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FDIC Federal Register Citations

Minnesota Bankers Association


From: Teresa Rice
Sent: Thursday, August 26, 2004 12:08 PM
To: Comments
Subject: Community Reinvestment -- RIN 3064-AC50

The Minnesota Bankers Association (MBA) is pleased to have the opportunity to comment on the proposed revisions to the Community Reinvestment Act. The MBA is a trade group representing 463 Minnesota banks. The MBA membership includes a broad range of banks, from independent community banks to regional banking organizations operating in multiple states.

The MBA strongly supports the FDIC’s proposal to increase the asset size of banks eligible for the small bank CRA examination to $1 billion. Banks’ 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.

The MBA does not support the proposal to add 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 we appreciate that the FDIC is concerned about the difficulty smaller institutions have finding qualified investments, it is important to remember that 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 quantified? 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 the 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? This seems like a step backward. Such a system would definitely increase the burden on banks because they will have to document their efforts in addition to documenting their results.

The proposal asks for comment on whether FDIC should apply a separate community development test in addition to existing streamlined performance criteria applicable to evaluate community development activities, 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 the MBA supports raising the small bank threshold, it does 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 proposed revision. If you have any questions concerning this comment letter, do not hesitate to call me at 952-835-3900.

Sincerely,

Tess Rice
General Counsel
Minnesota Bankers Association


Last Updated 08/26/2004 regs@fdic.gov

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