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KITSAP BANK
From: Roger Fitzpatrick
[mailto:rfitzpatrick@kitsapbank.com]
Sent: Friday, April 02, 2004 1:45 PM
To: Comments
Subject: Community Reinvestment Act Regulations
As a community banker, I strongly endorse the federal bank
regulators' proposal to increase the asset size of banks eligible for
the small bank streamlined Community Reinvestment Act (CRA) examination
from $250 million to $500 million and elimination of the holding company
size limit (currently $1 billion). This proposal will greatly reduce
regulatory burden.
Adjusting the asset size limit also more accurately reflects
significant changes and consolidation within the banking industry in the
last 10 years. To be fair, banks should be evaluated against their
peers, not banks hundreds of time their size. The proposed change
recognizes that it's not right to assess the CRA performance of a $500
million bank or a $1 billion bank with the same exam procedures used for
a $500 billion bank. Large banks now stretch from coast-to-coast with
assets in the hundreds of billions of dollars. It is not fair to rate a
community bank using the same CRA examination.
As community bank that just passed the $500 million level, the
proposed increase is a good first step, but does nothing to relieve our
recordkeeping and investment requirements for which we are evaluated and
must compete at the mega-bank level.
The size of banks eligible for the small-bank streamlined CRA
examination should be increased to $2 billion, or at a minimum, $1
billion. Increasing the size of banks eligible for the small-bank
streamlined CRA examination does not relieve banks from CRA
responsibilities. Our presence in the communities we serve is an
important factor in the success of our bank. The increase will merely
eliminate some of the most burdensome requirements.
Raising the limit to at least $1 billion is appropriate for two
reasons. First, keeping the focus of small institutions on lending,
which the small institution examination does, would be entirely
consistent with the purpose of the Community Reinvestment Act, which is
to ensure that the Agencies evaluate how banks help to meet the credit
needs of the communities they serve.
Second, raising the limit to $1 billion will have only a small effect
on the amount of total industry assets covered under the more
comprehensive large bank test. According to the Agencies’ own findings,
raising the limit from $250 to $500 million would reduce total industry
assets covered by the large bank test by less than one percent.
According to December 31, 2003, Call Report data, raising the limit to
$1 billion will reduce the amount of assets subject to the much more
burdensome large institution test by only 4% (to about 85%). Yet, the
additional relief provided would, again, be substantial, reducing the
compliance burden on more than 500 additional banks and savings
associations (compared to a $500 million limit).
In summary, I believe that increasing the asset-size of banks
eligible for the small bank streamlined CRA examination process is an
important first step to reducing regulatory burden. I also support
eliminating the separate holding company qualification for the
streamlined examination, since it places small community banks that are
part of a larger holding company at a disadvantage to their peers. While
community banks still must comply with the general requirements of CRA,
this change will eliminate some of the most problematic and burdensome
elements of the current CRA regulation from community banks. I also urge
the agencies to seriously consider raising the size of banks eligible
for the streamlined examination to $2 billion or, at least, $1 billion
in assets to better reflect the current demographics of the banking
industry.
Roger Fitzpatrick CBA, CCBCO
AVP & Compliance Officer
Kitsap Bank
PO Box 9
619 Bay Street
Port Orchard, WA 98366
RFitzpatrick@KitsapBank.com
360-876-7757 360-876-7885(fax)
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