The Community Reinvestment Act (CRA) and Bank Branching Patterns

Lei Ding and Carolina Reid

No 19-1, Community Affairs Discussion Paper from Federal Reserve Bank of Philadelphia

Abstract: This paper examines the relationship between the Community Reinvestment Act (CRA) and bank branching patterns, measured by the risk of branch closure and the net loss of branches at the neighborhood level, in the aftermath of Great Recession. Between 2009 and 2017, there was a larger decline in the number of bank branches in lower-income neighborhoods than in more affluent ones, raising concerns about access to mainstream financial services. However, once we control for supply and demand factors that influence bank branching decisions, we find generally consistent evidence that the CRA is associated with a lower risk of branch closure, and the effects are stronger for neighborhoods with fewer branches, for larger banks, and for major metro areas. The CRA also reduces the risk of net bank losses in lower-income neighborhoods. The evidence from our analysis is consistent with the notion that the CRA helps banks meet the credit needs of underserved communities and populations by ensuring the continued presence of brick-and-mortar branches.

Keywords: Banking industry; Community Reinvestment Act; Branch; Regulation (search for similar items in EconPapers)
JEL-codes: G21 G34 L10 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2019-09-10
New Economics Papers: this item is included in nep-ban
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.philadelphiafed.org/-/media/frbp/asset ... anching-patterns.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpcd:19-01

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Community Affairs Discussion Paper from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().