On July 31, 2026, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (the “Agencies”) released a notice of proposed rulemaking (the “Proposal”) to revise their regulatory frameworks for evaluating banks’ Community Reinvestment Act performance. The Federal Reserve did not join the rulemaking.
The Proposal would retain the basic structure of the Agencies’ existing CRA rules from 1995, which have remained in effect as a result of litigation over the 2023 interagency rules, but would make several notable changes. Comments on the Proposal are due October 13, 2026.
1. The Proposal would raise the asset-based thresholds for classifying institutions as small, intermediate, and large banks, with the potential for hundreds of institutions to be reclassified to a lower category with reduced compliance burdens.
The Proposal would revise the total asset size thresholds that determine the tests to which banks are subject, as follows:
| Category |
Current Asset Size Thresholds |
Proposed Asset Size Thresholds |
| Small banks (currently known as “small” banks that are not “intermediate small” banks) |
< $412 million |
< $1 billion |
| Intermediate banks (currently known as “intermediate small” banks) |
$412 million ≤ x < $1.649 billion |
$1 billion ≤ x ≤ $10 billion |
| Large banks |
≥ $1.649 billion |
> $10 billion |
The Agencies estimate that 126 OCC-supervised and 250 FDIC-supervised large banks would be reclassified as intermediate banks under the new thresholds, and 194 OCC-supervised and 604 FDIC-supervised intermediate small banks would be reclassified as small banks. The Agencies estimate that 79.8 percent of all banks subject to the CRA that the Agencies supervise would be classified as small banks.
As under the 1995 rules, large banks would be evaluated under the Lending Test, Service Test, and Investment Test, banks in the middle category (now “intermediate” banks) would be evaluated under a tailored Lending Test and Community Development Test, and banks in the smallest category (now “small” banks) would only be subject to the tailored Lending Test.
2. The revised Lending Tests would evaluate banks’ retail lending performance in their “major product lines” only.
The Agencies propose for the Lending Test (for all bank sizes) to evaluate banks’ retail lending based on only their “major product lines.” Under one alternative in the Proposal, the two largest of the four retail lending product lines (home mortgage, small business, small farm, and consumer lending) would be designated for evaluation in all assessment areas based on a quantitative test of dollar volume and loan count at the bank level. If the bank were to make loans in only one of the four product lines, the Lending Test would only evaluate the bank in that product line. Under another alternative under consideration, major product lines would be designated for evaluation on an assessment area-by-assessment area basis based on quantitative and qualitative factors.
Under either option, the Agencies would evaluate consumer lending only if the bank’s consumer loans represented more than 50 percent of its retail lending by both dollar volume and loan count, or at the bank’s option. Consumer loans would not be subdivided into subcategories such as credit card and motor vehicle loans.
3. The Proposal would make changes to the consideration of community development activities, including by restricting the scope of qualifying community development grants.
The Proposal would make a number of changes and clarifications to the consideration of community development activities. For example, the Proposal would narrow the scope of grants and donations that are eligible to receive credit under the CRA. A grant or donation would only qualify if it will be directly used by the recipient for a program, project, or initiative that has as its primary purpose community development and, for a large bank, is provided to a recipient whose indirect costs for administering the grant or donation do not exceed 15 percent. The bank would need to obtain supporting representations and documentation from grant and donation recipients.
The Proposal would also provide clarity regarding eligible categories of community development (affordable housing; community services, which would be recategorized as “civic assistance” under the Proposal; economic development; and revitalization and stabilization activities). Additionally, the Agencies propose to implement a public, non-exhaustive illustrative list of examples of community development activities, and would also codify an optional confirmation process through which a bank could confirm a loan, investment, grant, or service’s eligibility.
4. The Proposal would replace the concept of a “broader statewide or regional area” for counting a bank’s community development activity with a framework that would count activities that the bank conducts outside its assessment areas so long as the bank meets community development needs in its assessment areas.
Under the Proposal, if a bank adequately met community development needs inside its assessment areas, the bank’s community development activities outside its assessment areas could also receive credit at the State or multistate MSA level or at the bank level. The Proposal sets out two options of “geographic flexibility standards” – one quantitative, and one qualitative – to determine when a bank has met the community development needs of its assessment areas.
5. The Proposal would exclude the consideration of available deposit products when evaluating the range of an institution’s services under the large bank Service Test.
Under the 1995 rules, the Agencies evaluate the availability and effectiveness of a bank’s systems for delivering retail banking services, including the “range of services” that are provided in low-, moderate-, middle-, and upper-income geographies and the degree to which the services are tailored to meet the needs of those geographies. An Interagency Q&A had interpreted such “services” to include an evaluation of “available loan and deposit products.” The Proposal would overrule this regulatory guidance by amending the regulatory text to refer specifically to the “range and responsiveness of the credit services.” However, the Service Test would continue to consider elements like branch distribution and the availability and effectiveness of alternative systems for delivering retail banking services.
6. The Agencies would revise the standards for an institution to qualify as a limited purpose or wholesale bank and are also considering eliminating the Limited Purpose category.
Limited purpose and wholesale banks are subject to a modified Community Development Test in lieu of evaluation on their retail banking operations. The Proposal would make eligible for limited purpose designation those that offer “only a narrow product line (such as credit card or motor vehicle loans)” and offer other types of loans only on an “incidental basis.” The Proposal would make eligible for wholesale designation those banks that are “not in the business of extending home mortgage, small business, small farm, or consumer loans, other than on an incidental basis.”
For both limited purpose and wholesale banks, the term “incidental basis” would be defined as (1) provided infrequently as an—(i) incident to the bank’s specialized operations; or (ii) accommodation to the bank’s customers; and (2) not provided as a lending product the bank advertises or markets to the public or its customers; and (3) incidental lending constitutes no more than 5 percent of the bank’s total lending as of December 31 of both of the prior two calendar years. The Proposal does not clarify how that 5 percent test would be calculated.
The preamble to the Proposal also requests comment on whether the Agencies should eliminate the concept of limited purpose banks altogether, which could mean that currently-designated limited purpose banks would be subject to the regular CRA tests if they did not adopt strategic plans.
7. Strategic plans would remain an option for banks seeking flexibility in their CRA compliance.
The Agencies have proposed various amendments intended to simplify, modernize, and clarify the strategic plan process. For example, the Proposal would provide greater clarity regarding expectations for measurable goals across the three performance test categories. Both Agencies would publish approved strategic plans on their websites, as the OCC does today.
8. State member banks would not be subject to the Proposal.
Because the Federal Reserve did not join in the Proposal, state member banks would remain subject to the 1995 rules, creating the prospect of a fractured CRA framework. The last time the federal banking agencies split in their approach to CRA – in 2020, when the OCC overhauled its CRA rules by itself – the OCC quickly returned to the 1995 rules following a change in presidential administration.
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If you have any questions regarding the Proposal or the CRA framework generally, please contact the following Covington attorneys:
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