Federal Deposit
Insurance Corporation

Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation 550 17th Street, NW
Washington, DC 20429

RE: 12 CFR Part 345
Proposed Revisions to the Community Reinvestment Act Regulations

Dear Sir:

Thank you for providing us with the opportunity to comment on the proposed rule related to Community Reinvestment Act Regulations published in the Federal Register on February 6, 2004.

California Bank & Trust is one of the banking organizations brought together in common ownership by Zions Bancorporation. Our institution is a $9+ billion-dollar bank with banking offices located in California. Our affiliated banks engage in financial activities in Arizona, Colorado, Idaho, Nevada, New Mexico, Utah and Washington. Our family of excellent banks will be directly affected by the proposed changes to the Community Reinvestment Act Regulations.

We appreciate the efforts the agencies are taking to update the CRA regulations and we wish to provide the following comments on the issues outlined in the comment request as follows:

Small Institution Definition
We agree with the proposal to raise the asset threshold defining a small institution and the elimination of a bank holding company's assets from inclusion in this calculation. However, we believe the proposed threshold of $500 million is too low.

We recommend raising the asset threshold for a small institution to $ 1 billion. The number of small institutions has decreased dramatically since 1995 when the current CRA rules were written. Due to inflation and the increase in the size of large banks, increasing the threshold to only $500 million would essentially retain the percentage of industry assets subject to the large institution test – from a little more than 90% to a little less than 90%. Increasing the threshold to $1 billion will only have a small effect on the amount of industry assets covered under the large bank test. Based on December 31, 2003 Call Report data, raising the limit to S 1 billion would reduce the percentage of industry assets covered under the large bank test to 85% and would provide real regulatory relief to small institutions.

Consideration of Credit Terms and Practices
We believe that a high level of compliance with all lending laws must be maintained when providing credit to the members of the communities where we do business. We do not doubt the importance of complying with ECOA, Fair Housing Act, FTC Act, HOEPA, RESPA and TILA. However, these laws were passed by Congress at different times to achieve different purposes. Each includes its own compliance mechanisms and specifies the consequences of violations. Compliance with these laws is already strictly monitored by the agencies during regular compliance examinations and should not be included in determining CRA assessments.

We are concerned with tying CRA assessments to the still undefined concept of predatory lending. The agencies have noted in the proposal that they will "consider all credible evidence of discriminatory, other illegal, or abusive credit practices that comes to their attention". We would hope that the agencies would not look at compliance with the many local predatory lending laws that have been passed in recent years that are so broadly drafted that in several cases, ratings organizations refuse to rate any loans originated in jurisdictions in which they are passed. We are aware of a proposed ordinance in a major California city that defines a home loan as a covered predatory loan regardless of the fees or the rate if the creditor violates any provision of TILA or RESPA. This is a poorly drafted proposal that would not only dry up the availability of credit in that community but would also be unfair to financial institutions if the agencies were to cross-enforce this type of law with CRA assessments.

Public File (Separate Disclosure of Origination and Purchase Transactions)
The agencies propose to separate purchase transactions from origination transactions in banks' public evaluations. Although doing this would not place an additional burden on banks, we are opposed to this change. The availability of capital for secondary market purchases of mortgages has substantially increased the availability and affordability of housing credit. Distinguishing these transactions implies that purchase transactions are less important than originations under the CRA regulations when the opposite may be true.

Qualitative/Quantitative Standards
The agencies have indicated that they may seek to clarify through interagency guidance how qualitative considerations should be applied when assessing a bank's lending, investments and services.

We would welcome this guidance particularly as it would be applied to the two qualitative factors specifically addressed in the regulations, i.e., innovation and complexity. The lack of these factors has been used by examiners as a basis for preclusion from a higher CRA rating in all three of the CRA evaluation tests. We believe that a bank should receive recognition for finding innovative ways to provide CRA related loans, investments and services. However, if a bank can best meet the needs of its community by providing conventional forms of loans, investments and services, then the absence of innovation is irrelevant.

Investment Test
The agencies have indicated that they may develop additional interagency guidance on the investment test. We would welcome guidance on the following:

• Clarification that the investment test is not to be a source of pressure on banks to make imprudent equity investments. This clarification would need to include discussion of the possibility that suitable investment opportunities may not be available in some areas or may require an unreasonable amount of time and effort. Institutions faced with these situations should not be penalized.
• Guidance on counting community development activities outside of assessment areas as long as any efforts taken are at the bank's option.
• Guidance regarding the treatment of prior investments and commitments for future investments. Appropriate weight should be given to investments already on the books. The duration of an investment depends on factors that should be unrelated to a bank's CRA examination cycle and banks should not be expected to churn investments to satisfy CRA requirements.
• Guidance to relieve the pressure on banks to track investments in order to document the provision of services to targeted individuals and communities.
• Guidance on specific dollar amounts required for investments for each rating category based on either a percentage of total assets, total deposits or Tier I capital. Different agencies have different guidelines and two banks with the same characteristics can have very different dollar amount requirements for the various ratings simply because they have a different primary regulatory agency.

Again, thank you for providing us with an opportunity to comment on this proposed rule. If you have any questions concerning our comments, please contact Lynda Buckner at (858) 793-7470.

Sincerely,