FAQs About CRA Exams and Ratings

On a biennial basis, New York State bank examiners conduct an evaluation, pursuant to the Community Reinvestment Act (CRA), of an institution’s performance in helping to meet the credit needs of communities, including those of low or moderate income within its assessment area. An institution’s assessment area reflects those areas in which it operates branches, accepts deposits and/or does a significant amount of lending. Based on the evaluation, a rating of 1-4 is assigned.

1 - indicates an Outstanding record of helping to meet community credit needs.
2 - indicates a Satisfactory record of helping to meet community credit needs.
3 - indicates that the bank Needs to Improve its record of helping to meet community credit needs.
4 - indicates Substantial Non-compliance in helping to meet the credit needs of its community.

These ratings, along with a Performance Evaluation provide the bank and the public an understanding of how well the bank is performing under CRA.

The best way to research the CRA activities of a bank is to contact the bank and request a copy of the Performance Evaluation. It is mandatory that banks make their Performance Evaluations available to the public at each branch office and the institution’s headquarters. Performance Evaluations can also be requested from the bank’s supervisory agency. The Performance Evaluation is designed to show the bank’s CRA rating. Most banks have at least one staff member who serves the role of CRA Officer (sometimes referred to as a Compliance Officer). Call the bank for more information.

The Department of Financial Services regulates only New York State-chartered financial institutions. Some banks choose to operate under a state charter, and some elect to operate under a federal charter.

Federal regulators include the Office of the Comptroller of the Currency (OCC), which regulates all nationally chartered financial institutions. For example, banks that have N.A. (National Association) in their title are nationally chartered financial institutions. The Federal Reserve Bank (FRB) regulates those state-chartered institutions that are members of the Federal Reserve System. The Federal Deposit Insurance Corporation (FDIC) regulates non-FRB member state-chartered banks and state-chartered thrift institutions, and the Office of Thrift Supervision (OTS) regulates federally chartered Thrift institutions, as well as all Savings and Loan Associations.

All state-chartered banks in New York are regulated simultaneously by the Department and one of the above agencies, and the Department maintains a close working relationship with each of them. When possible, the Department examines institutions simultaneously, to maximize efficiency and minimize the financial and resource burdens on the institution.

In a CRA Performance Evaluation examiners evaluate the institution’s community development activity. All institutions, with the exception of certain small banks, are required to engage in some community development activity; although not required to do so, if a small bank elects to engage in community development activities, it may receive favorable consideration for those activities.

Community development is defined as:

1. Affordable housing (including multifamily rental housing) for low- or moderate-income individuals;
2. Community services targeted to low- or moderate-income individuals;
3. Activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration's Development Company or Small Business Investment Company programs or have gross annual revenues of $1 million or less;
4. Activities that revitalize or stabilize low- or moderate-income geographies.; or
5. Activities that prevent defaults and/or foreclosures in certain loans.

An institution receives favorable consideration for those activities that have a primary purpose of community development. Although primary purpose is not defined in the regulation, it is presumed to mean that a majority of the activities engaged in by the beneficiary of the bank’s support, meet the regulatory definition of community development. Community development support may take the form of community development loans, qualified investments (including grants), or community development services.

If an organization’s activities meet the community development definition set forth above, a bank can receive favorable consideration for supporting the organization, in a CRA Performance Evaluation.

It’s not surprising that we receive many phone calls from groups or individuals who have heard about CRA and think that it is a program through which they can apply for funding. However, the Department of Financial Services does not make grants; it regulates state-chartered financial institutions.

The Department may, however, offer a different type of assistance to community groups and banks alike. Through its authority to administer and enforce CRA, the Department plays an active role in facilitating partnerships between banks and communities. Staff are available to work with groups to address specific problems in the community that affect access to capital and community members are encouraged to inform the Department about local issues that may be relevant to a bank’s CRA performance or which may benefit from the Department’s involvement. Staff are also available to provide information and assistance to banks seeking additional lending and investment opportunities.

In accordance with New York Banking Law 28-c, and Supervisory Procedure G 112, state-chartered institutions must give notice to the Department of their intent to close a branch office at least 90 days in advance of the planned closing. In its notice, the bank must provide specific information, including, but not limited to, a statement of the reasons leading to the decision to close the branch, and a detailed map of the area served by the branch, showing the distance and direction of all remaining banks and state-licensed financial service providers. In addition, the bank must provide notice to its branch customers and post notice of its intent to close the branch on the same day that it submitted notice thereof to the Department.

Notice of the planned closing is published in the Department’s Weekly Banking Bulletin, commencing a public comment period. All comments are carefully reviewed and responded to by a Community Reinvestment Analyst, and public comments are shared with the bank for its response. Based on information provided by the bank and gathered from other sources, the Department is then required to make a finding of whether the closing would result in a "significant reduction of banking services" in the community to be affected. While the Department engages in substantial outreach to government officials, community groups and banking institutions in this context, it must be noted that we have no authority whatsoever to prohibit the closing of a bank branch. The Department’s outreach, however, may facilitate contact between the institution and the community, and ultimately mitigate a potentially adverse impact on the community.

While the Department performs thorough analyses of all branch-closing notifications, staff focuses on those that may impact low or moderate-income communities. If the closing branch or its service area includes low or moderate income areas, or if it appears that the closing may reduce services for residents in the community, then Department staff routinely contact local planning departments, community groups or leaders in order to:

1. learn more about the nature of the community to be affected;
2. gather other qualified opinions about the impact of the branch closing on the community; and
3. facilitate dialogue between the bank and the community about local concerns, including, but not limited to, future access to branch services, and seeking an appropriate purchaser or successor tenant for the site.

In some instances, Department staff makes site visits to the closing branch’s service area. Under the appropriate circumstances, the Department may bring issues to the attention of bank management, and ask the bank to reconsider the closing, or consider taking steps to mitigate the impact of the closing.

Anyone may submit a letter of protest regarding the closing to the Department of Financial Services.

In any instance where a branch closing may adversely impact a community, the Department will work with community members and the bank to encourage dialogue between the two parties. The Department encourages the public to comment on a proposed closing.

Many community leaders have a subscription to the Department’s Weekly Bulletin, which publishes all notices. You may forward your comments regarding branch closings to New York State Department of Financial Services, Office of the General Counsel, 1 State Street, New York, New York 10004 or by email to [email protected].

A bank’s record of opening and closing branches is one element of the "Service Test," which assesses an institution’s record of providing retail and community development services in its community. The Department reviews not only a branch closing in low or moderate income census tracts during the examination period, but also reviews branch closings in middle and upper income tracts that are adjacent to and presumably serve low or moderate income tracts.