AMERICAN
BANK
September 13, 2004
TO: FDIC
FROM: E. Ray Willoughby, President
SUBJECT: Community
Reinvestment -- RIN 3064 — AC50
American Bank 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. Bank's 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 qualified? 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,
E. Ray Willoughby
President
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