Delaware Bankers Association
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
comments@FDIC.gov
Re: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold
for the Small Bank CRA Streamlined Examination
Dear Sir or Madam:
I am David G. Bakerian, President of the Delaware Bankers Association
(DBA). The DBA is a not-for-profit, private trade association that
represents thirty-eight (38) dues and tax paying financial institutions
chartered to do banking business in the State of Delaware. Our member
banks range in size from $5 million to over $60 billion. Combined,
these institutions maintain assets of over $150 billion in the State.
Accordingly, we are filing this comment on their collective behalf,
particularly those with assets between $250 million and $1billion.
Accordingly, we appreciate the opportunity to comment on this important
matter.
On behalf of
our members, I am writing 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 those in our state under the
current regulation, which are required to meet the standards imposed
on the nation’s largest $1 trillion banks. I understand that
this is not an exemption from CRA and that our smaller banks would
still have to help meet the credit needs of its entire community
and be evaluated by their respective regulators. However, the DBA
believes that this would lower the regulatory burden on these smaller
financial institutions.
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 Community Development (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 examiners
know, it has proven extremely difficult for small banks, especially
those 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.
An additional
reason to support the FDIC’s CD criterion is
that it significantly reduces the current regulation’s “cliff
effect.” Today, when a small bank goes over $250 million, it
must completely reorganize its CRA program and begin a massive new
reporting, monitoring and investment program. If the FDIC adopts
its proposal, a state nonmember bank 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.
We believe that this change in the definition will go a long way
toward eliminating the current distortions in the regulation. We
also caution 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, we believe 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 the DBA urges the
FDIC to adopt its proposal, with the recommendations above. I will
be happy to discuss these issues further with you, if that would
be helpful.
As always, we would be pleased to provide any additional information.
You may contact me at 302-678-8600.
Very truly yours,
David G. Bakerian
President
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