Oklahoma
Bankers Association
March 19, 2004
Communications Division
Public Information Room
Mailstop 1-5
Office of the Comptroller of the Currency
250 E Street NW
Washington, DC 20219
Re: Docket No. 04-06
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429
Re: 12 CFR Part 345
Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 200551
Re: Docket No. R-1181
RE: Proposed Revisions to the Community Reinvestment Act Regulations
Good Morning:
The Oklahoma Bankers Association represents 272
member banks – virtually
every commercial bank in our state – and, on behalf of our
Board of Directors, we enthusiastically support the proposal to
increase the “Small Bank Threshold” for CRA examination
purposes from $250 Million to $500 Million This proposal will dramatically
and directly impact seven member banks that are “community” banks
in the most literal sense of that term, and will significantly
reduce the regulatory red tape with which these institutions must
currently comply.
We believe that the “Small Bank Threshold” helps the
Community Reinvestment Act better achieve its original purpose:
to enable examiners to determine realistically whether a bank is
helping to meet its community’s credit needs by reviewing
its loan portfolio and without requiring an “investment” of
some sort, and we salute you for making this proposal a possibility.
It is something that the banking industry has supported for some
time and should help reduce some of the mindless data-reporting
requirements that
consume large amounts of time, energy and
money – all
of which are in short supply at most of our smaller community
banks.
The original act created a simple, understandable
assessment test of the bank’s record of providing credit in its community:
the test considers the institution’s loan-to-deposit ratio;
the percentage of loans in its assessment areas; its record of
lending to borrowers of different income levels and businesses
and farms of different sizes; the geographic distribution of its
loans; and its record of taking action, if warranted, in response
to written complaints about its performance in helping to meet
credit needs in its assessment areas. While it’s true that
most “community” bankers in our state thought it unnecessary,
it was – in its original form – a “no brainer”.
Since then, the red tape requirements for smaller banks have grown
larger, including massive new reporting requirements under HMDA,
the USA Patriot Act and the privacy provisions of the Gramm-Leach-Bliley
Act. And the CRA is but one of some 129 different regulations with
which smaller banks struggle to keep up on a daily basis.
Importantly from our perspective, however, is the
fact that the nature of community banks has not changed since
the CRA was originally
adopted, even though the red tape requirements have changed dramatically. “Large
bank exam” standards mean more staff, more costs, more documentation
and more red tape on things that they must do anyway, every day,
in order to survive in this part of the country.
Stated simply, if community banks – regardless of their
size – don’t take care of their communities and their
customers, the bankers who run them don’t eat. That basic
fact seems to have gotten lost over the course of time, and it’s
refreshing to see that this proposal has finally been put o the
table for discussion.
Oklahoma’s banking community consists of
smaller community banks. There are approximately 210 banks in
our state that are
less that $100 Million in total assets, for example. But at their
core, the banks in our state are fairly simple operations: they
take deposits and make loans. Their business activities are usually
focused on small, defined geographic areas where the bank is
known in the community. The small institution examination accurately
captures the information necessary for examiners to assess whether
a community bank is helping to meet the credit needs of its community,
and nothing more is required to satisfy the Act.
Even though only seven banks would be directly
affected by this proposal in our state, raising the asset threshold
to $500 million
and eliminating the holding company limitation would retain the
percentage of industry assets subject to the large retail institution
test. It would decline only slightly, from a little more than 90%
to a little less than 90%. That decline, though slight, would more
closely align the current distribution of assets between small
and large banks with the distribution that was anticipated when
the Agencies adopted the definition of “small institution.” Thus,
in revising the CRA regulation, the
proposal really preserves the status quo of the regulation, which
has been altered by a drastic decline in the number of banks, inflation
and an enormous increase in the size of large banks.
In a perfect world, we would encourage you to provide
greater relief to community banks than just preserve the status
quo of
this regulation. In fact, we would encourage you to increase this
threshold to $1 Billion which would “only” impact another
six banks in our state.
Raising the limit to $1 billion is appropriate for two reasons.
First, keeping the focus of small institutions on lending, which
the small institution examination does, would be entirely consistent
with the purpose of the Community Reinvestment Act: to ensure that
the Agencies evaluate how banks help meet the credit needs of the
communities they serve.
Second, raising the limit to $1 billion will have
only a small effect on the amount of total industry assets covered
under the
more comprehensive large bank test. According to the Agencies’ own
findings, raising the limit from $250 to $500 million would reduce
total industry assets covered by the large bank test by less
than one percent. According to December 31, 2003, Call Report
data,
raising the limit to $1 billion will reduce the amount of assets
subject to the much more burdensome large institution test by
only 4% (to about 85%).
As minimal as these changes are, the result for the 13 Oklahoma
banks that would be directly affected by such a change would be
significant. The red tape compliance costs would be significantly
reduced, which means the banks would have more resources they can
devote to accomplishing the original intent of the Act itself:
making loans to support the communities served by the affected
institutions.
Accordingly, we urge the Agencies to raise the
limit to at least $1 billion. Such a move would provide significant
regulatory
relief without diminishing in any way the obligation of all insured
depository
institutions to meet the credit needs of their communities. And
while we’re at it, this same rule should also apply to
tax-subsidized credit unions as well.
Thanks for your consideration.
Sincerely,
Roger A. Beverage
President & CEO
Oklahoma Bankers Association
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