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First National Bank of South Dakota
March 26, 2004
RE: Proposed Revisions to the Community Reinvestment Act Regulations
To Whom It May Concern:
I am writing to support the federal bank regulatory agencies'
(Agencies) proposal to enlarge the number of banks and saving
associations that will be examined under the small institution Community
Reinvestment Act (CRA) examination. The Agencies propose to increase the
asset threshold from $250 million to $500 million and to eliminate any
consideration of whether the small institution is owned by a holding
company. This proposal is clearly a major step towards an appropriate
implementation of the Community Reinvestment Act and should greatly
reduce regulatory burden on those institutions newly made eligible for
the small institution examination, and I strongly support both of them.
As the Agencies state in their proposal, raising the small
institution CRA examination threshold to $500 million makes numerically
more community banks eligible. However, in reality raising the asset
threshold to $500 million and eliminating the holding company limitation
would retain the percentage of industry assets subject to the large
retail institution test. It would decline only slightly, from a little
more than 90% to a little less than 90%. That decline, though slight,
would more closely align the current distribution of assets between
small and large banks with the distribution that was anticipated when
the Agencies adopted the definition of "small institution." Thus, the
Agencies, in revising the CRA regulation, are really just preserving the
status quo of the regulation, which has been altered by a drastic
decline in the number of banks, inflation and an enormous increase in
the size of large banks. I believe that the Agencies need to provide
greater relief to community banks than just preserve the status quo of
this regulation.
While the small institution test was the most significant improvement
of the revised CRA, it was wrong to limit its application to only banks
below $250 million in assets, depriving many community banks from any
regulatory relief. Currently, a bank with more than $250 million in
assets faces significantly more requirements that substantially increase
regulatory burdens without consistently producing additional benefits as
contemplated by the Community Reinvestment Act. In today's banking
market, even a $500 million bank often has only a handful of branches. I
recommend raising the asset threshold for the small institution
examination to at least $1 billion. Raising the limit to $1 billion is
appropriate for two reasons. First, keeping the focus of small
institutions on lending, which the small institution 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.
Second, 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 Agencies' own findings,
raising the limit from $250 to $500 million would reduce total industry
assets covered by the large bank test by less than one percent.
According to 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% (to about 85%). Yet, the
additional relief provided would, again, be substantial, reducing the
compliance burden on more than 500 additional banks and savings
associations (compared to a $500 million limit). Accordingly, I urge the
Agencies to raise the limit to at least $1 billion, providing
significant regulatory relief while, to quote the Agencies in the
proposal, not diminishing "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."
In conclusion, I 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.. I also support eliminating the separate
holding company qualification for the small institution examination,
since it places small community banks that are part of a larger holding
company at a disadvantage to their peers and has no legal basis in the
Act. While community banks, of course, still will be examined under CRA
for their record of helping to meet the credit needs of their
communities, this change 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,
Peggy Joslin
Community Reinvestment Act Manager
First National Bank South Dakota
210 N. Lawler
Mitchell, SD 57301 |
