| California Bank & Trust
April 5, 2004
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation 550 17th Street, NW
Washington, DC 20429
RE: 12 CFR Part 345
Proposed Revisions to the Community Reinvestment Act Regulations
Dear Sir:
Thank you for providing us with the opportunity to comment on the
proposed rule related to Community Reinvestment Act Regulations
published in the Federal Register on February 6, 2004.
California Bank & Trust is one of the banking organizations brought
together in common ownership by Zions Bancorporation. Our institution is
a $9+ billion-dollar bank with banking offices located in California.
Our affiliated banks engage in financial activities in Arizona,
Colorado, Idaho, Nevada, New Mexico, Utah and Washington. Our family of
excellent banks will be directly affected by the proposed changes to the
Community Reinvestment Act Regulations.
We appreciate the efforts the agencies are taking to update the CRA
regulations and we wish to provide the following comments on the issues
outlined in the comment request as follows:
Small Institution Definition
We agree with the proposal to raise the asset threshold defining a small
institution and the elimination of a bank holding company's assets from
inclusion in this calculation. However, we believe the proposed
threshold of $500 million is too low.
We recommend raising the asset threshold for a small institution to $
1 billion. The number of small institutions has decreased dramatically
since 1995 when the current CRA rules were written. Due to inflation and
the increase in the size of large banks, increasing the threshold to
only $500 million would essentially retain the percentage of industry
assets subject to the large institution test – from a little more than
90% to a little less than 90%. Increasing the threshold to $1 billion
will only have a small effect on the
amount of industry assets covered under the large bank test. Based on
December 31, 2003 Call Report data, raising the limit to S 1 billion
would reduce the percentage of industry assets covered under the large
bank test to 85% and would provide real regulatory relief to small
institutions.
Consideration of Credit Terms and Practices
We believe that a high level of compliance with all lending laws must be
maintained when providing credit to the members of the communities where
we do business. We do not doubt the importance of complying with ECOA,
Fair Housing Act, FTC Act, HOEPA, RESPA and TILA. However, these laws
were passed by Congress at different times to achieve different
purposes. Each includes its own compliance mechanisms and specifies the
consequences of violations. Compliance with these laws is already
strictly monitored by the agencies during regular compliance
examinations and should not be included in determining CRA assessments.
We are concerned with tying CRA assessments to the still undefined
concept of predatory lending. The agencies have noted in the proposal
that they will "consider all credible evidence of discriminatory, other
illegal, or abusive credit practices that comes to their attention". We
would hope that the agencies would not look at compliance with the many
local predatory lending laws that have been passed in recent years that
are so broadly drafted that in several cases, ratings organizations
refuse to rate any loans originated in jurisdictions in which they are
passed. We are aware of a proposed ordinance in a major California city
that defines a home loan as a covered predatory loan regardless of the
fees or the rate if the creditor violates any provision of TILA or RESPA.
This is a poorly drafted proposal that would not only dry up the
availability of credit in that community but would also be unfair to
financial institutions if the agencies were to cross-enforce this type
of law with CRA assessments.
Public File (Separate Disclosure of Origination and Purchase
Transactions)
The agencies propose to separate purchase transactions from origination
transactions in banks' public evaluations. Although doing this would not
place an additional burden on banks, we are opposed to this change. The
availability of capital for secondary market purchases of mortgages has
substantially increased the availability and affordability of housing
credit. Distinguishing these transactions implies that purchase
transactions are less important than originations under the CRA
regulations when the opposite may be true.
Qualitative/Quantitative Standards
The agencies have indicated that they may seek to clarify through
interagency guidance how qualitative considerations should be applied
when assessing a bank's lending, investments and services.
We would welcome this guidance particularly as it would be applied to
the two qualitative factors specifically addressed in the regulations,
i.e., innovation and complexity. The lack of these factors has been used
by examiners as a basis for preclusion from a higher CRA rating in all
three of the CRA evaluation tests. We believe that a bank should receive recognition for finding innovative ways to
provide CRA related loans, investments and services. However, if a bank
can best meet the needs of its community by providing conventional forms
of loans, investments and services, then the absence of innovation is
irrelevant.
Investment Test
The agencies have indicated that they may develop additional interagency
guidance on the investment test. We would welcome guidance on the
following:
• Clarification that the investment test is not to be a source of
pressure on banks to make imprudent equity investments. This
clarification would need to include discussion of the possibility that
suitable investment opportunities may not be available in some areas or
may require an unreasonable amount of time and effort. Institutions
faced with these situations should not be penalized.
• Guidance on counting community development activities outside of
assessment areas as long as any efforts taken are at the bank's option.
• Guidance regarding the treatment of prior investments and commitments
for future investments. Appropriate weight should be given to
investments already on the books. The duration of an investment depends
on factors that should be unrelated to a bank's CRA examination cycle
and banks should not be expected to churn investments to satisfy CRA
requirements.
• Guidance to relieve the pressure on banks to track investments in
order to document the provision of services to targeted individuals and
communities.
• Guidance on specific dollar amounts required for investments for each
rating category based on either a percentage of total assets, total
deposits or Tier I capital. Different agencies have different guidelines
and two banks with the same characteristics can have very different
dollar amount requirements for the various ratings simply because they
have a different primary regulatory agency.
Again, thank you for providing us with an opportunity to comment on
this proposed rule. If you have any questions concerning our comments,
please contact Lynda Buckner at (858) 793-7470.
Sincerely, |
