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FDIC Federal Register Citations

STATEWIDE HOUSING ACTION COALITION

August 12, 2004

Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corp.
550 17th Street NW
Washington, DC 20429

Re: FDIC's Consideration of Changing the Definition of "Small Bank" for Community Reinvestment Act (CRA) Purposes

Dear Mr. Feldman:

We are writing to ask that you contact the Federal Deposit Insurance Corporation (FDIC) to request that they withdraw proposed changes to the Community Reinvestment Act (CRA). If the FDIC adopts this proposal, community development activity in low and moderate-income (LMI) neighborhoods and rural areas throughout Illinois and the nation will be threatened.

In February 2004, federal bank regulators jointly released proposed changes to the regulation of the CRA. Key among the changes was a proposal that would change the definition of a "small bank" from any institution with less that $250 million in assets and not part of a holding company with over $1 billion in assets to include all institutions with less than $500 million in assets regardless of holding company size.

In July 2004, the Office of Thrift Supervision (OTS), disregarding the February proposal, unilaterally announced that they were quadrupling the asset threshold for small institutions to $1 billion regardless of holding company size for the thrifts that it regulates. The Federal Reserve and Office of the Comptroller of the Currency (OCC) subsequently announced they were withdrawing the proposed changes to the CRA regulation and retaining the existing small bank definition. The FDIC delayed a vote on its decision until September 2004, but there are indications that the agency will side with the OTS.

The FDIC's decision is critical for a number of reasons. First, the FDIC is the primary regulator of many state chartered banks that frequently fall between $250 million and $1 billion in assets. For institutions active in Illinois in 2003, nearly 40 percent of assets controlled by FDIC-regulated institutions were held by banks with assets between $250 million and $1 billion. For other regulators, this number ranges from 6 percent for the Federal Reserve to 1.4 percent for the OCC.

If institutions that control a significant number of branches and deposits in LMI and rural communities are subject to streamlined CRA examinations, they will no longer be examined and given credit for their investments in affordable housing developments, developing innovative financial services products that reach the unbanked, or expanding their branch networks into underserved communities. Additionally, these banks, which are significant small business lenders, will no longer publicly report essential small business lending data.

The Statewide Housing Action Coalition (SHAC) works to increase and preserve the supply of decent, affordable, accessible housing in the state of Illinois for low and moderate-income households. The direct results of SHAC's work are community-based organizations with the capacity to develop and preserve affordable housing, a growing constituency with the knowledge and commitment to make affordable housing a public policy priority in Illinois, and increased public and private resources to develop and preserve affordable housing. We have 98 member organizations across the state.

We urge you to contact Chairman Powell of the FDIC and ask the agency to follow the Federal Reserve and OCC and withdraw the proposed changes to the CRA regulation.

Executive Director

Tammie Grossman
Executive Director
Statewide Housing Action Coalition
11 East Adams, Suite 1501
Chicago, IL 60603
 

Last Updated 08/26/2004 regs@fdic.gov

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