Regulation BB
What Is Regulation BB?
Regulation BB is a Federal Reserve regulation that carries out the 1977 Community Reinvestment Act. It sets standards to urge bank lending to borrowers in low-and moderate-income networks and expects banks to give certain data to the public. Regulation BB commands that banks must uncover to the public which networks they will serve and the type of credit that they will stretch out there. It likewise expects them to distribute any remarks they have about their Community Reinvestment Act (CRA) statement to the public.
Key Takeaways
- Regulation BB spreads out the Federal Reserve's implementation of the Community Reinvestment Act (CRA).
- The CRA is a federal law that guides regulators to urge lenders to supply credit and banking services to all fragments of the networks they serve, including low-and moderate-income areas.
- Regulation BB spreads out the performance standards, ramifications for poor evaluations, and data collection and disclosures that lenders are held to
Grasping Regulation BB
Regulation BB is part of the implementation of the CRA. This act empowers banks and lending institutions to stretch out credit to all sections of society, including the less creditworthy. Regulation BB, accordingly, requires these substances to unveil statements with respect to their policies on this. Regulation BB further approves regulatory specialists to survey how actually financial institutions have met the credit needs of all fragments of the networks they serve, including low-and moderate-income areas. Financial institutions are expected to address the issues of all sections of their networks in a way steady with sound operating choices.
The CRA was passed in 1977 to address oppressive lending practices that worked to the burden of lower-and moderate-income areas. This unfair practice was known as redlining and involved the denial of credit services to occupants of specific areas, which areas were signified on Home Owners' Loan Corporation residential security maps by red.
Regulation BB sets performance standards, tests, and ratings for lenders in view of the loans they have made to borrowers of various income portions. In view of these standards, regulators can involve the a lender's performance as evidence of oppressive lending practices, which can negatively impact bank controller's overall evaluation of a lender's performance and can defer or block required regulatory endorsements or applications that a lender needs.
Lender performance standards depend on a bank's lending, investment, and delivery of banking and community development services to the networks that they serve. From these three criteria, regulators assign every lender a rating on a four point scale to assess performance in serving all sections of their networks as required by the CRA.
Elective community development performance standards and tests are spread out for wholesale and limited purpose banks, which don't offer general retail lending or just deal in specific types of credit, for example, vehicle loans. Streamlined standards are accessible to assess small banks whose volume of business could make compliance challenging to decide.
The regulation additionally sets collection, disclosure, record keeping requirements to follow banks' compliance with the performance standards for community lending. Regulation BB expects banks to collect data on small business, small farm, community development, and home mortgage lending in the networks that they serve. It additionally permits, however doesn't expect, banks to collect comparative data on consumer lending. Banks are required to make a portion of this data, alongside records of any significant written remarks or grievances they have received accessible to the public.
