BANK OF THE WEST
August 31, 2004
By Electronic Delivery
Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Attention: RIN 3064-AC82
Re: Community Reinvestment Act Regulations
69 Federal Register 41181, July 8, 2004
Dear Mr. Feldman:
Bank of the West is submitting this comment in response to the
publication of a joint interim rule by the federal financial institution
regulatory agencies (the “Agencies”) in the Federal Register on July 8,
2004. The joint interim rule proposes to conform the Agencies’
respective regulations implementing the Community Reinvestment Act to
changes in the standards for defining metropolitan and micropolitan
statistical areas published by the U.S. Office of Management and Budget
(“OMB”). Bank of the West appreciates the opportunity to comment of this
important topic.
Bank of the West is a $29 billion asset commercial bank with 296
branches in six western states. Because many of our branches are widely
dispersed geographically, we currently designate 31 different CRA
assessment areas. Bank of the West is currently in the process of
merging with Community First National Bank of Fargo, North Dakota, and
Union Safe Deposit Bank of Stockton, California. When those mergers are
completed, Bank of the West will have almost $40 billion in assets,
approximately 470 branches in 16 states, and expects to have
approximately 90 CRA assessment areas. Both mergers are expected to be
completed by year end and hence, will affect Bank of the West’s data
reporting for 2004.
Bank of the West generally supports the joint interim rule and agrees
the changes it implements are primarily technical in nature; however, we
respectfully disagree that the changes are not substantive. We are
primarily concerned with removal of all references to Consolidated
Metropolitan Statistical Areas (“CMSAs”) in the Agencies’ regulations,
particularly the reference to CMSA in § 341.41(e)(4), and with it’s
wholesale replacement by the term “MSA.” Secondarily, we are concerned
with potential ambiguities and uncertainties created by certain
statements in the supplementary information accompanying the interim
rule. Finally, we note that the interim rule also invalidates certain
answers pertaining to assessment areas in the Interagency Questions and
Answers on CRA dated July 12, 2001, and note that the Agencies make no
reference to updating the Q&As in a timely manner in the July 8, 2004,
Federal Register notice.
We recognize that the term “CMSA” is obsolete; however, we believe
that it is more appropriate for the Agencies to replace this term with
OMB’s new designation “CSA” (Combined Statistical Area) rather than “MSA.”
This may appear to be a trivial change; we assure you that it is not.
Allowing an entire CMSA (or CSA going forward) as an assessment area
significantly reduces the administrative burden imposed by CRA both for
reporting purposes and as it affects the maintenance of an institution’s
public file; it also reduces the overall burden of CRA examinations.
For example, Bank of the West currently designates the greater San
Francisco Bay Area CSA—it’s most significant market—as one assessment
area. This geographic area is made up of ten counties and seven MSAs or
Metropolitan Divisions (MDs). If we are required to disaggregate this
region into separate assessment areas, we could end up with as many as
six different assessment areas in what is an otherwise relatively
integrated economic market. In the Los Angeles area, we would go from
one assessment area to three. Bank of the West will also be affected in
non-metropolitan areas within our footprint, as, in several cases,
multiple micropolitan statistical areas are now combined into a single
new CSA.
The experience of Bank of the West in the San Francisco CSA is
perhaps an extreme example and we have not done an analysis of other
CSAs outside our footprint; however, we are convinced that the change
from “CMSA” to “MSA” could have a similar impact on even relatively
small institutions operating in many of the nation’s metropolitan and
non-metropolitan areas. We also note that the potential increase in the
number of an institution’s assessment areas greatly increases the burden
on examiners in preparing CRA performance evaluations, particularly for
large, multi-state institutions such as Bank of the West. Conversely, we
do not believe that designating an entire CSAs as an assessment area
will hamper the work of the Agencies in evaluating an institution’s CRA
performance.
Equally as important, we are concerned that the proposed change from
CMSA to MSA in § 341.41(e)(4) may be interpreted to mean that financial
institutions may include only a single MSA within an assessment area,
even if that MSA is included with other MSAs in a larger CSA, such as is
the case in the San Francisco CSA. This possible interpretation could be
drawn from a statement in the supplemental information that “an
institution may designate one or more metropolitan divisions, up to an
entire MSA, as an assessment area.” Although this interpretation of the
interim rule appears to be contradicted by the plain words of the
regulation and a later statement in the supplemental information that
“the regulations still allow an institution to delineate an assessment
area consisting of more than one MSA,” we are aware that the “one MSA,
one assessment area” interpretation has already been promulgated as
established policy. At a minimum, the Agencies need to clarify
absolutely that institutions may include more than one MSA in a single
assessment area.
Many of OMB’s new CSAs combine both metropolitan and micropolitan
areas or MSAs from multiple states and we understand that fact may pose
problems for the Agencies in preparing an institution’s annual CRA
Disclosure Statement. If that is the case, Bank of the West urges the
Agencies to revise the CRA Q&As as soon as possible to clearly state
that financial institutions may include multiple MSAs or MDs within a
single state CSA in a single assessment area. Likewise, institutions
should be able to combine multiple micropolitan statistical areas within
a CSA into a single assessment area. Consistent with past practice, the
Q&As could also specify that institutions would be prohibited from
including in a single assessment area multiple MSAs in different states
or both metropolitan and micropolitan areas even if those areas are
included in a single CSA.
This formulation would give financial institutions the latitude to
designate assessment areas more appropriate to their market penetration,
would relieve some of the burden of CRA examinations on both
institutions and examiners, would be consistent with the current
language of the regulation, and would allow the Agencies to prepare
annual CRA Disclosure Statements in a format generally consistent with
past practice.
Please do not hesitate to contact us for further information.
Sincerely,
W. Gordon Smith
Senior Vice President and Corporate Compliance Manager
Bank of the West
180 Montgomery Street
San Francisco, CA 94104
