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HAWAII NATIONAL BANK
March 19, 2004
Mr. Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
Gentlemen:
RE: 12 CFR Part 345, Proposed Revisions to the Community Reinvestment
Act Regulations
Thank you very much for the opportunity to comment on the proposed
amendments to the Community Reinvestment Act (CRA) regulations.
The agencies propose to amend the definition of "small institution"
to mean an institution with total assets of less than $500 million,
without regard to any holding company assets. This proposal is a major
step towards an appropriate implementation of CRA and will reduce the
regulatory burden on those institutions which would become eligible
under the proposed rule. We support this proposal.
In today's banking environment, regulatory burden on community banks
have grown larger, including the new revised reporting requirements for
HMDA, the USA PATRIOT Act, and the privacy provisions of the Gramm-Leach-Bliley
Act. Our Bank is currently the smallest bank headquartered in Honolulu,
yet we have been subjected to the large institution examination with the
associated costs and burden, and our total assets are nearing the
proposed $500 million threshold. All other banks headquartered here have
assets in excess of $1 billion. We respectfully recommend raising the
threshold for small institutions to $1 billion for the following
reasons:
• Keeping the focus of small institutions on lending, which the
small institution, examination does, would be entirely consistent with
the purpose of CRA, which is to
• Keeping the focus of small institutions on lending, which the
small institution examination does, would be entirely consistent with
the purpose of CRA, which is to ensure that the Agencies evaluate how
banks help to meet the credit needs of the communities that they
serve.
• 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 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%. Yet, the additional relief provided would again be
substantial by reducing the compliance burden on more than 500
additional banks and savings associations (as compared to the proposed
$500 million threshold).
A community bank is typically non-complex; it takes in deposits and
it makes loans. Its 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. Accordingly, we urge the Agencies to raise the limit to
at least $1 billion which will provide significant regulatory relief and
will not, to quote the Agencies in the proposal, diminish "in any way
the obligation of all insured depository institutions subject to CRA to
help meet the credit needs of their communities. Instead, the changes
are meant only to address the regulatory burden associated with
evaluating institutions under CRA."
With respect to the agencies' proposal relating to an adverse rating
if an institution is found to have engaged in specified discriminatory,
illegal, or abusive credit practices, we support this proposal.
Again, thank you for the opportunity to provide you with our
comments.
Warren K.K. Luke
Chairman and CEO
Hawaii National Bank
Honolulu, Hawaii
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