First Volunteer Bank of Tennessee
From: Patti Steele
[mailto:Patti.Steele@firstvolunteer.com]
Sent: Monday, April 05, 2004 11:34 AM
To: Comments
Subject: CRA Regulations
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
REFERENCE: Community Reinvestment Act Regulations
Dear Mr. Feldman:
First Volunteer Bank of Tennessee is a $460 million bank
headquartered in downtown Chattanooga, TN with 21 branches
geographically disbursed throughout eastern and middle Tennessee. We
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.
The small bank CRA examination process was an excellent innovation.
First Volunteer Bank applauds the agencies for recognizing that it is
time to expand this critical burden reduction benefit to larger
community banks. At this critical time for the economy, this will allow
more community banks to focus on what they do best-fueling America's
local economies. When a bank must comply with the requirements of the
large bank CRA evaluation process, the costs and burdens increase
dramatically. And the resources devoted to CRA compliance are resources
not available for meeting the credit demands of the community.
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 times 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. And, while the proposed
increase is a good first step, the size of banks eligible for the
small-bank streamlined CRA examination should be increased to $2
billion, or at a minimum, $1 billion.
Additionally, let's review the investment test provision of CRA, the
definitions of community development investments and community
development loans as well as the proposal to include predatory
provisions in CRA.
Initially, the investment test was a vehicle for larger banks to
receive CRA credit for activities in support of low- and moderate-income
areas without making a direct loan. Since the investment test is now
mandatory, banks are forced into making investments when lending is of
more value to their community and its credit needs. Bank are not allowed
to make the choice. First Volunteer Bank is required to competitively
bid with the multi-regional banks and we most likely lose the
opportunity or have to take the investment at a loss.
Next, community development investments and community development
loans should include projects 'to support economic development even if
not specifically targeted to low- and moderate-income areas.' Doesn't an
economic development that benefits an entire assessment area also
benefit low- and moderate-income residents?
Lastly, the proposal to include regulation and consideration of loan
practices that are considered predatory should not be considered as a
part of CRA. This belongs in existing consumer protection regulations.
These issues should be addressed directly by safety and soundness and
consumer protection rather than through CRA evaluation.
Since the survival of many community banks is closely dependent upon
the success and viability of their communities, increasing the size of
banks eligible for the small-bank streamlined CRA examination does not
relieve banks from CRA responsibilities, it eliminates some of the more
burdensome requirements.
In summary, First Volunteer Bank strong supports increasing the
asset-size of banks eligible for the small bank streamlined CRA
examination process as an important first step to reducing regulatory
burden. We 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 that are drowning in regulatory
red-tape. We strongly 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.
Sincerely,
Patti W. Steele,
President & COO
First Volunteer Bank of Tennessee
Chattanooga, TN
