On June 4, 2019, Jelena McWilliams, the Chairman of the Federal Deposit Insurance Corporation (“FDIC”), addressed the Community Development Bankers Association. Her remarks emphasized the importance of community banking in the U.S. economy while also touching upon a number of related topics including Minority Depositary Institutions (“MDIs”), the Community Reinvestment Act (“CRA”), Small-Dollar Lending and Innovation.

• Minority Depositary Institutions: Chairman McWilliams noted FDIC’s statutory responsibility to preserve and promote the health of MDIs and outlined steps that the FDIC is taking to support MDIs. These include: appointing a full-time executive to manage MDI programs across the FDIC; increasing the representation of MDI’s on the FDIC’s Community Bank Advisory Committee; hosting roundtables and conferences to promote and explore the work of MDIs; publishing a study on the impact of MDIs in communities; and providing technical assistance to groups seeking to form new MDIs.

• Community Reinvestment Act: Under the CRA, federally-insured banks are required to meet the credit needs of their communities, including low and moderate-income neighborhoods. Chairman McWilliams noted that the banking landscape has changed dramatically since the law was enacted. For that reason, the FDIC, along with the other federal banking agencies, is looking at ways to modernize the CRA framework. Chairman McWilliams indicated that she expects the agencies’ much anticipated CRA proposal will focus on: clarifying what activities qualify for CRA credit; how to assess lending, including digital lending, by banks outside the geographic area where their main branches are located; and ensuring that CRA investments target those most in need in a bank’s community.

• Small-Dollar Lending: According to a recent study by the Federal Reserve Board, nearly four in 10 households cannot cover a $400 emergency with cash. Chairman McWilliams said that the FDIC is seeking ways to encourage banks to step into this underserved space. In November, the FDIC issued a request for information (“RFI”) on small-dollar credit products to gather information on consumer demand, products currently offered by banks, and measures the FDIC can take to encourage banks to offer small-dollar credit products. Following on that RFI, it appears likely that the FDIC will take the lead in developing guidance or a regulation on small dollar lending that could be issued jointly with the Federal Reserve Board and the Office of the Comptroller of the Currency.

• Innovation: The FDIC is establishing a new internal office to promote innovation in the industry. Chairman McWilliams is particularly focused on identifying policy changes necessary to foster innovation and leveraging technology (including fintech) to expand access to the banking system for those who are unbanked or underbanked.

• Minority Depositary Institutions: Chairman McWilliams noted FDIC’s statutory responsibility to preserve and promote the health of MDIs and outlined steps that the FDIC is taking to support MDIs. These include: appointing a full-time executive to manage MDI programs across the FDIC; increasing the representation of MDI’s on the FDIC’s Community Bank Advisory Committee; hosting roundtables and conferences to promote and explore the work of MDIs; publishing a study on the impact of MDIs in communities; and providing technical assistance to groups seeking to form new MDIs.

• Community Reinvestment Act: Under the CRA, federally-insured banks are required to meet the credit needs of their communities, including low and moderate-income neighborhoods. Chairman McWilliams noted that the banking landscape has changed dramatically since the law was enacted. For that reason, the FDIC, along with the other federal banking agencies, is looking at ways to modernize the CRA framework. Chairman McWilliams indicated that she expects the agencies’ much anticipated CRA proposal will focus on: clarifying what activities qualify for CRA credit; how to assess lending, including digital lending, by banks outside the geographic area where their main branches are located; and ensuring that CRA investments target those most in need in a bank’s community.

• Small-Dollar Lending: According to a recent study by the Federal Reserve Board, nearly four in 10 households cannot cover a $400 emergency with cash. Chairman McWilliams said that the FDIC is seeking ways to encourage banks to step into this underserved space. In November, the FDIC issued a request for information (“RFI”) on small-dollar credit products to gather information on consumer demand, products currently offered by banks, and measures the FDIC can take to encourage banks to offer small-dollar credit products. Following on that RFI, it appears likely that the FDIC will take the lead in developing guidance or a regulation on small dollar lending that could be issued jointly with the Federal Reserve Board and the Office of the Comptroller of the Currency.

• Innovation: The FDIC is establishing a new internal office to promote innovation in the industry. Chairman McWilliams is particularly focused on identifying policy changes necessary to foster innovation and leveraging technology (including fintech) to expand access to the banking system for those who are unbanked or underbanked.

• Community Banks: As of March 31, the U.S. has 4,390 community banks. Chairman McWilliams believes that supporting community banks is of paramount importance. Such banks are intertwined with the communities they serve, and the FDIC is the primary Federal supervisor for many of them. The Chairman is halfway through a 50-state community bank listening tour. Informed by her meetings, she has directed the FDIC to: actively seek ways to reduce the regulatory burden on community banks; encourage community banking, including by the establishment of de novo banks; promote the nation’s MDIs; and modernize the CRA, by clarifying CRA obligations for institutions and adopting a regulatory framework that encourages banks to offer products and services to low and moderate-income households.

• Minority Depositary Institutions: Chairman McWilliams noted FDIC’s statutory responsibility to preserve and promote the health of MDIs and outlined steps that the FDIC is taking to support MDIs. These include: appointing a full-time executive to manage MDI programs across the FDIC; increasing the representation of MDI’s on the FDIC’s Community Bank Advisory Committee; hosting roundtables and conferences to promote and explore the work of MDIs; publishing a study on the impact of MDIs in communities; and providing technical assistance to groups seeking to form new MDIs.

• Community Reinvestment Act: Under the CRA, federally-insured banks are required to meet the credit needs of their communities, including low and moderate-income neighborhoods. Chairman McWilliams noted that the banking landscape has changed dramatically since the law was enacted. For that reason, the FDIC, along with the other federal banking agencies, is looking at ways to modernize the CRA framework. Chairman McWilliams indicated that she expects the agencies’ much anticipated CRA proposal will focus on: clarifying what activities qualify for CRA credit; how to assess lending, including digital lending, by banks outside the geographic area where their main branches are located; and ensuring that CRA investments target those most in need in a bank’s community.

• Small-Dollar Lending: According to a recent study by the Federal Reserve Board, nearly four in 10 households cannot cover a $400 emergency with cash. Chairman McWilliams said that the FDIC is seeking ways to encourage banks to step into this underserved space. In November, the FDIC issued a request for information (“RFI”) on small-dollar credit products to gather information on consumer demand, products currently offered by banks, and measures the FDIC can take to encourage banks to offer small-dollar credit products. Following on that RFI, it appears likely that the FDIC will take the lead in developing guidance or a regulation on small dollar lending that could be issued jointly with the Federal Reserve Board and the Office of the Comptroller of the Currency.

• Innovation: The FDIC is establishing a new internal office to promote innovation in the industry. Chairman McWilliams is particularly focused on identifying policy changes necessary to foster innovation and leveraging technology (including fintech) to expand access to the banking system for those who are unbanked or underbanked.