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What are covered CRA Sunshine Agreements? Are they common?

In preparation for an examination, our bank received a request letter from our regulators asking if the bank has any "Covered CRA Sunshine Agreements." What are covered CRA Sunshine Agreements? Are they common?

The Community Investment Act’s (CRA’s) Sunshine Act and its implementing regulations mandate that insured depository institutions, their affiliates, and nongovernmental entities or persons (NGEPs) publicly disclose certain agreements related to the CRA and report the agreements to the bank's primary federal regulator.

Essentially, these requirements apply to agreements between banks and community groups whereby the bank provides certain payments and agrees to provide certain loans, services, and investments related to the bank's fulfillment of its CRA obligations.

Agreements subject to the CRA Sunshine requirements (Covered Agreements) include contracts, arrangements, or understandings that meet all of the following criteria:

  • Are in writing;
  • Involve one or more banks and/or their affiliates as well as one or more NGEPs;
  • Provide that the bank and/or its affiliate will provide cash payments, grants, loans, or other consideration that exceeds certain dollar thresholds in a calendar year;
  • Are "made pursuant to, or in connection with, the fulfillment of" the CRA; and
  • Are with a NGEP that has had a "CRA communication" with the bank or its affiliate.

The ABA Compliance Hotline has seen an uptick in questions related to Covered Agreements, and ABA’s CRA Working Group has discussed the issue on multiple occasions in recent months. In the past, community groups focused on entering Covered Agreements with banks who were preparing to engage in mergers or acquisitions. More recently, some community groups have expanded their efforts to include banks who are preparing for a CRA exam.

Banks should review their community development partnerships to determine whether they have entered into agreements that are subject to the CRA Sunshine requirements. In addition to becoming familiar with the CRA Sunshine regulations, banks should consider establishing a policy describing how the institution will determine when a Covered Agreement is established and who is responsible for associated public disclosure and regulatory reporting requirements.

The CRA Sunshine requirements implement Section 711 of the Gramm-Leach Bliley Act. They were issued on an interagency basis and went into effect on April 1, 2001. (See 12 CFR 207/Regulation G for Federal Reserve, 12 CFR 346 for FDIC and 12 CFR 35 for OCC). (July 2018)