AMERICAN HERITAGE
September 23, 2004
Mr. Robert E. Feldman Executive Secretary
Attention: 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 Exam
Dear Mr. Feldman:
I'm writing in strong support for the FDIC's proposal to increase the
threshold for the streamlined small bank CRA examination to $1 billion,
without regard to the size of the bank's holding company.
In spite of what some consumer groups and some politicians are
claiming, this proposal does not remove or exempt banks below $1 billion
from their CRA requirements. It just addresses the exorbitant costs that
smaller banks face in trying to live up to the same standards for CRA
purposes that are, imposed on trillion dollar banks. It makes no sense
to apply trillion-dollar standards — for CRA or any other purposes for
that matter — to small, community banks.
I agree with the American Bankers Association in supporting the
addition of a community development criterion to the small bank
examination for larger community banks. However, I believe the FDIC
should adopt its original $500 million threshold without a Community
Development (CD) criterion.
The new CD criterion should be applied only to banks greater than
$500 million up to $1 billion. In my state, that applies to six banks.
Community banks up to $500 million now hold about the same percent of
overall industry assets as community banks up to $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's been 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 or its own customers. Congress
certainly did not intend this when it enacted the Community Reinvestment
Act so many years ago.
Importantly, I strongly oppose making the CD criterion a test that is
separate from the bank's overall CRA evaluation. Such differentiation
creates the impression that CD lending is different from providing
credit to the entire community. The current small bank test considers
the institution's overall lending in its community, as it should. 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, eroding what I believe to be the
intent of the streamlined exam.
Finally, I strongly support the FDIC's proposal that would change the
definition of "community development" to include rural residents and not
just focus on low-and moderate-income area residents. This change will
go a long way toward eliminating distortions in the current regulations
that result in a small rural bank being told to invest in regional
affordable housing bonds for an urban area not in the bank's community.
Respectfully,
Linda K Matthews
Assistant Vice President
Member OBA Government Relations Council
American Heritage
Sand Springs, OK
