News Release: Bank Oversight Should Advance Racial, Environmental Justice


August 8, 2022

Carter Dougherty
(202) 251-6700

Bank Oversight Should Advance Racial, Environmental Justice

Federal banking regulators should ensure that banks advance financial inclusion, further racial justice in lending and avoid making loans or investments that harm the environment or cause housing displacement, a group of public interest organizations argued today.

In a letter to the regulators, a group of 26 civil rights groups, financial inclusion advocates, and financial reform activists called on the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve, and the Office of the Comptroller of the Currency to include more robust standards for banks in their much-needed regulatory update of the Community Reinvestment Act, a 1977 law that requires banks to meet the financial services needs of the communities they serve.

“With a growing racial wealth gap and the increased threats of housing displacement and environmental destruction, it’s time to update the Community Reinvestment Act regulations to ensure that banks invest responsibly in communities of color and low-income neighborhoods,” said Caroline Nagy, senior policy counsel at Americans for Financial Reform Education Fund. “This law is the primary tool bank regulators have to meet their mandates around financial inclusion and they need to use it.” 

The group calls for a new race-conscious approach to CRA bank exams in order to remedy the harms caused by redlining and confront today’s growing racial wealth gap. Even though the CRA was passed in response to redlining, regulators have never required banks to ensure that they’re serving communities of color. 

“Under the current regulations, banks must demonstrate that they’re serving low- and moderate-income communities,” said Nagy. “By incorporating an explicit focus on race, we can center the financial services needs of communities who have been harmed by racist banking practices and move to close the racial wealth gap.”

The group also calls for regulators to expand qualifying bank investments in climate and disaster resiliency and downgrade banks’ CRA ratings when they invest in harmful behavior, such as fair lending violations, financing housing displacement, and causing environmental harms.

The Community Reinvestment Act was passed in 1977 to end redlining, the practice where financial institutions and the U.S. government systematically denied loans and credit to people of color and immigrants. Under the CRA, bank regulators evaluate, and grade banks based on whether they are meeting the financial needs of their communities.