CENTER FOR FINANCIAL SERVICES INNOVATION
September 14, 2004
Mr. Robert Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
comments@fdic.gov
Dear Mr. Feldman:
The Center for
Financial Services Innovation (CFSI) appreciates this opportunity
to comment
on the FDIC’s Proposed Rules on
the Community Reinvestment Act that would change the definition of “small
bank” to raise the asset size threshold to $1 billion regardless
of holding company affiliation (12 CFR Part 345, RIN 3064-AC50).
CFSI, an initiative of ShoreBank Advisory Services with support from
the Ford Foundation, was launched in 2004 to encourage the development
of asset-building opportunities that create value for both customers
and companies. CFSI assists pioneering financial institutions and
organizations both large and small to serve underbanked consumers
across the economic, geographic and cultural spectrum.
CFSI believes
that basic financial services enable consumers to begin to build
assets. Access
to financial institutions and their
services, including convenient bank branches and availability of
deposit products, is important for families to be able to begin to
save money and build positive credit histories. CFSI is particularly
concerned about adverse impacts of the change in definition of small
bank on the service test, which measures a bank’s delivery
of retail banking and community development services. Any bank examined
as a small bank would no longer be subject to the service test. This
change affects a potentially significant percentage of banks, as
evidenced by the following:
• Fewer
than 5% of FDIC regulated banks would be subject to the full CRA
exam across
the United States. In Illinois, only 13
of 467 FDIC regulated banks would be subject to the full CRA exam.
• 879 FDIC institutions across the country would be subject to a streamlined
CRA exam that does not include the important service test. In Illinois,
70 additional banks would be subject to a streamlined CRA exam that
does not include the important service test.
Although the FDIC has proposed that a community development criterion
will be added for banks with assets between $250 million and $1
billion, this criterion will allow banks to choose among services
and investment activities, leading to the possibility that banks
could choose to avoid including community development services
altogether. Moreover, we note that this change is justified by
concerns about the investment test; nowhere in the proposal does
the FDIC suggest any reason to alter coverage of the service test.
In fact, to better encourage banks to fully serve the needs of all
those in their communities for both savings and other asset-building
services and for transaction services, the service test should
instead be strengthened. Currently, under the service test, regulatory
agencies look a variety of criteria, including branch locations
and closings, the availability and effectiveness of alternative
systems for delivering retail financial services, and the range
of services provided and how they are tailored to the needs of
consumers in the assessment area in question. CFSI would like to
see more rigorous and performance-based measures taken into consideration
in the service test, including consideration of who is actually
served, and specific standards and benchmarks for retail banking
services.
Thank you for the opportunity to comment on this important matter.
Please contact me if you have any questions or require further information.
Sincerely,
Jennifer Tescher,
Director
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