Venture Bank
September 1, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: 12 CFR Part 345
comments@fdic.gov
RE: RIN Number 3064-AC50
Dear Mr. Feldman:
I am writing
on behalf of my community bank to support the federal bank regulatory
agencies’ (Agencies)
proposal to enlarge the number of bank and savings associations
that will be examined under
the small institution Community Reinvestment Act (CRA) examination
The FDIC now proposes to increase the asset threshold for the small
bank streamlined CRA examination from $250 million in assets to
under $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 which are currently the same as the
standards imposed on the nation’s largest $1 trillion banks.
I understand 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.
The regulatory
burden on small banks has only grown larger in the past few years,
including
massive new reporting requirements under
HMDA, the USA Patriot Act and the privacy provisions of the Gramm-Leach-Bliley
Act. The nature of community banks has not changed and when a community
bank must comply with the requirements of the large bank CRA examination,
the costs and burdens on the community bank increase dramatically.
This imposition of a dramatically higher regulatory burden drains
both money and personnel away from helping to meet the credit needs
of the bank’s community.
Keeping the focus
of small banks on lending, which the small bank examination does,
would
be entirely consistent with the purpose of
the Community Reinvestment Act, which is to ensure that the Agencies
evaluate how banks help to meet the credit needs of the communities
they serve. It is our belief that a community bank’s main purpose
is to lend to its community. Lending dollars provide a much larger
and more tangible benefit to the local economy than purchasing an
investment vehicle.
The new proposal
includes adding a mandatory Community Development (CD) criterion
for those
small banks with assets over $250 million
up to $1 billion as an additional component of the streamlined small
bank examination. The proposal states that banks will be required
to engage in activities that meet credit needs in their assessment
area(s), but may balance their community development lending, investing
and service activities based on the opportunities in the market and
the Bank’s own strategic strengths. The addition of this criterion
causes some concern that this is simply form over substance. Questions
arise as to what the documentation requirements would be under this
part of the examination and how much weight would be provided to
lending versus investments versus services.
CRA performance
evaluations show that small community banks typically have a strong
performance
in community lending and services with
the only real struggle in finding qualified investments. Qualified
investments available to community banks typically provide no tangible
benefit to the communities the bank serves. We suggest that the CD
criterion be an optional test that may be considered to obtain an “outstanding” rating.
I strongly oppose
making the CD lending 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 examination.
We commend the FDIC for proposing changes that do
not diminish in any way the obligation of financial institutions
subject to CRA to
help meet the credit needs of their communities. In conclusion:
• We strongly support
increasing the asset-size of banks eligible for the small bank streamlined
CRA examination process as a vitally important
step in revising and improving the CRA regulations and in reducing
regulatory burden.
•
We oppose the addition of a “mandatory” community development
criterion and instead feel it should be at the option of the bank
to obtain a higher rating.
•
We strongly oppose making CD lending a separate test from the Bank’s
overall CRA evaluation. A separate test would create an additional
obligation and regulatory burden that would erode any benefit of
the streamlined examination.
While community banks, of course, still will be examined under CRA
for their record of helping to meet the credit needs of their communities,
these changes will eliminate some of the most problematic and burdensome
elements of the current CRA regulation from community banks that
are drowning in regulatory red-tape.
Sincerely
Jon M. Jones
President
Venture Bank
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