Benjamin Cluff
145 E Center St
Provo, UT 84606
September 17, 2004
Robert E. Feldman
Dear Robert Feldman:
I am writing to strongly support the FDIC's proposal to
raise the
threshold for the streamlined small bank CRA examination to $1 billion
without regard to the size of the bank's holding company.
This would
greatly relieve the regulatory burden imposed on many small banks
such as
my own under the current regulation, which are required to meet the
standards imposed on the nation's largest $1 trillion banks.
I
understand that this is not an exemption from CRA and that my bank
would
still have to help meet the credit needs of its entire community
and be
evaluated by my regulator. However, I believe that this would lower
my
current regulatory burden significantly.
I also support the addition of a community development criterion
to the
small bank examination for larger community banks. It appears to
be a
significant improvement over the investment test. However, I urge
the FDIC
to adopt its original $500 million threshold for small banks without
a CD
criterion and only apply the new CD criterion to community banks
greater
than $500 million up to $1 billion. Banks under $500 million now
hold
about the same percent of overall industry assets as community banks
under
$250 million did a decade ago when the revised CRA regulations were
adopted, so this adjustment in the CRA threshold is appropriate.
As FDIC
examiners know, it has proven extremely difficult for small banks,
especially those in rural areas, to find appropriate CRA qualified
investments in their communities. Many small banks have had to make
regional or statewide investments that are extremely unlikely to
ever
benefit the banks' own communities. That was certainly
not intent of
Congress when it enacted CRA.
An additional reason to support the FDIC's CD criterion
is that it
significantly reduces the current regulation's "cliff
effect". Today, when a small bank goes over $250 million,
it must
completely reorganize its CRA program and begin a massive new reporting,
monitoring and investment program. If the FDIC adopts its proposal,
a
state nonmember bank would move from the small bank examination to
an
expanded but still streamlined small bank examination, with the
flexibility to mix Community Development loans, services and investments
to meet the new CD criterion. This would be far more appropriate
to the
size of the bank, and far better than subjecting the community bank
to the
same large bank examination that applies to $1 trillion banks. This
more
graduated transition to the large bank examination is a significant
improvement over the current regulation.
I strongly oppose making the CD criterion a separate test from the
bank's overall CRA evaluation. For a community bank, CD
lending is
not significantly different from the provision of credit to the entire
community. The current small bank test considers the institution's
overall lending in its community. The addition of a category of CD
lending
(and services to aid lending and investments as a substitute for
lending)
fits well within the concept of serving the whole community. A separate
test would create an additional CD obligation and regulatory burden
that
would erode the benefit of the streamlined exam.
I strongly support the FDIC's proposal to change the definition
of
"community development" from only focusing on low-
and
moderate-income area residents to including rural residents. I think
that
this change in the definition will go a long way toward eliminating
the
current distortions in the regulation. We caution the FDIC to provide
a
definition of "rural" that will not be
subject to misuse to
favor just affluent residents of rural areas.
In conclusion, I believe that the FDIC has proposed a major improvement
in
the CRA regulations, one that much more closely aligns the regulations
with the Community Reinvestment Act itself, and I urge the FDIC to
adopt
its proposal, with the recommendations above. I will be happy to
discuss
these issues further with you, if that would be helpful.
Thank you for considering my position.
Regards,
Ben Cluff
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