BANK OF THE BLUE VALLEY
September 14, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold for
the Small Bank CRA Streamlined Examination
Dear Sir:
I am writing as the President of Bank of Blue Valley, a $600 million
bank located in a Kansas suburb of the Kansas City metropolitan area.
Our bank is currently subject to the large bank CRA exam. I am writing
to strongly support the FDIC’s proposal to raise the threshold for the
streamlined small bank CRA exam 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 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 by $35,000 to
$50,000 primarily in the area of record keeping and administration of
the technical aspects of the CRA regulations. This change would not
impact our approach to community reinvestment. Most successful community
banks are already active members of their community and factor in the
economic and social health of their community. If anything, the
reduction in administrative burden would allow us to devote more time
and effort to the implementation of community projects as opposed to the
administration and record keeping for regulatory purposes.
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 the intent of Congress when it enacted CRA. Our bank has had
difficulty meeting the investment criterion for CRA because of the lack
of investment grade opportunities in our community. We have been forced
to go to external agencies that sell a CRA product that is specifically
designed to try and help meet this investment criterion. This is an
inefficient way for a bank to meet its CRA requirements and those funds
could be better spent investing in low to moderate income housing in our
affected area as opposed to meeting some arbitrary investment criterion.
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. A separate
CD test would increase administrative burden and divert assets and
administrative attention from the actual investment to additional
administrative burden effectively diminishing the bank’s overall CRA
effort.
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. I can be reached at 913-234-2240.
Sincerely,
Robert D. Regnier
President
Bank of Blue Valley |
