|
Home > Regulation & Examinations > Laws & Regulations > FDIC Federal Register Citations |
|||
|
FDIC Federal Register Citations Bedford
Federal Savings Bank Re: RIN Number 3064-AC50 Dear Mr. Feldman: I am writing to comment on the FDIC's proposed changes to its CRA regulation. I applaud the FDIC's proposal to raise the definition of "small bank," for purposes of determining those banks eligible for the streamlined examination standards, from $250 million in assets to $1 billion in assets regardless of holding company affiliation. I believe the arguments in support of such a change are compelling, and urge the FDIC to finalize its proposal at the earliest possible time. Community banks in Virginia are under enormous regulatory strain. New requirements under the USA Patriot Act and the Sarbannes-Oxley Act have pushed the overall burden on banks to a new high. This burden hits community banks particularly hard, as we simply do not have the resources available to address compliance that the large banks have. In light of this compliance burden, I believe the FDIC should remain ever vigilant in reducing the burden whenever it can. CRA is an area where the FDIC can, and should, reduce the burden on small banks. In this regard, community banks subject to the large bank exam standards under CRA have had the greatest compliance challenges of all banks. As indicated, we do not have the resources to devote to the detailed CRA administrative requirements, that larger banks do, and yet are subject to the very same standards. Increasing the threshold, for streamlined exam eligibility would benefit us significantly, without in any way affecting our CRA lending. In particular, Virginia community banks, by the very nature of our business, are lending to all segments of the communities we serve. CRA loans are an important part of our business. Changing the definition of "small bank" recognizes the significant institutional growth that has taken place since the current $250 million threshold was established in 1995. Indeed, the number of institutions defined as "small banks" has declined by over 2,000 since the threshold was set in 1995, and their percentage of industry assets has declined substantially. Moreover, much asset growth since 1995 has been due to inflation, not real growth. Thus, the proposed increase in the threshold is warranted simply based on institutional growth and inflation. It is also justified because small banks can simply not compete against large banks for qualified investments in their communities. The large bank test, with its investment component, simply doesn't work for community banks. Finally, increasing the threshold to $1 billion will not impact the vast majority of bank assets, which, because they are held by large institutions, will still be subject to the full CRA examination process. But it will relieve smaller institutions of unnecessary and, we believe, inappropriate regulations. Again, the cost of compliance for institutions just above the current threshold is disproportionately high relative to institutions above the threshold. The FDIC is right to address this by increasing the threshold to $1 billion. I do not believe, however, that the FDIC should adopt a community development criterion for institutions between $250 million and $1 billion. Such criterion would create regulatory burden without adding any countervailing benefit in assessing how a bank is doing in meeting the credit needs of low to moderate-income individuals in the communities it serves. In summary, I commend the FDIC for pursing the right course on this issue. Community banks are incurring significant costs in CRA compliance that many of our competitors (e.g., credit unions) are not. Making CRA easier for community banks by reducing unnecessary administrative requirements will ease compliance burdens (while in no way affecting CRA lending) and thereby allow us to compete more effectively in the marketplace. I appreciate the opportunity to comment. Sincerely,
|
||
| Last Updated 11/22/2004 | regs@fdic.gov | |