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FDIC Federal Register Citations
Chesapeake
Bank
From:
Jeff Szyperski [mailto:jszyperski@chesbank.com]
Sent: Monday, October 18, 2004 3:06 PM
To: Comments
Cc: psmith@aba.com
Subject: RIN No. 3064-AC50
October 18, 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 Examination
Dear Sir or Madam:
I am Chairman, President & CEO of Chesapeake Bank. Our main office
is located in the rural town of Kilmarnock in Lancaster County on the
Northern Neck of Virginia. My bank is $350 million in assets and is
subject to the large bank CRA exam. I am writing to 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 many small banks such as my own under the current regulation,
which are required to meet the standards imposed on the nation's largest
$1 trillion banks. I understand that this is not an exemption from
CRA and that my bank would still have to help meet the credit needs
of its entire community and be evaluated by my regulator. However,
I believe that this would lower my current regulatory burden and the
associated expenses.
I also support the addition of a community development criterion to
the small bank examination for larger community banks. It appears to
be a significant improvement over the investment test. However, I urge
the FDIC to adopt its original $500 million threshold for small banks
without a CD criterion and only apply the new CD criterion to community
banks greater than $500 million up to $1 billion. Banks under $500
million now hold about the same percent of overall industry assets
as community banks under $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. That was certainly not
the intent of Congress when it enacted CRA.
An additional reason to support the FDIC's CD criterion is that it
significantly reduces the current regulation's "cliff effect." Today,
when a small bank goes over $250 million, it must completely reorganize
its CRA program and begin a massive new reporting, monitoring and investment
program. If the FDIC adopts its proposal, a state nonmember bank would
move from the small bank examination to an expanded but still streamlined
small bank examination, with the flexibility to mix Community Development
loans, services and investments to meet the new CD criterion. This
would be far more appropriate to the size of the bank, and far better
than subjecting the community bank to the same large bank examination
that applies to $1 trillion banks. This more graduated transition to
the large bank examination is a significant improvement over the current
regulation.
I strongly oppose making the CD criterion a separate test from the
bank's overall CRA evaluation. For a community bank, CD lending is
not significantly 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 that would erode the benefit of the streamlined exam.
I 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. I think that this change in
the definition will go a long way toward eliminating the current distortions
in the regulation. We caution the FDIC to provide a definition of "rural" that
will not be subject to misuse to favor just affluent residents of rural
areas.
In conclusion, I believe that the FDIC has proposed a major improvement
in the CRA regulations, one that much more closely aligns the regulations
with the Community Reinvestment Act itself, and I urge the FDIC to
adopt its proposal, with the recommendations above. I will be happy
to discuss these issues further with you, if that would be helpful.
Sincerely,
Jeffrey M. Szyperski
Chairman, President & CEO
Chesapeake Bank
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