The interagency proposal on the classification  of commercial credit exposures is inappropriate for Iowa State chartered commercial banks.

Implementation of this proposal will produce costs for small and medium sized banks that far outweigh the benefits of the proposed classification scheme.  We have a loan watch list that conforms to the current classification system.  Implementation of the proposal will require our bank to retool our internal rating systems, credit review procedures and internal reporting systems.  Complete retooling of these systems is unnecessary and a waste of resources.

At the same time all these additions to classification procedures are to be added, the old system of analysis, classification and reporting must be retained for real estate, consumer and other non-commercial extensions of credit.

If the agencies decide to put additional effort into development of a new classification scheme, they should first perform the cost/benefit analysis on the proposal to determine its value to the industry and regulators.

I suggest the proposal be tested in the largest and most complex banking organizations. If there is benefit demonstrated throughout, the proposal might be refined and improved to a degree that is implementation costs could be outweighed by the benefits.

I urge the agencies to refrain from implementing this proposal. If the proposal is implemented I urge the Agencies to restrict it to large complex banking organizations.  Small to medium sized institutions already bear an excessive amount of regulatory burden imposed by inappropriate and irrelevant regulation.. There is no valid reason to impose a new commercial loan classification system on small and medium sized banks.

Sincerely,
Jon C. Simplot
President/CEO