June 30, 2020
Industry Letter: CRA Consideration for Activities in Response to COVID-19
To All Banking Institutions Subject to the New York Community Reinvestment Act:
The New York State Department of Financial Services (the Department) is issuing this Industry Letter to describe circumstances where covered banking institutions may receive Community Reinvestment Act (“CRA”) credit for activities undertaken in response to the COVID-19 pandemic, particularly for activities involving small businesses and minority- and women-owned businesses.
Small business lending is a crucial component of CRA evaluations. The federal Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) created the Paycheck Protection Loan Program (“PPP”), a new small business loan product administered by the Small Business Administration (“SBA”). The PPP is intended to provide economic relief to small businesses nationwide, including the many New York businesses that have been significantly adversely impacted by the COVID-19 pandemic.
The Department will evaluate PPP loans consistent with guidance jointly issued by the Federal Reserve (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) on May 27, 2020.[1] Generally, loans to businesses in amounts of $1 million or less, including PPP loans, are considered small business loans under the applicable CRA lending test. PPP loans may also receive consideration as innovative or flexible lending practices. A PPP loan in an amount greater than $1 million to a small business may qualify as a community development loan under the purpose of economic development if the loan helped to create or retain jobs, or under revitalization/stabilization if the loan benefitted low- or moderate-income areas or distressed or underserved areas.
Numerous reports and studies have found that people of color and minority- and women-owned businesses have been disproportionately impacted by COVID-19. As described in a separate industry letter issued today, the New York CRA was recently amended to require the Department to consider several aspects of banking institutions’ activities with respect to minority- and women-owned businesses in CRA performance evaluations, consistent with safe and sound operation of the banking institutions. The Department urges institutions to undertake activities, including making loans through the PPP program, to assist people of color and minority- and women-owned businesses impacted by COVID-19.
The Department also encourages institutions to assist all consumers and communities impacted by the COVID-19 pandemic, particularly those that are low- or moderate-income, and will consider appropriate activities for CRA credit. On March 19, 2020, the FRB, FDIC, and OCC issued an interagency statement concerning CRA consideration for activities related to the COVID-19 pandemic.[2] Consistent with that interagency statement, the Department will favorably consider retail banking services and retail lending activities in an institutions’ assessment areas that are responsive to the needs of low- or moderate-income individuals and communities, small businesses, and small farms affected by COVID-19. The Department will also consider for CRA credit community development activities located in a broader statewide or regional area that include institutions’ CRA assessment area and that help to stabilize communities affected by the COVID-19, provided that such institutions are responsive to the community development needs and opportunities that exist in their own assessment area(s).
Sincerely,
Brian H. Montgomery, Deputy Superintendent
New York State Department of Financial Services
[1] Community Reinvestment Act (CRA) Consideration for Activities in Response to the Coronavirus, CA 20-10, May 27, 2020, available online at: https://www.federalreserve.gov/supervisionreg/caletters/caltr2010.htm; associated Frequently Asked Questions available online at: https://www.federalreserve.gov/supervisionreg/caletters/CA%2020-10%20Attachment%20CRA%20Consideration%20for%20Activities%20in%20Response%20to%20COVID-19%20FAQs%20-%20Final.pdf.
[2] Joint Statement on CRA Consideration for Activities in Response to the COVID-19, FIL-19-2020, March 19, 2020. Available online at: https://www.fdic.gov/news/news/financial/2020/fil20019a.pdf.