Federal Banking Regulators Seek to Lift Texas Court Injunction on New CRA Rules
Federal banking regulators are making a bold move to push forward new Community Reinvestment Act (CRA) rules by asking the Fifth Circuit Court of Appeals to lift a Texas court injunction that is currently blocking their implementation.
The FDIC, OCC, and Federal Reserve Board are challenging U.S. District Judge Matthew Kacsmaryk’s ruling, which stated that only the geographic area surrounding a bank’s physical facilities should be considered when evaluating its community reinvestment efforts under the CRA. The regulators argue that this narrow interpretation does not align with the changing landscape of the banking industry.
In response to the injunction issued in March, various industry groups, including the U.S. Chamber of Commerce and the American Bankers Association, filed a lawsuit claiming that the new rules would impose significant financial burdens on financial institutions and did not adhere to the statute.
The regulators are emphasizing the need for a comprehensive update to the regulations, highlighting the shift towards online banking and the evolving ways in which banks interact with their communities. They argue that Judge Kacsmaryk’s injunction effectively altered the language of the law, which is not within his jurisdiction.
While the regulators acknowledge that there are areas of the new rules that could be improved, they believe that the Act allows for a broader interpretation of what constitutes a bank’s “entire community.” They suggest that assessment areas should not be limited to physical branch locations but should also consider where banks source their deposits, especially in the age of online banking.
The outcome of this legal battle will have significant implications for how financial institutions are evaluated on their community reinvestment efforts. As the banking industry continues to evolve, it is crucial for regulators to adapt the rules to ensure that all banks are meeting the needs of their entire community, regardless of their business model.