Performance Ratings Indicate They Already Have

When the new 2023 CRA Rule was approved by regulators FDIC Chairman Martin Gruenberg indicated one of the goals was to “raise the bar” for CRA performance ratings. Now that the final 2023 CRA performance ratings are in it looks like the regulators may already have raised the bar!

During the first year of the Biden Administration (2021) there were 1,129 CRA exams performed for which CRA performance ratings were released. Of those exams 15 resulted in a “Needs to Improve” or “Substantial Non-compliance” rating accounting 1.33% of performance ratings that year. 

During 2023 1,068 CRA performance ratings were published of which 31 resulted in less than a satisfactory performance rating. This is equivalent to a CRA exam failure rate of 2.9% or more than double the failure rate for exams conducted during 2021 and 2022.

Figure 1: CRA Exam Failure Rate (Source: FFIEC CRA Examination Ratings)

Comparing the CRA performance evaluations across the Federal Reserve Board, the FDIC, and the OCC reveals some other interesting observations. 

During 2021 only 2 OCC-regulated banks (of 201 examined that year) failed their CRA exam. In 2023 9 OCC-regulated banks failed their CRA exam (of 240 examined banks). This resulted in a 1.0% failure rate jumping to 3.75%.

For banks regulated by the Federal Reserve the CRA exam failure rate for exams published during 2021 was 0.54% (1 of 185). During 2023 that failure rate increased to 1.71% (3 of 175).

Finally, for CRA exams conducted by the FDIC during 2021, 12 banks failed their CRA exam (a failure rate of 1.61%). But during 2023, 22 FDIC-regulated banks failed their CRA exams accounting for a failure rate of 3.37%.

The foregoing data indicates that banks regulated by the Federal Reserve fail their CRA exams at a much lower rate than banks regulated by the OCC or the FDIC. The data also show that the most dramatic change in CRA exam failure rates occurred at the OCC which had an increase from a 1.0% CRA exam failure rate during 2021 to a 3.75% failure rate during 2023.

While the foregoing data represents a significant increase in CRA exam failure rates from 2021 through 2023 those increased failure rates pale in comparison to the projected 10.3% institution failure rates when the 2023 CRA Rule is put into effect, now scheduled to begin in January 2026. GeoDataVision clients have told us their CRA exams during the last 2 years were the toughest they have ever experienced. But that may be a preview of things to come in CRA enforcement when the 2023 CRA is scheduled to go into effect in January 2026. Fasten your seat belts!