Article written by Rina Jonesen

Recently, US regulators revised the Community Reinvestment Act (CRA). These regulations are meant to supervise banks' performance and ensure that they don't practice redlining—refusing or offering only limited lending services to certain populations, especially minorities. These updated fair lending rules will ensure that banks meet their communities' needs, so more people can access financial services.

Community banks are among the institutions that need to comply with the CRA. Since these banks focus on the needs of families and businesses within their community, they especially need to guarantee that locals can depend on them. And though it may be more challenging for them to do so with limited resources compared to traditional banks, it's not impossible.

how to build stronger strategies in line with the CRA:

Ensure top management understands the Community Reinvestment Act (CRA)

To build a successful CRA strategy, it's vital that community bank leaders first understand it. The leadership is responsible for developing and employing compliance within its organization, as they have a say in operations. Learning more about the CRA can also help them show commitment to the new regulations, which will encourage employees to follow suit and ultimately facilitate the bank's compliance.

To further help community bank leaders learn how to integrate CRA compliance with organizational goals, they can undergo leadership development training. Coaching experts can conduct diagnostic assessments to gauge the current health of the bank and suggest ways to implement CRA initiatives in line with its existing resources and capabilities. These assessments can also determine the talent potential and strengths of a bank's leadership, like innovation and resiliency, and use such traits to help it form strategies aligned with the CRA. In practice, this can help leaders find ways to adapt old bank processes and make them more accessible across a community's demographic groups.

Consider performance context-based initiatives

Performance context refers to a community bank's economic, demographic, and community-specific conditions in its area. Taking note of these factors is important before employing new strategies in line with the CRA, as it guarantees that these will meet the community's needs. One example is improving fair lending practices, which prohibits banks from considering people's race, gender, religion, and disabilities when applying for financial services. This practice is especially applicable to community banks that serve low-income areas.

Community banks can also look at the state of financial awareness and literacy in their local neighborhoods to consider strategies like encouraging employees to volunteer with local nonprofits. This qualifying activity can help improve a bank's CRA evaluations by allowing them to contribute financial knowledge to the operations of these institutions.

Tools, such as Swoovy, make it easy to access a database of nonprofit volunteer opportunities, filter by key words and categories, and track community engagement activity.

Track progress in terms of CRA compliance

Despite implementing different strategies to boost CRA compliance, community banks must know if such activities are helping their progress. Otherwise, there might be better things they can do to improve their compliance. This is crucial to do as most of the CRA's final rule requirements will start being applicable in 2026.

To monitor CRA progress, community banks can access their past performance evaluations on the Federal Reserve's website, which contains their previous ratings and performance. They can compare their current strategies with old ones to address past weaknesses and make adjustments as needed. Community banks can also consult their senior management members to identify areas of improvement.

Staying in line with the CRA ensures that community banks can serve their areas and all of its members to the best of their abilities. These tips can serve as an initial roadmap for building stronger strategies that achieve CRA compliance.