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FDIC Federal Register Citations
Conference of State Bank Supervisors
October 12, 2004
Robert E. Feldman
RE: Proposed Changes to the Community Reinvestment Act Regulation
Dear Mr. Feldman:
The Conference of State Bank Supervisors (CSBS)1 is pleased to have the opportunity to comment on the FDIC’s Notice of Proposed Rulemaking (proposal) to amend the regulations that implement the Community Reinvestment Act (CRA.) In response to the proposal as outlined in greater detail below, CSBS supports amending the definition of small bank from those with less than $250 million2 in total assets to those with assets up to $1 billion regardless of the bank’s holding company status. CSBS notes that this change would not diminish the responsibility of any nonmember bank to support its community by providing access to credit, which is a primary tenet of the Community Reinvestment Act.
CSBS also views the proposed changes as a valuable tool to reduce regulatory burden for our nation’s community banks, the vast majority of which are state chartered. Community banks have a long record of meeting the credit needs of both individuals and small businesses and provide critical fuel to our nation’s economic engine. Community banks have faced a growing amount of regulatory requirements that may have the effect of stifling this critical component of our nation’s economy. Accordingly, CSBS supports efforts to reduce regulatory burden when doing so does not compromise safety and soundness considerations or consumer protection.
If the FDIC adopts the $1 billion small bank definition outlined in the proposal, the percentage of banks considered large would drop from 21% of all nonmember banks which hold approximately 80% of all nonmember bank assets to approximately 4% of all nonmember banks which hold approximately 58% of all nonmember bank assets. The FDIC provided this data (reflecting March 31, 2004 statistics) for background purposes.
CSBS notes that a $1 billion definition for small institutions is reasonable because the number of nonmember banks that would remain subject to the three part large bank evaluation hold the majority of the assets of all nonmember banks. The FDIC proposal also notes that although the percentage of all banks and thrifts considered large would drop from 20% in 1995 to 6.3% in 2004, the percentage of assets in all large banks and thrifts, subject to a three part evaluation, would decrease only modestly from 86.2% in 1995 to 85.1% as of 2004. This information highlights the comparative impact of the proposed “large bank” definition as it relates to the current definition established in 1995.
Consistent Review of CRA
For example, on July 16, 2004, both the Federal Reserve Board (Board) and the Office of the Comptroller of the Currency (OCC) issued a statement withdrawing their proposals to raise the small bank asset threshold to $500 million. Accordingly, the definition of a small bank ($250 million in assets) and the corresponding criteria governing streamlined CRA evaluations may remain unchanged for national banks and state member banks. In contrast, on August 18, 2004, the Office of Thrift Supervision (OTS) released a final rule in the Federal Register, that effective October 1, 2004, redefines “small” savings associations as those with total assets of less than $1 billion, without regard to holding company assets.
Both the OCC and the OTS have also recently announced that each agency will issue additional proposals in the near future that will address community development issues arising from fewer banks being examined under the existing three part large bank CRA evaluation. CSBS recommends that the FDIC assume a leadership role as the federal insurer of all banks and thrifts by bringing the federal agencies back to the table to identify a consistent approach to fulfill the initial intent of CRA when passed in 1977.
“Small Bank” Definition
Proposed Definition for Predatory Lending
Other regulatory agencies noted that commenters strongly opposed including this single, abusive, asset-backed lending standard in the CRA regulations and, accordingly, withdrew this provision of the previous NPR. CSBS feels strongly that the asset-based definition of abusive lending in the previously published NPR is not sufficient to address the challenge of deterring abusive lending. In our April 2004 comment letter CSBS requested that such a narrow definition of abusive lending as a tool to identify and prohibit predatory lending be withdrawn because it could become the de facto universal standard in connection with predatory lending activity. There are numerous other factors that should be considered when determining whether an institution has participated in a pattern or practice of abusive lending. Additionally, CSBS notes that predatory lending is not specifically addressed in the original CRA statute and should be more thoroughly reviewed and deterred through other means, including state predatory lending statutes and unfair and deceptive practice statutes at state and federal levels. We continue to request that the FDIC formally withdraw this aspect of its CRA regulation.
CSBS also strongly believes that the federal bank and thrift regulatory agencies must remain consistent in issuing joint regulations and interpretations in regard to CRA. In its role as the federal insurer of all banks and thrifts, the FDIC is uniquely positioned to renew coordination efforts among the agencies. As the professional organization for the nation’s state banking agencies, CSBS would welcome opportunities to work with the federal regulatory agencies in developing guidance in this area. Currently, seven state banking departments have authority to enforce their state’s CRA law and other state banking departments review compliance with federal CRA requirements for their state chartered banks. Cooperative efforts between state and federal regulatory authorities will reduce regulatory burden, ensure that financial institutions fully understand compliance requirements, and will have a greater impact than individual efforts at either the state or federal level.
Thank you for your consideration. We invite you to call on us if we can provide additional information as you evaluate this important subject.
Best Personal Regards,
1 CSBS is the national organization of state officials
responsible for chartering, regulating and supervising the nation’s 6,331
state chartered commercial and savings banks and nearly 420 state-licensed
branches and agencies of foreign banks.
cc: Chairman Donald E. Powell
Director James E. Gilleran
Comptroller John D. Hawke, Jr.
Governor Susan Schmidt Bies
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