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FDIC Federal Register Citations

Venture Bank


September 1, 2004

Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: 12 CFR Part 345

comments@fdic.gov


RE: RIN Number 3064-AC50

Dear Mr. Feldman:

I am writing on behalf of my community bank to support the federal bank regulatory agencies’ (Agencies) proposal to enlarge the number of bank and savings associations that will be examined under the small institution Community Reinvestment Act (CRA) examination

The FDIC now proposes to increase the asset threshold for the small bank streamlined CRA examination from $250 million in assets to under $1 billion, without regard to the size of the bank’s holding company. This would greatly relieve the regulatory burden imposed on many small banks which are currently the same as the standards imposed on the nation’s largest $1 trillion banks. I understand this is not an exemption from CRA and that my bank would still have to help meet the credit needs of its entire community and be evaluated by my regulator.

The regulatory burden on small banks has only grown larger in the past few years, including massive new reporting requirements under HMDA, the USA Patriot Act and the privacy provisions of the Gramm-Leach-Bliley Act. The nature of community banks has not changed and when a community bank must comply with the requirements of the large bank CRA examination, the costs and burdens on the community bank increase dramatically. This imposition of a dramatically higher regulatory burden drains both money and personnel away from helping to meet the credit needs of the bank’s community.

Keeping the focus of small banks on lending, which the small bank examination does, would be entirely consistent with the purpose of the Community Reinvestment Act, which is to ensure that the Agencies evaluate how banks help to meet the credit needs of the communities they serve. It is our belief that a community bank’s main purpose is to lend to its community. Lending dollars provide a much larger and more tangible benefit to the local economy than purchasing an investment vehicle.

The new proposal includes adding a mandatory Community Development (CD) criterion for those small banks with assets over $250 million up to $1 billion as an additional component of the streamlined small bank examination. The proposal states that banks will be required to engage in activities that meet credit needs in their assessment area(s), but may balance their community development lending, investing and service activities based on the opportunities in the market and the Bank’s own strategic strengths. The addition of this criterion causes some concern that this is simply form over substance. Questions arise as to what the documentation requirements would be under this part of the examination and how much weight would be provided to lending versus investments versus services.

CRA performance evaluations show that small community banks typically have a strong performance in community lending and services with the only real struggle in finding qualified investments. Qualified investments available to community banks typically provide no tangible benefit to the communities the bank serves. We suggest that the CD criterion be an optional test that may be considered to obtain an “outstanding” rating.

I strongly oppose making the CD lending a separate test from the bank’s overall CRA evaluation. For a community bank, CD 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 CD lending (and services to aid lending and investments as a substitute for lending) fits well within the concept of serving the whole community. A separate test would create an additional CD obligation and regulatory burden that would erode the benefit of the streamlined examination.

We commend the FDIC for proposing changes that do not diminish in any way the obligation of financial institutions subject to CRA to help meet the credit needs of their communities. In conclusion:

• We strongly support increasing the asset-size of banks eligible for the small bank streamlined CRA examination process as a vitally important step in revising and improving the CRA regulations and in reducing regulatory burden.

• We oppose the addition of a “mandatory” community development criterion and instead feel it should be at the option of the bank to obtain a higher rating.

• We strongly oppose making CD lending a separate test from the Bank’s overall CRA evaluation. A separate test would create an additional obligation and regulatory burden that would erode any benefit of the streamlined examination.

While community banks, of course, still will be examined under CRA for their record of helping to meet the credit needs of their communities, these changes will eliminate some of the most problematic and burdensome elements of the current CRA regulation from community banks that are drowning in regulatory red-tape.

Sincerely

Jon M. Jones
President
Venture Bank

 

Last Updated 10/08/2004 regs@fdic.gov

Last Updated: August 4, 2024