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FDIC Federal Register Citations

From: David Stephens
Sent: Monday, June 27, 2005 2:39 PM
To: Comments
Subject: Proposal on Classification of Commercial Credit Exposures

David Stephens
1226 265th St
Tipton, IA 52772

June 27, 2005

Comment Site FDIC

Dear Comment Site FDIC:

Dear Primary Federal Regulator:

The Interagency Proposal on the Classification of Commercial Credit
Exposures will likely have costs and burdens for most Iowa banks which
outweigh any benefits of this proposed classification system. 

Implementation of this proposal will require banks to rewrite loan
policies relating to allowance for loan loss adequacy, loan
administration, credit review and collection procedures – and will require
substantial retraining of bank staff to implement these changes.  Nearly
all Iowa banks now have loan watch procedures which coordinate with the
current classification system. 

Current systems for most Iowa banks are adequate for identifying credit
exposures under the current classification rules.  Only the largest money
center banks could possibly see any benefit to this “transparent” proposal
of a two-dimensional rating framework which considers a borrower’s
capacity to meet its debt obligations separately from the facility
characteristics influencing loss severity. 

The resulting ratings under the new system seem no more clear than the
current system, and would seem to be a significant new regulatory burden
for most Iowa banks.  We therefore urge the agencies to withdraw this
proposal, as there is no valid reason to impose a new commercial
classification system on Iowa banks at this time. 


Dave Stephens

Last Updated 04/27/2006

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