|
Bank of Commerce and Trust Company
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Dear Mr. Feldman:
RE: Proposed Revisions to the Community Reinvestment Act Regulations
Bank of Commerce supports the federal bank regulatory agencies'
(Agencies) proposal to increase the asset threshold from $250 million to
$500 million and to eliminate any consideration of whether the small
institution is owned by a holding company. Adopting this proposal would
be a major step toward greatly reducing the regulatory burden on
financial institutions.
When the CRA regulations were rewritten in 1995, the banking industry
recommended that community banks of at least $500 million be eligible
for a less burdensome small institution examination. The most
significant improvement in the new regulations was the addition of that
small institution CRA examination, which actually evaluated the bank's
loans to assess whether the bank was helping to meet the credit needs of
its entire community. It imposed no investment requirement on small
banks, it added no data reporting requirements on small banks, and it
created a simple, understandable assessment test of the bank's record of
providing credit in its community.
Since then, the regulatory burden on small banks has only grown
larger, including massive new reporting requirements under HMDA, the USA
Patriot Act and the privacy provisions of the Gramm-Leach-Bliley Act.
But the nature of community banks has not changed. To comply with the
requirements of the large institution CRA examination, the costs and
burdens on community banks has increased dramatically. In reviewing our
bank, converting to the large institution examination requires
additional staff to document services and investments, the purchase of
additional equipment to transmit the documentation and additional costs
in providing additional training to implement these new requirements.
This imposes a dramatically higher regulatory burden that drains both
money and personnel away from helping to meet the credit needs of our
community.
I believe that it. is as true today as it was in 1995, and in 1977
when Congress enacted CRA, that a community bank meets the credit needs
of its community if it makes a certain amount of loans relative to
deposits taken. Like other small institutions, our community bank's
business activities are focused on a small,. defined geographic area
where the bank is known in the community. The small institution
examination accurately captures the information necessary for examiners
to assess whether a community bank is helping to meet the credit needs
of its community, and nothing more is required to satisfy the Act.
As the Agencies state in their proposal, raising the small
institution CRA examination threshold to $500 million makes numerically
more community banks eligible. However, in reality raising the asset
threshold to $500 million and eliminating the holding company limitation
would retain the percentage of industry assets subject to the large
retail institution test. It would decline only slightly, from a little
more than 90% to a little less than 90%. That decline, though slight,
would more closely align the current distribution of assets between
small and large banks with the distribution that was anticipated when
the Agencies adopted the definition of "small institution." Thus, the
Agencies, in revising the CRA regulation, are really just preserving the
status quo of the regulation, which has been altered by a drastic
decline in the number of banks, inflation and an enormous increase in
the size of large banks. I believe that the Agencies need to provide
greater relief to community banks than just preserve the status quo of
this regulation.
The small institution test was the most significant improvement of
the revised CRA. However, it deprived many community banks from any
regulatory relief. A bank with more than $250 million in assets faces
significantly more requirements that substantially increase regulatory
burdens without consistently producing additional benefits. In today's
banking market, even a $500 million bank often has only a handful of
branches to serve its local community. It is recommended raising the
asset threshold far the small institution examination to at least $1
billion. Raising the limit to $1 billion is appropriate for two reasons:
• First, it would keep the focus of small institutions on lending,
which the small institution examination does.
• Second, raising the limit to $1 billion will have only a small
effect on the amount of total industry assets covered under the more
comprehensive large bank test. The additional relief provided would be a
substantial reduction in the compliance burden for more than 500
additional banks and savings associations compared to a $500 million
limit.
Accordingly, I urge the Agencies to raise the limit to at least $1
billion, providing significant regulatory relief while not diminishing
the obligation of all insured depository institutions subject to CRA to
help meet the credit needs of their communities. Instead, the changes
are meant only to address the regulatory burden associated with
evaluating institutions under CRA."
Bank of Commerce strongly supports increasing the asset-size of banks
eligible for the small bank CRA examination as a significant step in
improving the CRA regulations and reducing regulatory burden. Community
banks would be examined for their record of helping meet the credit
needs of their communities. This change would eliminate some of the most
problematic and burdensome elements of the current CRA regulation.
Thank you for your consideration in this matter.
Sincerely,
John W. Sarver President/ CEO
Bank of Commerce and Trust Company
326 North Avenue G
Crowley, LA 70527 |
