What is Community Investment?

The Community Reinvestment Act passed in 1977 is just one of a series of laws in the United States designed to help certain disadvantaged groups effectively access financing services.

Community Reinvestment Act

Right!

The Community Reinvestment Act passed in 1977 is just one of a series of laws in the United States designed to help certain disadvantaged groups effectively access financing services.

In the 1960s and 1970s, credit discrimination caused by market failures and racial discrimination severely hindered the credit needs of low- and middle-income regions and borrowers in the United States. The Community Reinvestment Act passed in 1977 is just one of a series of laws in the United States designed to help certain disadvantaged groups effectively access financing services. As early as 1968, the United States enacted the Fair Housing Act, which banned

The United States Congress passed the Community Reinvestment Act in 1977 ^[1]

In the 30 years since the CRA was promulgated, it has continuously learned the lessons from the implementation process and made multiple modifications to adapt to changes in the economic and financial environment. (1) In 1989, it was required to publicly disclose the CRA level and evaluation of the institution; the assessment results were divided into four levels; and the basic information such as ethnicity, race, gender, and income of the loan applicant was incorporated into the Housing Mortgage Loan Disclosure Act (HMDA ) Database. (2) In 1992, Fannie Mae and Fannie Maetwo government-backed enterprises were required to purchase and securitize some CRA loan assets in order to increase the market liquidity of such loans. (3) In 1994, it was clarified that if a bank wants to set up branches across states, it must obtain a higher CRA rating to obtain regulatory approval. (4) The CRA assessment process was revised in 1995 to make it more objective and performance-oriented; the types of institutions were classified according to asset size, and the four assessment models established for different institutions have been used to this day. (5) In 1999, the deposit institution's CRA assessment results were used as conditions for its application to establish a financial holding company and develop new financial business; required disclosure of CRA agreements negotiated between financial institutions and community organizations; and reduced the frequency of CRA assessment of small banks. (6) In 2005, the threshold for assets of small banks was raised, and simplified assessment procedures were applied; the category of "small and medium banks" was added to small banks, and loan assessments and community development assessments were applied; the practice of clearly discriminating, illegal and fraudulent loans will be regulated CRA assessment has negative impacts. (7) In 2008, low-cost education loans issued by financial institutions were included in the CRA rating assessment scope of institutions.

The United States is currently continuing discussions on the next amendment to the Community Reinvestment Act. The latest "Community Reinvestment Modernization Act of 2009" submitted by Congressman Johnson to the US House of Representatives Financial Services Committee on March 12, 2009

Community reinvestment laws are not forcing financial institutions to issue high-risk loans and run counter to the principle of sound business operations. The implementation of the Community Reinvestment Law can objectively promote the economic development of local communities, and at the same time bring more profit opportunities for financial institutions, forming a win-win situation.

The implementation of the Community Reinvestment Law has established a mechanism for the common development of financial institutions and their communities. Some banks that focus on public image and intend to acquire other institutions have implemented community reinvestment laws very seriously in order to obtain policy support. These financial institutions strengthen credit, increase their business outlets, and provide more comprehensive and higher-quality services. Through the Community Reinvestment Law, financial institutions continue to invest the deposit funds absorbed in the region into the local economic construction, which has reduced the outflow of funds to the less developed regions to a certain extent.

The Community Reinvestment Act has played a positive role in promoting local economic development and promoting the effective provision of credit services by financial institutions. According to a survey by the Federal Reserve, the joint collaboration between community financial institutions, community development organizations, and regulators has played a key role in the rapid economic development of some underdeveloped regions in the United States. Community financial institutions provide credit services to local businesses and residents and help them with risk management. Financial institutions that actively implement the Community Reinvestment Law usually receive the support of the local government. The government not only deposits its own funds in these institutions, but also encourages residents of the community to deposit funds in financial institutions with a high rating in the Community Reinvestment Law.

The dispute over the CRA has not been interrupted for 30 years.

Critics argue: (1)

In recent years, in order to solve the problem of the outflow of deposit funds in counties, China s Party Central Committee Document No. 1 has repeatedly mentioned that county financial institutions put a certain percentage of deposits in local areas. CRA has gradually solved the counties for us with more than 30 years of practical experience and lessons. Finance, rural finance, financing of SMEs, student loans, laid-off employment and other vulnerable areas, group loans provide practical lessons.

At the 19th meeting of the 11th Standing Committee of the CPPCC National Committee in November 2012, Ma Peihua, a member of the Standing Committee of the CPPCC National Committee, suggested in a speech on behalf of the CDB that lender regulations, community reinvestment laws and community bank supplements must be introduced as soon as possible. Regulations and other laws and regulations. ^[4]

Ma Peihua

Standing committee member Ma Peihua said that reform and opening up are eternal power to promote scientific development. Not long ago, the state ministries and commissions successively issued detailed implementation rules for 42 aspects of promoting private investment, which will create a wider market space for private capital.

In order to further activate private investment, Standing Committee member Ma Peihua suggested: First, increase supervision and inspection to ensure the implementation of detailed rules and strive for effectiveness. Further encourage social funds to enter the fields of railway, municipal administration, energy, telecommunications, finance, culture, health, education, science and technology, etc., and indeed launch a number of specific projects that private investment can participate in construction. The second is to speed up the reform of interest rate liberalization and guide private capital into the financial sector. It is recommended to speed up the comprehensive financial reform test work, and under the premise of strengthening supervision and effectively preventing risks, relax market access for small and medium-sized financial institutions, build a competitive grass-roots financial service system, further enhance the ability of financial services to the real economy, and provide access to China s private capital. Experience in the financial sector. Establish a reasonable fee system and deposit insurance system. Laws and regulations such as lender regulations, community reinvestment laws, and community bank supplementary regulations should be promulgated as soon as possible.