How COVID-19 Impacts CRA Obligations on Financial Institutions
We are fortunate to have members of the Berkshire Bank team, Gary Levante, SVP, Corporate Responsibility & Culture, and Erin Boggan, SVP, CRA & Fair Lending, share insight in how COVID-19 is impacting the financial industry at this time.
As we continue to navigate through this period of uncertainty and the short and long-term effects that COVID-19 will have on our stakeholders and communities, we’re reminded of the importance of those working at the intersection of social good and business. Those of us working in this space are doing what we’ve always done; collaborating, responding to critical needs, and ensuring the financial resiliency of our communities. At Berkshire Bank, we’re thinking about both the immediate and long-term impacts by harnessing our assets and Be FIRST culture to ensure the health, safety, and economic resiliency of our employees, customers, and communities.
Financial institutions have always been in a unique position to help during times of crisis, not only with their philanthropy, volunteerism, and other community investments but with their capital. Banks are also one of the only industries to be federally regulated to reinvest in their communities. The Community Reinvestment Act (CRA), adopted in 1977 in response to redlining and lack of investment in low-income communities, encourages banks to meet the credit needs of low and moderate-income neighborhoods. The CRA requires federal regulators to assess how well each bank fulfills its obligations to these communities across Lending, Investments, and Services.
While there are many ways banks, including Berkshire, can and are helping; providing financial flexibility to their customers, deploying additional capital, and waiving fees, those working in the corporate philanthropy and community involvement space have a unique opportunity to help enhance their support of their institution’s CRA performance during the current pandemic. In response to COVID-19, the federal government issued new guidance allowing financial institutions to qualify certain COVID-19 related responses both inside and outside their assessment areas for CRA credit. These activities support community services and investments targeted to low-moderate income individuals and communities. Some examples include:
- Investments or service activities that support the provision of food supplies
- Investments and services that support access to health care and technology
- Economic development activities that sustain small business operations
Under normal circumstances, for volunteer services to qualify for CRA credit, the activity must have occurred on behalf of the bank, benefited a low-moderate income community in the bank’s service area, and the employee delivering the service must have used their expertise as a financial services professional. For financial investments to qualify they must be made in the bank’s assessment area and primarily benefit low-moderate income individuals. The new guidance allows for a much broader set of services and investments to be counted so long as they support relief efforts of COVID-19.
In today’s virtual environment, many companies are not able to physically deploy volunteers. However, stopping volunteerism all together would only compound the challenges facing nonprofits and those they serve. Instead, we must embrace new delivery methods to meet critical needs, including financial education, which the current crisis has highlighted as a deficit in all our communities, not just the ones often overlooked. Financial institutions can adapt their strategies and continue to deliver relevant content virtually, leveraging employee volunteers, and technology to deliver classes in this new environment. Collectively banks and all companies can reimagine the delivery of their programs in collaboration with nonprofit partners. Many volunteer opportunities that previously were done in person, including career coaching and mock interviewing, can and should be adapted and conducted virtually. Companies can also think about how they can harness their supply chain, as many financial institutions have access to supplies that nonprofits and hospitals need during this time. At Berkshire, we have sourced masks, hand sanitizers, and other products in short supply and donated them to front-line responders. Not only is this another way to harness the power of your business for good but banks can obtain some extra CRA credit.
While the current crisis may have reshaped how we deliver programs and what we can “count” for CRA, it doesn’t have to change the why or the vital importance of businesses harnessing their human capital and resources to support all the stakeholders. We will get through our current environment, together, and in the process, build a more resilient ecosystem for social good.