WHEREAS, In 1977, Congress enacted the Community Reinvestment Act (CRA) to address redlining, the discriminatory denial or withholding of financial services from communities on the basis of race or ethnicity, and to require federal banking regulators to encourage financial institutions to help meet the credit needs of low- and moderate-income communities; and
WHEREAS, The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have proposed rules that would raise the asset threshold for defining the large banks that receive the greatest scrutiny from federal regulators, potentially reducing community development obligations and transparency around small business lending for hundreds of banks; and
WHEREAS, Community Reinvestment Act activity supports investments and services that are essential to the well-being of Philadelphia neighborhoods, including affordable housing development and preservation, community development financial institutions, housing counseling, small-business lending, workforce development, and other locally based community-development efforts; and
WHEREAS, The proposed rules may limit the ability of financial institutions to receive Community Reinvestment Act consideration for general operating support provided to nonprofit organizations and may restrict recognition of certain administrative and indirect costs, thereby reducing flexible resources available to smaller and community-based organizations serving low- and moderate-income communities; and
WHEREAS, Reducing the number of institutions subject to robust Community Reinvestment Act review could diminish incentives for financial institutions to make loans, investments, grants, and other community-development contributions that help address Philadelphia’s affordable-housing needs, expand access to capital for small businesses, and strengthen neighborhood-based organizations; and
WHEREAS,
Banks receiving less scrutiny will no longer have their separate branches evaluated, impacting thousands of bank branches in low- and moderate-income areas which will have reduced incentives to serve these communities; and
WHEREAS, Raising the threshold for defining large banks will mean less banks will have to collect and report data on small business and community development loans, potentially increasing credit deserts and reducing the ability of regulators to understand whether local credit needs are being met; and
WHEREAS,
While the proposed rules reduce the number of banks who are subject to greater oversight, the proposals also increase the number of entities that will be defined as small banks so less banks will be evaluated for their impacts on community development, reducing the incentives to participate in affordable housing programs such as federal Low-Income Housing Tax Credits (LIHTC); and
WHEREAS, Under the proposed rules retail banks will generally no longer be evaluated for whether they offer deposit services such as checking and savings accounts to customers, and the largest banks will no longer have to ensure these services are affordable, likely reducing the availability of these products to unbanked and underbanked households; and
WHEREAS, The proposals would also eliminate the requirement for banks seeking credit for economic development under the CRA to show that their activity creates, preserves, or improves jobs for low- and moderate-income people and areas, incentivizing the further redirection of financing to wealthy upper-income areas; now, therefore, be it
RESOLVED, BY THE COUNCIL OF THE CITY OF PHILADELPHIA,
That the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation are urged to withdraw the proposed amendments to their Community Reinvestment Act rules, which would roll back anti-redlining standards and weaken banking services to low- and moderate-income communities while threatening investments in affordable housing and community development.
End