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Cleveland Fed President Mester Addresses CRA Effectiveness and Reform

Federal Reserve Bank of Cleveland President and CEO Loretta Mester shared her views about community banking and the Community Reinvestment Act (CRA) at the Community Banking in the 21st Century Research and Policy Conference held at the St. Louis Federal Reserve.   

 Speech Highlights:  

  • Community banks are more trusted than big banks, the stock market, or mutual funds 
  • Community banks have an advantage over big banks when lending to small businesses where key information is more known locally than in public documents accessible to competitors  
  • Big banks and online firms are increasing their market share of small business lending at the expense of community banks 
  • But the CRA needs to be updated to better reflect the variety of financial institutions and delivery systems supporting low- and moderate-income lending 
  • For example, the current definition of the CRA’s assessment area was based on the locations of bank branches and ATMs 
  • With widespread interstate banking and online financial transactions, the CRA must be updated to ensure distance lending is still supporting community needs 

The remarks in their entirety are available here.

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