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FDIC Federal Register Citations
Chesapeake Bank
From: Cee Klink [mailto:cklink@chesbank.com]
Sent: Tuesday, October 19, 2004 1:32 PM
To: Comments
Subject: RIN No. 3064-AC50
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:
I am Compliance Officer of Chesapeake Bank, located in Kilmarnock, Virginia.
We serve customers in mainly rural communities. My bank is subject to
the large bank CRA exam for the first time this year. Our assets are
just under $350 million. 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.
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 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,
Cecelia G. Klink
AVP, Compliance Officer
Branch Administration
Chesapeake Bank
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