Skip Header

Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank



Home Regulation & Examinations Laws & Regulations FDIC Federal Register Citations


   


FDIC Federal Register Citations

All American Bank

From: mjkidney@sbcglobal.net [mailto:mjkidney@sbcglobal.net]
Sent: Wednesday, October 20, 2004 3:02 PM
To: Comments
Cc: psmith@aba.com
Subject: RIN No. 3064-AC50

October 20, 2004

Mr. Robert E. Feldman

Executive Secretary

Attention: Comments/Legal ESS

Federal Deposit Insurance Corporation

550 17th Street, NW

Washington, DC 20429

Re: RIN Number 3064-AC50; FDIC Proposed Increase in the Threshold for the Small Bank CRA Streamlined Examination

Dear Madam or Sir:

As a community banker for the past 24 years, I have seen the positive changes that have taken place as a result of the Community Investment Act. Gone are the days when banks would red-line in their communities. Bankers are much more mindful of looking at opportunities within their communities and being integral to community development efforts. I am currently involved with a group that has an application for a new charter in Des Plaines, IL, a diverse community 17 miles northwest of Chicago, IL, with a population of 56,000.

I 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 small banks 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, when open, 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 greatly lower the regulatory burden imposed on the smaller community banks. Banks I have been affiliated with in the past spent over 800 man-hours collecting, editing, checking, and submitting the CRA data.

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 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.

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.

Sincerely,

Michael J. Kidney

All American Bank, I.O.

9344 W. Ballard Rd.

Des Plaines, IL

 


Last Updated 11/12/2004 regs@fdic.gov

Skip Footer back to content