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
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