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FDIC Federal Register Citations

Alabama Bankers Association

Sent: Wednesday, June 29, 2005 1:02 PM
To: Comments;
Subject: Comments on Interagency Proposal on the Classification of Commercial Credit Exposures

Dear Mr. Feldman and Ms. Johnson:

The Alabama Bankers Association, which represents over 140 commercial banks
with over $200 billion in total assets doing business in 19 states, would
like to submit our objections to the commercial credit classification
proposal. Our membership includes four of the top 50 commercial banks, and
range in size from $13 million to $84 billion.

We contend that the current system of classifying credits is
well-understood by examiners and bankers. We all understand the meanings of
'Substandard', 'Doubtful', and 'Loss' and generally apply the same standards when
classifying loans. To adjust to a system as complex as the one
proposed would simply be inefficient and counter-productive.

The reasons asserted in support of adoption of this proposal include a
need to reduce split classifications of credits, inconsistencies in the
application of credit classifications, and ambiguity in the current system. We do not believe
that such widespread deficiencies exist in the current system. We also
believe that the current system is well-understood, has served us well for
decades, and when correctly applied, accomplishes more than the proposed

The proposal should be withdrawn. It is flawed in its assumption that
split classifications can be reduced by adopting a framework that splits the
evaluation of all loans into two tiers. It is itself replete with ambiguities and
invites the very inconsistencies which it purports to minimize.

Contrary to the assertions made within the proposal, there is absolutely
nothing new in this proposal that isn't already addressed by the current
system. The most this proposal will do is require our loan officers and
examiners to expand their current classification vocabulary from five
relatively clear and concise definitions to some eighteen ambiguous
definitions. Adding ratings with different names which are separate
and distinct from those used for all other asset categories will cause
additional confusion. Tremendous inefficiency will ultimately result
from the unnecessary debate over the meanings and application of these new,
ambiguous categories.

If adopted, it will replace a well-understood system with a confusing
one which will require tremendous resources for implementation and training
of loan officers and examiners. The time and effort required to implement
the proposed system should be reallocated to issues more pressing to the
industry. Additional training to address inconsistencies (if such
inconsistencies actually exist) in the application of the current
system would cost far less than implementation of the proposed system. Such
costs to implement this proposal amount to an additional imposition of
unnecessary regulatory burden. Our discussions with our banks, of all sizes,
indicate little support for this proposal for this very reason.

Again, when regulatory relief is of paramount concern to the industry,
it is completely objectionable for you to move forward with a proposal as
burdensome as this one. We firmly believe that the proposal should be
withdrawn. Please feel free to contact us should you require any
further details, and thank you for allowing us to comment on this proposal.


Alan Worrell
Chairman and CEO
Sterling Bank
President, Alabama Bankers Association
Montgomery, AL 36106

Tom Layfield
Alabama Bankers Association

Last Updated 07/07/2005

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