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Inactive Financial Institution Letters

Community Reinvestment Act

August 23, 2004

TO: CHIEF EXECUTIVE OFFICER (also of interest to Compliance Officer)
SUBJECT: FDIC Issues Proposed Rule Seeking Additional Comments on "Small Bank" Community Reinvestment Act (CRA) Threshold and Other Revisions (Part 345 of FDIC's Rules and Regulations)
Summary: The FDIC has issued a proposed rule seeking additional comments regarding the Community Reinvestment Act (CRA). The proposed rule would change the definition of "small bank" to raise the asset size threshold to $1 billion regardless of holding company affiliation; add a community development activity criterion to the streamlined evaluation method for small banks with assets greater than $250 million and up to $1 billion; and expand the definition of "community development" to encompass a broader range of activities in rural areas. Comments are due by September 20, 2004.

The Federal Deposit Insurance Corporation (FDIC) on August 20, 2004, issued the attached proposed rule seeking additional comments concerning changing the definition of small bank for purposes of the Community Reinvestment Act (CRA) and other revisions. Comments are due by September 20, 2004.

On February 6, 2004, the FDIC, along with the other banking and thrift regulators, published for comment a proposed rule to make changes to CRA evaluations that would, among other things, increase the small institution threshold to $500 million from $250 million (see FIL-15-2004, dated February 6, 2004). After reviewing the more than 900 comment letters received, the FDIC decided to issue this new proposal to solicit additional comments on the impact of changing the definition of a small bank for purposes of CRA. The proposed definition of "small bank" would include those with total assets of up to $1 billion, regardless of holding company affiliation.

In addition, for banks with assets greater than $250 million and up to $1 billion, the proposal would add a new community development criterion to the small bank performance standards that would provide these institutions with flexibility among community-based lending, investment and service activities. The proposal also seeks comments on whether a separate community development test, in addition to a lending test, would be more appropriate; and on expanding the definition of community development to encompass a broader range of activities in rural areas.

The purpose of the proposed rule is to solicit further comments for the FDIC to consider before making a final decision on rule changes. It does not withdraw or supersede the February 6, 2004, proposed rule. We encourage you to review the attached notice of proposed rulemaking and to provide your comments. Information on how to submit comments is provided in the attached Federal Register notice.

Michael J. Zamorski
Division of Supervision and Consumer Protection

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Distribution: FDIC-Supervised Banks (Commercial and Savings)

NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (1-877-275-3342 or (703) 562-2200).

Last Updated 08/23/2004

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