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Iowa Division of Banking
June 15, 2005
Dear Mr. Feldman and Ms. Johnson:
I am writing in opposition to the Interagency Proposal on the Classification of Commercial Credit Exposures. The proposed policy statement is not needed for Iowa state-chartered banks. The increased granularity created under the proposal unnecessarily complicates a system that is now well-understood by our examiners and the state-chartered banks we regulate. More importantly, the current system works well for Iowa banks. It appears we are trying to fix something that is not broken.
Implementation of the proposal would result in unnecessary costs for banks and our regulatory agency. Among the additional costs our agency would incur include revisions to procedure manuals, changes to electronic examination tools, training costs, and considerable personnel costs. We do not have the monetary or human resources available for such changes when they yield little or no additional benefits to our current examination program. Similar costs will be incurred by the banking industry. We are already hearing pleas from the industry, regulators, and politicians for the need to reduce regulatory burden. The proposal does nothing to reduce regulatory burden and would unnecessarily add to it.
It does not appear the proposed system would provide better or more accurate ratings then the current system. Under the current system, our examiners already consider the factors outlined under the proposed system. After analyzing those factors and discussion with bank lending staff, the credits are either passed or classified. Under the current system, our examiners have been able to accurately assess the risk in the banks loan portfolio.
We currently give consideration to guarantors. However, I question if the proposed system will provide any better assessment of the guarantor than the present system. Evaluating the effectiveness of the guarantor really isnt known until its time for the guarantor to step up to the plate and perform.
In conclusion, if the mega-banks need a more granular system, then why not create a bifurcated system rather than adopting a one size fits all system? It would seem small and medium-sized banks gain little from the proposal except additional expenses and increased regulatory burden. Thank you for your consideration to my comments.
Vaughn M. Noring
|Last Updated 06/27/2005||Regs@fdic.gov|