Effects Of Revisions To The CRA In 1995 On Regulatory Enforcement

Abstract

Revisions to the Community Reinvestment Act (CRA) enacted in 1995 were intended to focus greater regulatory attention on objective assessments of CRA-targeted lending. To determine the effectiveness of the revisions, we examine CRA regulatory practices, 1990 through 2000, utilizing a sample of 25,601 bank examinations. Our empirical evidence indicates that CRA examination scheduling reflected CRA ratings and real estate loan levels in the period before, but not after, enactment of the revisions, and that examination intervals, particularly for small banks, lengthened. For a subsample of banks with substandard CRA ratings, changes in loan levels influenced their odds of recovery to a satisfactory rating after, but not before, enactment of the revisions.