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FDIC Federal Register Citations Business Bank of Nevada Mr. Robert E. Feldman Re: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold for the Small Bank CRA Streamlined Examination Dear Sir: I am the SVP of Compliance & Internal Control at Business Bank of Nevada, headquartered in Las Vegas, Nevada, but also with branches in the smaller, more rural, northern Nevada communities of Carson City and Minden. My bank is currently 300 million in asset size; however, 2005 will be the first year we will be required to meet the large bank CRA criteria requirements. I am writing on behalf of our bank 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. We understand that the FDIC’s proposal is not an exemption from CRA and that our bank would still have to help meet the credit needs of its entire community and be evaluated by its primary regulator. However, we believe that the FDIC’s proposal would lower our anticipated regulatory burden to meet the large bank CRA criteria requirements next year by significant man-hours and system enhancement costs. This is one of the primary reasons we support the FDIC’s proposal -- it significantly reduces the current regulation’s “cliff effect.” Today, when a small bank such as Business Bank of Nevada goes over $250 million in assets, it must completely reorganize its CRA program and begin a massive new reporting, monitoring and investment program. As you are more than aware, implementation of large bank CRA requirements at my bank beginning in 2005 will involve not only the 40+ man-hours that is currently expended to meet small bank CRA requirements, but also the significant time and costs to begin meeting the large bank CRA requirements to provide reports to our respective federal bank regulatory agency that reflect our bank’s lending performance over the past year. We estimate it will take in excess of 160 man-hours to implement the system enhancements necessary to do this reporting, and in excess of 80 hours per year to prepare and submit the reports by March 1 of the year following each calendar year in which we collect the data. We 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, we 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 and other regulatory examiners know, it has proven extremely difficult for small banks such as ours, especially those with branches 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. We anticipate that in Business Bank of Nevada’s case, it will have to meet its qualified investment requirements primarily in Las Vegas, thereby reducing funding resources that could be allocated to lending in the more rural communities served by our branches in Carson City and Minden. An additional reason to support the FDIC’s CD criterion is that it significantly reduces the current regulation’s “cliff effect” previously discussed in more detail. If the FDIC adopts its proposal, and forges the path for other bank regulatory agencies, banks 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. We 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. We 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 because Business Bank of Nevada also serves rural-like communities with its branches in Carson City and Minden, Nevada. We think that this change in the definition will go a long way toward eliminating the current distortions in the regulation. We encourage 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, Business Bank of Nevada believes 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 we urge the FDIC to adopt its proposal, with the recommendations above, and lead the way for and with all banking regulatory agencies. Sincerely, George E. Burns Senior Vice President – Compliance & Internal Control cc: The Honorable Alan Greenspan
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| Last Updated 11/05/2004 | regs@fdic.gov | |