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FDIC Federal Register Citations

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


Last Updated 09/15/2004 regs@fdic.gov

Last Updated: August 4, 2024