As regulators try to agree on how to update the Community Reinvestment Act, a big sticking point may be conforming the 1977 law to today's banking environment while ensuring the law stays true to itself.

Among the key objectives with the CRA reform effort is redefining geographic areas in which banks are evaluated. Those areas are traditionally based on physical branch networks, but the rapid shift to digital banking has prompted a rethink.

While most stakeholders agree that regulators should revisit the assessment areas, some worry a new definition could lead to CRA grade inflation, remove an incentive for banks to keep branches open or divert community investments away from neighborhoods that need them most.

“The central issue going forward will be to preserve the foundations of CRA — the community-based focus, the reliance on community input, and the consideration of discriminatory and other illegal credit practices in the CRA evaluation — while adapting CRA to a changing banking environment,” said Martin Gruenberg, who sits on the Federal Deposit Insurance Corp.'s board and is the former chairman, in a speech last month.

Read more in American Banker.