| FIRST NATIONAL BANK
September 15, 2004
Robert E. Feldman, Executive Secretary
Attention: Comment/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
comments@fdic.gov
RE: Community Reinvestment, RIN number 3064-AC50; Proposal to Expand
Eligibility for the Streamlined CRA Exam
Dear Mr. Feldman:
As a community banker, I join my fellow community bankers throughout
the nation in strong support of the FDIC’s proposal to increase the
asset size limit of banks eligible for the streamlined small-bank CRA
examination. I also strongly support the elimination of the separate
holding company qualification.
The proposal will greatly alleviate unnecessary paperwork and
examination burden without weakening our commitment to reinvest in our
communities. Reinvesting in our communities is something we do everyday
as a matter of good business. My community bank will not long survive if
my local community doesn’t thrive, and that means my bank must be
responsive to community needs and promote and support community and
economic development.
Making it less burdensome to undergo a CRA examination by expanding
eligibility for the streamlined exam will not change the way my bank
does business. In fact, it will free up human and financial resources
that can be redirected to the community and used to make loans and
provide other services.
It is important to remember that the streamlined CRA exam is not an
exemption from CRA. It is a more cost effective and efficient CRA exam.
Banks subject to the simplified CRA exam are still fully obligated to
comply with CRA. Just as now, community banks would continue to be
examined to ensure they lend to all segments of their communities,
including low- and moderate-income individuals and neighborhoods. It
just doesn’t make sense and is inequitable to evaluate a $500 million or
$1 billion bank using the same exam procedures as for $100 billion or
$500 billion banks.
One of the problems with the current large bank CRA exam is that the
definition of “qualified investments” is too limited, and qualified
investments can be difficult to find. As a result, many community banks
(especially those in rural areas) have to invest in regional or
statewide mortgage bonds or housing bonds and the like to meet CRA
requirements. These investments may benefit other areas of the state or
region, but they actually take resources away from the bank’s local
community. Community banks and communities would e better off if the
banks could truly reinvest those dollars locally to support their own
local economies and residents.
For this reason, I find that the FDIC’s proposed community
development requirement for banks between $250 million and $1 billion is
more flexible and more appropriate than the large bank investment test.
The advantage to this proposal is that it continues to focus on
community development, but considers investments, lending and services.
It would let community banks pursue community development activities
that both meet the local community needs and make sense in light of the
bank’s strategic strengths.
Similarly, the proposal will help rural banks meet the special needs
of their communities by expanding the definition of “community
development” so that it includes activities that benefit rural residents
in addition to low- and moderate-income individuals. Rural banks are
frequently called upon to support needed economic or infrastructure
development such as school construction, revitalizing Main Street, or
loans that help create needed or better-paying jobs. These activities
should not be ineligible for CRA credit because they do not benefit only
low- or moderate-income individuals.
The FDIC’s proposed changes to CRA are needed to help alleviate
regulatory burden. Without changes such as this, more and more community
banks like mine will find they cannot sustain independent existence
because of the crushing regulatory burden, and will opt to sell out. For
many small towns and rural communities, the loss of the local bank is a
major blow to the local community. By easing regulatory burden, it will
make it easier for community banks like mine to continue to provide
committed service to local communities that few other financial service
providers are willing to do.
Thank you for considering my views.
Sincerely,
Dr. Charles Shields
Director
First National Bank |
