KANSAS BANKERS ASSOCIATION
September 13, 2004
Mr. Robert E. Feldman, Executive Secretary
Attn: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: Community Reinvestment Act Regulations Proposed Revisions
Dear Mr. Feldman:
Thank you for the opportunity to offer comments on the proposed
revisions to the Community Reinvestment Act (CRA). As a non-profit
trade organization having 355 of the 359 Kansas banks as its members,
the Kansas Bankers Association represents a diverse group in terms
of size, representing banks with over $2.5 billion in total assets
to the smallest bank in Kansas with $2.5 million in total assets.
The comments that follow will hopefully provide some insight as changes
to the regulation are contemplated.
Small institution definition. We support the proposed changes to
the definition of “small institution” that increase
the asset threshold from $250 million to $1 billion and that eliminate
any consideration of whether the small institution is owned by
a holding company. According to our calculations, implementation
of this change would affect 29 of the 359 Kansas banks. There is
no question but that the regulatory burden on smaller banks is
exponentially greater and still growing as we enter the brave new
world of assisting the anti-terrorism efforts through the USA PATRIOT
Act. Our data tells us that the banks with $1 billion or less average
34.7 full-time employees. Banks, like other employers, find that
their largest expense internally is their employees, i.e., the
cost of salary and benefits to attract and maintain good people.
It is not within the budget of many of these smaller institutions
to hire a compliance officer to do nothing but compliance. Many
of these banks share the duties of compliance among various officers
of the bank. It would be so much more beneficial for the bank and
for the community for these employees to be able to focus on meeting
the credit and service needs of the community, rather than focusing
on the data collection required under the large bank examination
procedures.
We also strongly support
the proposal to not consider whether a small institution is a part
of a holding company. These institutions
operate quite independently of the holding company. Every bank is
evaluated internally on its own merits and must pass the muster of
its owners’ projections and expectations independently of other
units in the holding company. It only makes sense that the regulation
would treat them the same way.
Community Development
Criteria. In addition to the current streamlined criterion applicable
to all small banks, the proposal would set forth “community
development criterion” that would be applicable to those banks
with assets between $250 million and $1 billion. As we understand
the proposal, there is a lot of flexibility built into these criterion
versus the current large bank test, as a bank would be able to engage
in any one of the three community development activities – lending,
qualified investments or services – and perform well under
the new guidelines.
This flexibility appears to recognize that not all banks face the
same challenges. Things such as competition for qualified investments
with larger banks, low lending demand in an aging demography and
the population shift to urban areas have required some banks to examine
their existing philosophy. We believe that the development of this
new criteria recognizes these very different challenges.
This is especially true
of the proposed changes to the definition of “community development”, expanding “community
development activity” to include efforts in rural areas to
serve, revitalize or stabilize low- and moderate-income individuals
and geographies. As you might guess, there are many, many banks in
Kansas that serve rural customers. Many of these rural customers
represent a way of life that we believe is important to preserve,
as well as being important to our nation’s food supply. These
customers may not technically live in a “community”,
but they certainly are a part of the greater community and are the
reason many communities still survive. It is vitally important that
banks’ efforts to serve, revitalize or stabilize these areas
count toward the CRA rating.
The proposal requests
comment on whether a definition of “rural” would
be helpful. There are many examples of laws that have tried to define
this term. Some would say that it needs no definition as “you
know it when you see it”. Perhaps keeping the definition simple
would be the most beneficial. We would favor a definition that includes
individuals residing in any area that is not an incorporated city
of 10,000 or more.
In conclusion, it is
safe to say that the industry as represented by our membership,
believes that too much time is still spent in
efforts to prove to the examiners that the bank is doing what it
opened its doors to do – lend money and provide services
to the community. While the industry recognizes that this would
in no way diminish the obligation of small institutions to help
meet the credit needs of their communities, the proposal to expand
the small bank institution definition is definitely needed and
evidence of movement in the right direction. Thank you for your
time and attention to this most important matter.
Sincerely,
James S. Maag
President
Kathleen Taylor Olsen
Associate General Counsel
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