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FDIC Federal Register Citations



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FDIC Federal Register Citations

ILLINOIS FACILITIES FUND

October 5, 2004

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St NW
Washington DC 20429
RE: RIN 3064-AC50
Dear Mr. Feldman:
The Illinois Facilities Fund (IFF) urges you to support the current structure of the Community Reinvestment Act by withdrawing your proposal to raise the “small bank” definition from $250
million to $1 billion in assets and the other proposed changes to CRA. Any changes to CRA and
especially the definition of a “small bank” will:
! Adversely impact the Community Development Financial Institutions (CDFI) industry and
other vital community development investments in low-income and underserved areas
that have been essential to providing communities and individuals with access to capital;
! Result in Illinois only having 13 of 467 FDIC regulated banks subject to the full CRA
examination; and
! Negatively affect community and economic development investments in rural
communities.

Importance of CRA to IFF and CDFIs
CRA has promoted investments by financial institutions in the IFF and served as an essential solution to the problem of the denial of access to capital in minority and low-income communities. As a federally certified community development financial institution (CDFI), the IFF offers lending, facilities planning and development, research and related education and advocacy to Illinois nonprofits serving low-income and special needs populations. Since the inception of the IFF, 12 Illinois banks have provided the IFF with over $31 million at below market rates. This financing is essential to the IFF’s track record of providing more than $75 million in real estate financing to over 200 Illinois nonprofits, resulting in the creation of 7,500 jobs and development of 3.7 million square footage of new real estate in traditionally financially underserved markets. IFF clients include child care centers, food pantries, supportive housing for families and individuals with developmental disabilities, health clinics in rural areas and faithbased organizations in high-need and low-income communities.

In addition to the IFF, CDFIs in communities throughout the country, such as community development credit unions, revolving loan funds, and venture capital funds, have benefited from similar bank investments. And because of CRA have the resources to specialize in providing financial services and access to capital to individuals, small businesses, faith-based or nonprofit community-based organizations in low-income or economically under-invested markets. In 2002 alone, a sample of 442 CDFIs from across the country provided over $6.2 billion in financing, developed 34,000 units of affordable housing, closed 4,100 mortgages and created or maintained more than 34,000 jobs.

Impact on Illinois

If FDIC chooses to raise the small bank standard from $250 million to $1 billion, only 13 of 467 FDIC regulated banks would be subject to the full CRA Exam, including the investment and services tests. This would eliminate the most important incentive for financial institutions to partner with CDFIs and others engaged in community development. Without this incentive, it will be increasingly difficult for community development finance organizations to obtain the resources and investments to fund essential development projects, especially at a time when the national poverty rate is increasing. IFF’s strategic plans, based on a careful market demand analysis showed that there were nonprofits throughout Illinois in need of access to capital, call for significant growth statewide, aiming for $100  million in capital to invest in the next five years. A change to the CRA regulations would pose serious hurdles to attaining that growth.

In Illinois, there are 467 banks regulated by the FDIC with combined assets of over $83.4 billion. 97.2% of these banks have assets under $1 billion. With this change, an additional $31.1 billion in banks assets would only be subject to a streamlined CRA Exam. This combined with the $33.1 billion in assets already subject to a streamlined CRA Exam, results in over $66.6 billion—or 79.8%--in assets of FDIC regulated Illinois banks not subject to the full CRA regulations.

Implement New Community Development Criterion for Existing Small Banks
It would be beneficial for FDIC to implement the new community development criterion for small banks with assets under $250 million that currently are subject to only the streamlined exam instead of impacting banks with assets over $250 million that are currently subject to the full CRA examination. Under FDIC’s proposal, banks with assets between $250 million and $1 billion choose the community development activities to engage in instead of providing an array of comprehensive community development activities needed by low-and moderate-income communities. As an alternative and to ensure community development is part of the CRA evaluation process, it would be beneficial if FDIC chose to subject banks with assets under $250 million to this new community development criterion. Since these banks currently are only subject to a streamlined “small bank” CRA examination, this would provide these banks with the opportunity to be rated on their community development work when currently no opportunity exists. By changing your proposal to impact current “small banks” there will be more bank involvement in community development instead of the significantly less that will result from your current proposal.

Impact on Rural Communities
Many small municipalities and rural areas in Illinois will be negatively impacted by the proposed changes with less community investments targeted to low and moderate-income areas, especially under the new proposed definition of rural. It is essential to support community development and respond to the unique challenges confronting rural communities, but this response should ensure that resources are targeted to those with the greatest need. Changing the definition of community development to encompass all rural areas instead of just low and moderate income areas will result in less resources in areas with the greatest need. Compound this with the fact that the proposed changes in the definition of a small bank will result in only 7 of Illinois’ 102 counties being home to FDIC regulated banks subject to the full CRA Examination. Through IFF lending and investments in many rural areas and small communities throughout Illinois, the IFF knows that there is a great need for investments and capital especially for affordable housing, community facilities and transportation, however, changing the definition of community development to encompass all rural areas and having less banks subject to the full CRA examination will negatively impact low and moderate rural communities with the greatest needs.

Conclusion
CRA has been vital not only for the IFF, but to the growth and sustainability to the Community Development Finance industry and its ability to provide financial services and products to traditionally underserved communities throughout the county. The proposed changes for FDIC regulated banks with assets over $250 million should be withdrawn in order to ensure the continued growth of this important industry.

Sincerely yours,

Elizabeth A. Evans
Director of Government & Community Affairs
Illinois Facilities Fund Illinois Facilities Fund
Chicago
300 West Adams Street
Suite 431
Chicago, Illinois 60606

Last Updated 10/13/2004 regs@fdic.gov

Last Updated: August 4, 2024