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FDIC Federal Register Citations Ravenswood Bank
From: Roland Dehne [mailto:dehner@Ravenswoodbank.com] March 6, 2006 Federal Deposit Insurance Corporation RE: Comment on the Proposed Interagency Guidance On Commercial Real Estate Lending This proposal is worrisome for a small community bank for a number of reasons. It appears that the proposed guidance will have the effect of reducing commercial real estate (CRE) lending by community banks and that has been one of the few profitable lending products that we have left. If smaller banks will be subject to increased regulatory review, when there is a CRE concentration, it will have the effect of reducing the levels of CRE concentration. This would not be good for the bank's profitability and not good for the local economy. Restricting capital flows to this segment of the economy can have a chilling impact. It could raise the possibility that a recession will occur as CRE lending has been an engine of economic growth in our area. Our staff thinks that this proposal could also lead to larger banks (regionals and multi-regional banks) grabbing a bigger piece of the CRE pie from the smaller banks. The larger banks have the ability to raise capital (if the regulators will insist on additional capital if the concentration levels are high) which community banks do not. This could lead to more concentrations in the banking community - as this segment of lending would be restricted to some banks. If the bank has been specializing in CRE - either you force the bank to go into other lending fields which it probably doesn't have expertise - or you force it to reduce lending - or you force it to sell/merge. The proposal does not take into account the level of expertise at banks that lend primarily on CRE. The reason the concentration level is high in these banks is because these banks have the ability to properly underwrite and manage these loans. The proposal will have the effect of hurting the banks that have been doing a good job. If a higher concentration level will serve to reduce CRE lending in those successful banks, these CRE credits will be made either by the larger banks or by banks that do not have this CRE expertise (unless CRE lending dries up and this could have a negative impact on the entire economy). It seems that the proposal might have an impact of reducing CRE lending in banks that have the "know how" and having less sophisticated lenders take on these loans. You are penalizing the banks that have been successfully making CRE loans for no seemingly logical reason. Lastly, there already are CRE guidelines in place with Part 365 of the FDIC Rules and Regulations. Why is it necessary to add new guidance? Banks are becoming increasing buried with paperwork and this would add significantly to this. I urge you to reconsider the impact this proposal would have on community banks. Sincerely,
Eric Hubbard | ||
| Last Updated 04/05/2006 | Regs@fdic.gov | |