Federal Deposit
Insurance Corporation

October 20, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Via email to comments@FDIC.gov

Re: RIN Number 3064-AC50

Dear Sir or Madam:

I am writing on behalf of the Pennsylvania Bankers Association. PBA is the statewide trade association representing commercial and savings banks, bank and trust companies, savings associations, trust companies and their affiliates of all sizes in the Commonwealth of Pennsylvania.

We strongly support the FDIC’s proposal to raise the threshold for the streamlined small bank CRA examination to $1 billion without regard to the size of the bank’s holding company. This would greatly relieve the regulatory burden imposed on small banks under the current regulation, which are required to meet the standards imposed on the nation’s largest $1 trillion banks. Community banks would still be required to help meet the credit needs of their entire communities and would continue to be so evaluated by their regulator.

We also support the addition of a community development criterion to the small bank examination for larger community banks, but we believe that 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. 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 has proven extremely 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. This result certainly was not intended by Congress when it enacted CRA.

We strongly oppose making the CD criterion a separate test from the bank’s overall CRA evaluation. Such differentiation creates the impression that CD lending is different from the provision of credit to the entire community. The current small bank test considers the institution’s overall lending in its community. 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 the intent of the streamlined exam.

We strongly support the FDIC’s proposal to change the definition of “community development” from only focusing on low- and moderate-income area residents to including rural residents. This change will go a long way toward eliminating the current distortions in the 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.

Sincerely,
Louise A. Rynd
General Counsel

cc:
The Honorable Julie Williams
Acting Comptroller of the Currency
Independence Square, 250 E Street, S.W.
Washington, DC 20219-0001

The Honorable Alan Greenspan
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551