Community
West Bank
September 20, 2004
Mr. Robert E. Feldman
Executive Secretary
Attn: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429
Re: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold
for the Small Bank CRA Streamlined Examination
Dear Sir:
I am President/CEO
of Community West Bank, located in Goleta, California, a city of
approximately
55,000. My bank has an asset size of $344
million and as such is subject to large bank CRA exam. I am writing
to strongly support the FDIC’s proposal to raise the threshold
for the streamlined small bank CRA examination to $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
such as my own under the current regulation, which are required to
meet the standards imposed on the nation’s largest $1 trillion
banks. I understand that 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. However, I believe that
this would lower my current regulatory burden. This past CRA exam,
our first under the large bank criteria, resulted in increased regulatory
burden and cost that was significant to an institution our size.
I also support
the addition of a community development criterion to the small
bank examination
for larger community banks. It appears
to be a significant improvement over the investment test. However,
I urge the FDIC to adopt its original $500 million threshold for
small banks without a CD criterion and only apply the new CD criterion
to community banks greater than $500 million up to $1 billion. Banks
under $500 million now hold about the same percent of overall industry
assets as community banks under $250 million did a decade ago when
the revised CRA regulations were adopted, so this adjustment in the
CRA threshold is appropriate. As FDIC examiners know, it has 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. That was certainly not the intent of Congress when it
enacted CRA.
An additional
reason to support the FDIC’s CD criterion is
that it significantly reduces the current regulation’s “cliff
effect”. We know from experience that when a small bank goes
over $250 million, it must completely reorganize its CRA program
and begin a massive new reporting, monitoring and investment program.
If the FDIC adopts its proposal, a state nonmember bank 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 CD criterion. This
would be far more appropriate to the size of the bank, and far better
than subjecting the community bank to the same large bank examination
that applies to $1 trillion banks. This more graduated transition
to the large bank examination is a significant improvement over the
current regulation.
I strongly oppose
making the CD criterion 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 exam.
In conclusion, I believe that the FDIC has proposed a major improvement
in the CRA regulations, one that much more closely aligns the regulations
with the Community Reinvestment Act itself, and I urge the FDIC to
adopt its proposal, with the recommendations above. I will be happy
to discuss these issues further with you if that would be helpful.
Sincerely,
Lynda Nahra
President/CEO
Community West Bank
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