|
ALLIANCE FINANCIAL SERVICES, INC.
Alliance Financial Services, Inc. (A Bank Holding Company), is pleased
to have the opportunity to comment on the proposed revisions to the
Community Reinvestment Act. We strongly support the FDIC's proposal to
increase the asset size of banks eligible for the small bank CRA
examination to $1 billion. Banks' regulatory burden has increased
greatly over the past few years with the passage of such laws as the
Gramm-Leach-Bliley Act, the USA PATRIOT Act, the FACT Act and the Check
21 Act. While banks understand the need for banking regulations,
community banks find complying with them especially burdensome. Changing
the asset threshold to $1 billion will decrease the regulatory burden
for many community banks, leaving more time for bank employees to meet
the credit needs of their community.
Eliminating the holding company size requirement will also reduce the
regulatory burden for many community banks. Small banks with sizable
holding companies find complying with CRA requirements just as difficult
as small banks without sizable holding companies. When examined under
the large bank requirements based on their holding company status, small
banks that are part of sizable holding companies are at a competitive
disadvantage. Such banks should be measured with their peers, not put on
the same playing field as large banks.
However, we do not support adding a mandatory community development
performance criterion for banks with assets greater than $250 million
and up to $1 billion as an additional component of small bank standards.
While FDIC is concerned that it is difficult for smaller institutions to
make qualified investments, smaller institutions also have a difficult
time competing with larger more established banks for community
development loans and services.
In addition, the proposal does not explain what the community
development criterion is or how it will be tested. If FDIC adds
community development criterion, how would it be quantified? The
proposal states "banks would be required to engage in activities based
on opportunities in the market and the bank's strategic strengths." How
will the agency test this criterion? What if the bank uses staff and
time resources and does not get results? In 1995, the Agencies did away
with giving CRA credit based on a bank's effort rather than a bank's
results. Is the proposal suggesting that the Agency will again review
banks based on how hard they try and not just the dollar result of the
CD loan, investment or service? Such a system would definitely increase
the burden on banks because they would have to document their efforts in
addition to documenting their results.
As an alternative, the FDIC asks whether it should apply a separate
community development test, instead of adding a community development
criterion. A separate community development test would not reduce the
burden for small banks between $250 million and $1 billion and would
require the bank to compete for the same community development loans and
activities as under the current CRA large bank requirements.
In conclusion, while we support raising the small bank threshold, we
do not support adding new tests or criteria. Adding new tests or
criteria will defeat the FDIC's purpose of reducing regulatory burden,
creating new rules that are just as onerous as the current rules. We
thank you very much for considering our input on this proposal.
Sincerely,
V. Phillip Reim
Chief Executive Officer
Alliance Financial Services
444 Cedar St
Saint Paul, MN 55101 |
