Why was the Community Reinvestment Act instituted?
Prior to 1977, many banks were not lending money or providing services in certain areas of their markets such as low- and moderate-income neighborhoods or in certain ethnic communities. The Community Reinvestment Act states that banks will do business within the entire market area in which they serve. How do banks comply? Essentially, banks participate in community reinvestment by lending money for affordable housing developments, or business loans. Banks build partnerships through employee community involvement with nonprofit, for-profit and governmental organizations, which help them identify donation and investment opportunities within the community. Federal bank examiners evaluate if and how a bank is meeting those community reinvestment requirements. How do banks identify community reinvestment opportunities? Through their community development officers, banks develop relationships with local organizations and become involved in opportunities to transform the community. Community
