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NEBRASKA BANKERS ASSOCIATION
October 7, 2004
Mr. Robert E. Feldman, Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
comments@fdic.gov
RE: RIN #3064-AC50
Dear Mr. Feldman:
I write on behalf of the Nebraska Bankers Association (NBA) to
express support for the FDIC’s proposal to raise the threshold for the
streamlined “small bank” CRA examination without regard to the size of
the bank’s holding company. The NBA is a trade association representing
257 of Nebraska’s 259 commercial banks and 9 of the 16 savings and loan
institutions in the state of Nebraska.
The FDIC proposes to increase the asset threshold from $250 million
to one billion and to eliminate any consideration of whether the small
bank is owned by a holding company. This proposal represents a
significant positive change in implementing the Community Reinvestment
Act and should greatly reduce regulatory burden on banks which will
become eligible for the small institution examination. We commend the
FDIC for proposing the expansion of the number of banks that will
qualify for examination under the streamlined CRA process, as it is well
known that small banks incur a disproportionately high regulatory cost
when subjected to the large retail bank exam.
The NBA also supports the addition of a community development
criterion to the small bank examination for larger community banks.
However, we would urge the FDIC to adopt its original $500 million
dollar threshold for small banks without imposing the new community
development criterion and only apply the new community development
criterion to community banks with assets between $500 million and $1
billion. Banks under $500 million in assets now hold about the same
percentage of overall industry assets as community banks under $250
million did a decade ago when the revised CRA regulations were adopted,
so this adjustment to the CRA threshold would be appropriate. As FDIC
examiners are aware, it is proven extremely difficult for small banks,
especially those in rural areas, to find appropriate CRA qualified
investments in their communities. Many small banks have had to make
regional or statewide investments that are extremely unlikely to ever
benefit the banks’ own communities in order to satisfy this requirement.
This was certainly not the intent of Congress in enacting the CRA.
An additional reason to support the FDIC’s community development
criterion is that it significantly reduces the current regulation’s
“cliff effect.” Currently, when a small bank exceeds the over $250
million asset threshold, it must completely reorganize its CRA program
and begin a massive new reporting, monitoring and investment program. If
the FDIC adopts its proposal with the revisions suggested above,
qualifying banks would move from the small bank examination to an
expanded but still streamlined small bank examination, with the
flexibility to mix community development loans, services and investments
to meet the new community development criterion. This would be far more
appropriate to the size of the bank, and far better than the current
rule of subjecting community banks to the same large bank examination
that applies to the nation’s largest banks. This more graduated
transition to the large bank examination is a significant improvement
over the current regulation.
I strongly oppose making the Community development criterion a
separate test from the bank’s overall CRA evaluation. For a community
bank, community development lending is not significantly different from
the provision of credit to the entire community. The current small bank
test considers the institution’s overall lending in its community. The
addition of a category of community development lending (and services to
aid lending and investments as a substitute for lending) fits well
within the concept of serving the whole community.
We also support the portion FDIC’s proposal to change the definition
of “community development” from only focusing on low- and
moderate-income area residents to including rural residents. This
modification in the definition will go a long way toward eliminating the
current distortions in the regulation. We would caution the FDIC to
provide a definition of “rural” that will not be subject to misuse to
favor just affluent residents of rural areas.
In conclusion, we would strongly support the increase in the asset
size of banks eligible for the small banks streamlined CRA examination
process as a vitally important step in revising and improving the CRA
regulations and in reducing regulatory burden. We also support
eliminating the separate holding company qualification for the small
bank examination, since it places small community banks that are part of
a larger holding company at a significant disadvantage vis-à-vis their
peers and has no legal basis in the act. We would urge the FDIC to adopt
its proposal, with the recommendation set forth above. We would be happy
to discuss these issues further with you, if that would be of
assistance.
Sincerely,
George Beattie
President
NBA
233 South 13th St.
Lincoln, NE 68508
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