lael brainard : modernizing and strengthening cra regulations - a conversation with the consumer bankers association speech by ms lael brainard, member of the board of governors of the federal reserve system, at the consumer bankers association community reinvestment act committee meeting, 17 december 2020. * * * good afternoon and thank you for inviting me to take part in the consumer bankers association ’ s ( cba ’ s ) community reinvestment act ( cra ) committee meeting. the cra officers and teams at your institutions play an important role in identifying community priorities and building partnerships with stakeholders to implement effective cra programs. we appreciate the opportunity to hear feedback from cba members and this committee reflecting your extensive experience making loans and investments to support local communities. 1 the federal reserve issued an advance notice of proposed rulemaking ( anpr ) on cra modernization earlier this fall. 2 the anpr seeks to strengthen the regulation in alignment with the cra statute, and the discussion in the anpr recognizes the historical context of redlining and racial discrimination prior to the cra ’ s enactment in 1977. we believe that the cra remains an important tool to promote economic and financial inclusion, and we have specifically asked for feedback about what modifications and approaches would strengthen cra regulatory implementation in addressing ongoing systemic inequity in credit access for minority individuals and communities. we also recognize the need to update the regulation to reflect the changes that have happened in the banking industry over time. in addition, the anpr reflects other key objectives like providing greater consistency and transparency in cra examinations, effectively tailoring regulations, and minimizing data burden. we ’ re looking forward to feedback on these big - picture questions and objectives in addition to the specific proposals discussed in the anpr. many of the ideas in the anpr reflect interagency discussions, and our hope is that the anpr provides a foundation for the agencies to converge on a consistent approach to cra modernization that also has strong stakeholder support. let me take a minute to highlight some of the key proposals addressed in the anpr. first, we propose a cra evaluation framework that incorporates the use of metrics and tailored standards that take into account differences across local communities and reflect differences in bank size and business model. we heard feedback about the importance of separately evaluating retail and community development activities in order to capture the distinct importance of each type of activity in meeting community needs. therefore, the anpr proposes that large retail banks would be

, morobe province, which the bank of papua new guinea licensed in 2004, is showing strong signs of growth by expanding its micro - finance operations into the city of lae after one year of commencement. these initiatives are not in direct competition with the existing financial institutions, but are seen as complementary to the financial system. foreign exchange control liberalisation let me touch on the bank ’ s decision to remove the remaining controls on foreign exchange. the first question many may ask is the obvious one : why liberalise the exchange controls? the rationale as i have stated is to allow for a smoother flow of capital into and out of the country. under a floating exchange rate regime, exchange controls are not required because the market can adjust itself to meet the supply and demand of foreign currency and the exchange rate acts as an adjustor to adverse impacts from domestic or external shocks. prior attempts and intentions to liberalise exchange controls did not eventuate. in 1994, after the kina was floated, the controls were retained to allow the severely depleted reserves to be rebuilt to comfortable levels. again in 1997 and 1998, the timing was inappropriate with adverse economic shocks resulting from the el nino drought, sandline crisis and low confidence levels. one of the deciding factors not to pursue liberalisation was that, the central bank did not have the independence to rein in a monetary expansion, as a result of any expansionary fiscal policy, and to stop the pressure on the kina emanating from it. in 2000, whilst the enactment of the central banking act gave the central bank greater independence, the controls were kept to give the bank time to develop appropriate monetary instruments and prudential standards to achieve the objective of price stability. the stable macroeconomic environment that emerged in 2003 and improved outlook for the country has enabled the bank to revisit the liberalisation of the exchange controls. if ever there was a time to liberalise, this is it. the next question many of you may have is : what form would this liberalisation process take? as explained in my address to the annual mining conference in december 2004, the liberalisation involves imposing exemptions on the exchange control regulations, without actually doing away with the legislation on foreign exchange and gold regulation itself. we are in a sense shelving the legislation with the possibility of re - introducing it as and when the need arises, the most probable being in the event of a severe balance of payments crisis. another question on the minds of many present here is : when will