Central Bank
From: Larry Albert
Sent: Thursday, March 25, 2004 8:48 AM
To: Comments
Subject: CRA Proposal
Dear Sir or Madam:
As a community banker, I strongly endorse the federal bank regulators'
proposal to increase the asset size of banks eligible for the small
bank
streamlined Community Reinvestment Act (CRA) examination from $250
million to $500 million and elimination of the holding company size
limit (currently $1 billion). This proposal will greatly reduce the
regulatory burden. I am the President of Central Bank, a $260 million
bank located in Stillwater, Minnesota. We have recently crossed the
$250 million threshold and are formulating plans as to how to comply
with the increased requirements brought on by the growth. It will
take
considerably more resources to maintain compliance. You should also
know we are serving the credit needs of our communities with a loan
to
deposit ratio of over 100%. 80% of our portfolio is in small business
loans.
The small bank CRA examination process was an excellent innovation.
As
a community banker, I applaud the agencies for recognizing that it
is
time to expand this critical burden reduction benefit to larger
community banks. At this critical time for the economy, this will
allow
more community banks to focus on what they do best-- fueling America's
local economies. When a bank must comply with the requirements of
the
large bank CRA evaluation process, the costs and burdens increase
dramatically. And the resources devoted to CRA compliance are resources
not available for meeting the credit demands of the community.
Adjusting the asset size limit also more accurately reflects
significant changes and consolidation within the banking industry
in the
last 10 years. To be fair, banks should be evaluated against their
peers, not banks hundreds of time their size. The proposed change
recognizes that it's not right to assess the CRA performance of a
$500
million bank or a $1 billion bank with the same exam procedures used
for
a $500 billion bank. Large banks now stretch from coast-to-coast
with
assets in the hundreds of billions of dollars. It is not fair to
rate a
community bank using the same CRA examination. And, while the proposed
increase is a good first step, the size of banks eligible for the
small-bank streamlined CRA examination should be increased to $2
billion, or at a minimum, $1 billion.
Ironically, community activists seem oblivious to the costs and
burdens. And yet, they object to bank mergers that remove the local
bank from the community. This is contradictory. If community groups
want to keep the local banks in the community where they have better
access to decision-makers, they must recognize that regulatory burdens
are strangling smaller institutions and forcing them to consider
selling
to larger institutions that can better manage the burdens.
Increasing the size of banks eligible for the small-bank streamlined
CRA examination does not relieve banks from CRA responsibilities.
Since
the survival of many community banks is closely intertwined with
the
success and viability of their communities, the increase will merely
eliminate some of the most burdensome requirements.
In summary, I believe that increasing the asset-size of banks eligible
for the small bank streamlined CRA examination process is an important
first step to reducing regulatory burden. I also support elimination
the separate holding company qualification for the streamlined
examination, since it places small community banks that are part
of a
larger holding company at a disadvantage to their peers. While
community banks still must comply with the general requirements of
CRA ,
this change will eliminate some of the most problematic and burdensome
elements of the current CRA regulation from community banks that
are
drowning in regulatory red tape. I also urge the agencies to seriously
consider raising the size of banks eligible for the streamlined
examination to $2 billion or, at least, $1 billion in assets to better
reflect the current demographics of the banking industry.
Sincerely,
Larry Albert
President
Central Bank
Stillwater, MN
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