From: Mark Packard [mailto:packardm@cbutah.com]
Sent: Friday, September 17, 2004 4:21 PM
To: Comments
Subject: Support the FDIC Proposal for Streamlined CRA Exam
Mark Packard
202 South Main
Springville, Ut 84663
September 17, 2004
Robert E. Feldman
Dear Robert Feldman:
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
my own 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 my bank would still
have
to help meet the credit needs of its entire community and be evaluated
by
my regulator. However, I believe that this would lower my current
regulatory burden significantly.
I 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, I 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
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
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.
I 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.
I 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. I think that this change
in
the definition will go a long way toward eliminating the current
distortions in the regulation. We 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, I 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 I urge 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.
Thank you for considering my position.
Sincerely,
Mark Packard
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