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STATEWIDE HOUSING ACTION COALITION August 12, 2004
Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corp.
550 17th Street NW
Washington, DC 20429
Re: FDIC's Consideration of Changing the Definition of "Small Bank"
for Community Reinvestment Act (CRA) Purposes
Dear Mr. Feldman:
We are writing to ask that you contact the Federal Deposit Insurance
Corporation (FDIC) to request that they withdraw proposed changes to the
Community Reinvestment Act (CRA). If the FDIC adopts this proposal,
community development activity in low and moderate-income (LMI)
neighborhoods and rural areas throughout Illinois and the nation will be
threatened.
In February 2004, federal bank regulators jointly released proposed
changes to the regulation of the CRA. Key among the changes was a
proposal that would change the definition of a "small bank" from any
institution with less that $250 million in assets and not part of a
holding company with over $1 billion in assets to include all
institutions with less than $500 million in assets regardless of holding
company size.
In July 2004, the Office of Thrift Supervision (OTS), disregarding
the February proposal, unilaterally announced that they were quadrupling
the asset threshold for small institutions to $1 billion regardless of
holding company size for the thrifts that it regulates. The Federal
Reserve and Office of the Comptroller of the Currency (OCC) subsequently
announced they were withdrawing the proposed changes to the CRA
regulation and retaining the existing small bank definition. The FDIC
delayed a vote on its decision until September 2004, but there are
indications that the agency will side with the OTS.
The FDIC's decision is critical for a number of reasons. First, the
FDIC is the primary regulator of many state chartered banks that
frequently fall between $250 million and $1 billion in assets. For
institutions active in Illinois in 2003, nearly 40 percent of assets
controlled by FDIC-regulated institutions were held by banks with assets
between $250 million and $1 billion. For other regulators, this number
ranges from 6 percent for the Federal Reserve to 1.4 percent for the OCC.
If institutions that control a significant number of branches and
deposits in LMI and rural communities are subject to streamlined CRA
examinations, they will no longer be examined and given credit for their
investments in affordable housing developments, developing innovative
financial services products that reach the unbanked, or expanding their
branch networks into underserved communities. Additionally, these banks,
which are significant small business lenders, will no longer publicly
report essential small business lending data.
The Statewide Housing Action Coalition (SHAC) works to increase and
preserve the supply of decent, affordable, accessible housing in the
state of Illinois for low and moderate-income households. The direct
results of SHAC's work are community-based organizations with the
capacity to develop and preserve affordable housing, a growing
constituency with the knowledge and commitment to make affordable
housing a public policy priority in Illinois, and increased public and
private resources to develop and preserve affordable housing. We have 98
member organizations across the state.
We urge you to contact Chairman Powell of the FDIC and ask the agency
to follow the Federal Reserve and OCC and withdraw the proposed changes
to the CRA regulation.
Executive Director
Tammie Grossman
Executive Director
Statewide Housing Action Coalition
11 East Adams, Suite 1501
Chicago, IL 60603
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