Banks Fear Top Grades Out of Reach in Community Lending Rewrite

Banks are firing warning shots that their lending to low-to-moderate income neighborhoods may suffer if federal anti-redlining rule change proposals make passing grades too hard to achieve.

A proposed rewrite of the Community Reinvestment Act would make it nearly impossible for banks to receive an “outstanding” grade on federal regulators’ lending performance reviews, according comment letters submitted last week by three major banking trade groups.

An outstanding grade is the highest a bank can receive for CRA compliance, while poor grades can stymie banks’ growth through expansion or mergers.

If achieving the highest grades is impossible, banks will likely just ...