Why A Bank Serves A Geographic Area

1524 WordsMay 13, 20167 Pages
If a bank serves a geographic area that extends substantially beyond a state boundary, the bank must delineate separate assessment areas for the areas in each state. If a bank serves a geographic area that extends substantially beyond an MSA boundary, the bank must delineate separate assessment areas for the areas inside and outside the MSA. PERFORMANCE TESTS AND STANDARDS The Regulatory Agencies evaluate a bank’s CRA performance under various standards depending on whether the bank is a large or small banks, is a wholesale or limited purpose bank, or is operating under a strategic plan. CRA ratings are publicly available. Therefore, a poor rating may have an effect on a bank’s reputation. There is no monetary fine or other direct financial repercussion for a poor grade. If a bank applies to open a new branch or any type of merger or combination transaction with another financial institution the bank’s CRA rating is considered in the approval or disapproval of the application. A poor CRA rating may result in the denial of a covered application. LARGE BANKS The Regulatory Agencies use three tests to evaluate an institutions CRA performance: the lending, investment, and service tests. A bank is a large bank if it is not a small bank, that is if the past two years it had assets in excess of $1.216 billion (adjusted annually for inflation). A small bank (including intermediate small banks) may choose to be tested under the large bank standards, provided they have collected
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