 billion: Community lending and investment commitments negotiated with 22 banks since 2016, leverage built on CRA scorekeeping.
1 in 20: Banks that would still face the full Community Reinvestment Act examination, down from roughly 1 in 6 today.
Two of three: Enforcing agencies behind the proposal. The Federal Reserve did not sign on.
60: Days to comment once the rule is published in the Federal Register.
A Law That Works by Keeping Score
Plain language: Community Reinvestment Act
The Community Reinvestment Act is a 1977 federal law requiring regulators to check whether banks are meeting the credit needs of the communities where they operate, including low- and moderate-income neighborhoods, and to publish a grade. It is the reason banks fund affordable housing and community development at the scale they do.
The CRA does not order any bank to make any particular loan. That is worth saying clearly because it is the most common misunderstanding about the law.
What the law does is keep score. Examiners look at where a bank lends, invests and does business, and they check whether working-class neighborhoods inside its territory are getting served. Then they publish a grade. The grade has teeth because banks need regulators’ permission to merge, acquire or open branches. A weak record invites delay, conditions and public opposition, real friction that banks plan around.
When banks merge, they must show the deal benefits the public, and their CRA record is the evidence. Community groups have used that moment of leverage to negotiate binding community benefits agreements: written commitments for mortgage lending, small-business lending, community development investment and philanthropy in underserved neighborhoods. Since 2016, agreements negotiated through the National Community Reinvestment Coalition alone, ncrc.org/cba, with 22 bank groups total nearly $688 billion.
The Proposal Changes Who Gets Metered
The rule, proposed jointly by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, would not repeal the law. The proposal is available at www.occ.gov/news-issuances/news-releases/2026/nr-ia-2026-64a.pdf.
Today, roughly 1 bank in 6 faces the full examination, the one that reviews community development lending, investment and services and requires public reporting of the underlying data. Under the proposal, that drops to about 1 bank in 20.
Because the Federal Reserve did not join, banks it supervises would keep today’s $1.65 billion threshold. The entire change falls on banks overseen by the OCC and FDIC, where the number facing a full exam would drop from roughly 480 to 86, and about four out of five would be graded on the lightest standard available: basic lending only, with no separate look at community development.
The banks moving out of full review are not the giants, and they are not the corner institutions either. They are the middle: regional and locally significant banks, hundreds of them. That middle band matters more than its size suggests because those are the institutions that write the deals too small for a national bank and too big for a credit union. The four-unit building. The commercial storefront. The contractor expanding to a second crew.
Three other changes travel with the thresholds, and each deserves attention on its own.
Deposit services stop counting. Account products, transaction fees and other deposit-related services would no longer factor into a bank’s grade. Only credit services would. Branch locations still count, but only for banks that still face a service test at all, and that is where the real loss sits: By NCRC’s count, more than 400 banks would no longer be evaluated for branches or services of any kind.
“Economic development” stops requiring jobs. Under current rules, a bank claiming economic development credit must show the financing created, improved or kept jobs for working-class people or places. The proposal drops that requirement and looks mainly at whether the financed business is small.
Nonprofit overhead gets capped. For the largest banks, a community development grant would count only if the receiving organization’s indirect costs stay at or below 15 percent.
Community Economic Leaders Will Feel This First
If you run a community development financial institution, a housing development shop, a small-business center or a workforce program, you have relationships with bankers. Some of those relationships are genuine. Some exist because you were useful to somebody’s exam. You have probably never known which is which. You are about to find out.
That is not cynicism about bankers. It is how institutions work. A loan officer choosing between a straightforward deal and a complicated one in a neighborhood the bank does not know well is making a business decision, and right now the scoring rule puts a thumb on the scale toward the harder deal. Remove the rule, and the thumb comes off. Nobody sends a memo. The calls just get returned a little slower, and then not at all.
Your bank contact may lose their internal argument. Community development officers at midsize banks justify their budgets partly by pointing at the exam. When the exam no longer asks, that justification weakens, and so does their standing inside the bank.
Your job-creating deal loses its advantage. When economic development credit no longer requires job creation, financing a business owned by a wealthy investor in a prosperous part of town can count the same as financing the employer hiring in Hilltop. Both are small businesses. Only one puts people to work where work is scarce. The rule stops distinguishing.
Branch closures stop costing anything for most banks. The largest banks would still be graded on where their branches sit. But several hundred banks would drop out of the service test entirely, and for those, a bank could close every location in a low-income part of the county and take no hit on its grade. For people who are not borrowers, who need a safe place to cash a check, a low-fee account or a person to talk to, that is the whole banking relationship, and for most banks, it is about to become invisible to the exam.
The Data Loss Is the Loss That Lasts
The quietest change is the reporting requirement, and it may be the one that matters longest. Banks under the new threshold would no longer collect and publish detailed CRA lending data. That data is how anybody outside a bank knows what a bank is doing. It is what lets you compare two institutions, document that a neighborhood is being skipped, write a comment letter with numbers in it or challenge a merger with evidence instead of impressions.
Take away the data, and the argument becomes anecdote. You can still say your community is underserved. You just cannot prove it, and neither can anyone else.
This is why “less paperwork” is not a neutral description. The paperwork is the accountability. That $688 billion in negotiated commitments exists because community groups could walk into a merger review holding the numbers. You cannot organize around what you cannot see.
This Rule Is Not Settled
Three federal agencies enforce this law. Only two signed this proposal. The Federal Reserve did not join and declined to comment when reporters asked. That is unusual, and it matters practically: Two banks on the same street could end up judged by different standards depending on which agency oversees them.
The proposal is also not the outer limit of what the agencies are considering. Buried in the 407-page document is a question asking whether the small-bank line should be set at $10 billion and the large-bank line at $30 billion, far beyond what was proposed. Under that version, roughly 98 percent of the banks these two agencies supervise would face the lightest standard, rather than about 80 percent. It is a live option in an open docket, which means a comment opposing only the published thresholds would leave the larger version unopposed.
Not yet scheduled: Federal Register publication. This starts the 60-day comment clock. The proposal still carries a placeholder where the deadline will go.
Your Comment Is Part of the Official Record
This is a proposal, not a law. Regulators are required to read and respond to substantive public comments, and a letter describing a real project financed in a real neighborhood is evidence that no trade association in Washington, D.C., can supply. The window closes 60 days after publication.
Write down what bank financing has built in your community: the building, the business, the loan or the grant. Specifics with addresses beat general concern every time.
Submit your comment at Regulations.gov using Docket ID OCC-2026-0694, or email comments@fdic.gov with RIN 3064-AG31 in the subject line. Comments become part of the public record.
Ask your bank contacts which of their community commitments depend on their current CRA classification, and ask your congressional delegation where its members stand.
Comment on Docket OCC-2026-0694 at www.regulations.gov.
