| SHOREBANK ADVISORY
SERVICES
From: Katy Jacob [mailto:KJacob@cfsinnovation.com]
Sent: Wednesday, September 15, 2004 10:20 AM
To: Comments
Subject: Community Reinvestment -- RIN 3064-AC50
Please find attached a PDF version of comments on proposed changes to
the Community Reinvestment Act. I have attached the text of the letter
into this email as well. Thank you for your consideration of these
comments.
September 15, 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
Katy Jacob
Senior Analyst, Center for Financial Services Innovation
ShoreBank Advisory Services
2230 S. Michigan, Suite 200
Chicago, IL 60616
T: 312-881-5821
F: 312-881-5801
kjacob@cfsinnovation.com
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