FDIC Federal Register Citations

I am commenting in opposition to the proposed revisions to 12 CFR 345 implementing the Community Reinvestment Act (CRA) that would change the definition of "small bank" to raise the asset size threshold to $1 billion regardless of holding company affiliation. However, I support the addition of a community development criterion to the evaluation of small banks without a change to the definition of "small bank."

To my knowledge, a significant number of banks operating in underserved urban areas possess assets between $250 million and $1 billion. These banks' ability to be designated as "small banks" would allow them to effectively circumvent many CRA regulations to which they are currently bound. Whereas some may consider this change (in conjunction with the addition of a community development criterion to the evaluation of small banks) a "streamlining" of the process, I would argue that it weakens the intent of the CRA and reduces service to low-income communities, particularly in urban areas.

Importantly, I do not feel that the existing CRA structure hinders the operation or profitability of small or large banks. That is, small and large banks are not hurt by current regulations. To the contrary, I believe that the current regulatory structure opens up profit-making opportunities for banks that the risk-averse management of financial institutions would not otherwise pursue. Some would make the claim that banks are inherently discriminatory and that the CRA makes them "play fair" -- I will not make this claim, but will instead point to the numerous available data demonstrating (1) lack of activity by financial institutions in low-income areas prior to CRA; and (2) profitability of activities by financial institutions in low-income areas (presumably driven by CRA). My point is that the system is not broken-- quite the contrary. We don't need to fix it or tweak it.

On a personal level, I have worked in low-income urban communities for the better part of the last decade and can attest to the tremendous work in these communities of "large" banks (which could be re-classified as "small" by the proposed regulations) that presumably (i.e. generally understood by all parties at the table) was driven by a desire to meet CRA goals. Colleagues in other cities to whom I have spoken have met with much less success; it is in these cities that the Federal government must continue to wield its strongest levers for improved services, as the goals of CRA have not even come close to being met. The CRA and related regulations as currently conceived are perhaps the strongest levers of all.

And, as mentioned before, the financial institutions will probably turn a tidy profit. (but I am sure that FDIC never gets a thank you).  Please do not alter the CRA to redefine "small banks."

Thank you for your time and consideration,
Ben Dookchitra