Federal Deposit
Insurance Corporation

Please find attached a PDF version of comments on proposed changes to the Community Reinvestment Act. I have attached the text of the letter into this email as well. Thank you for your consideration of these comments.

September 15, 2004

Mr. Robert Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
comments@fdic.gov

Dear Mr. Feldman:

The Center for Financial Services Innovation (CFSI) appreciates this opportunity to comment on the FDIC’s Proposed Rules on the Community Reinvestment Act that would change the definition of “small bank” to raise the asset size threshold to $1 billion regardless of holding company affiliation (12 CFR Part 345, RIN 3064-AC50). CFSI, an initiative of ShoreBank Advisory Services with support from the Ford Foundation, was launched in 2004 to encourage the development of asset-building opportunities that create value for both customers and companies. CFSI assists pioneering financial institutions and organizations both large and small to serve underbanked consumers across the economic, geographic and cultural spectrum.

CFSI believes that basic financial services enable consumers to begin to build assets. Access to financial institutions and their services, including convenient bank branches and availability of deposit products, is important for families to be able to begin to save money and build positive credit histories. CFSI is particularly concerned about adverse impacts of the change in definition of small bank on the service test, which measures a bank’s delivery of retail banking and community development services. Any bank examined as a small bank would no longer be subject to the service test. This change affects a potentially significant percentage of banks, as evidenced by the following:

Fewer than 5% of FDIC regulated banks would be subject to the full CRA exam across the United States. In Illinois, only 13 of 467 FDIC regulated banks would be subject to the full CRA exam. 879 FDIC institutions across the country would be subject to a streamlined CRA exam that does not include the important service test. In Illinois, 70 additional banks would be subject to a streamlined CRA exam that does not include the important service test.

Although the FDIC has proposed that a community development criterion will be added for banks with assets between $250 million and $1 billion, this criterion will allow banks to choose among services and investment activities, leading to the possibility that banks could choose to avoid including community development services altogether. Moreover, we note that this change is justified by concerns about the investment test; nowhere in the proposal does the FDIC suggest any reason to alter coverage of the service test.

In fact, to better encourage banks to fully serve the needs of all those in their communities for both savings and other asset-building services and for transaction services, the service test should instead be strengthened. Currently, under the service test, regulatory agencies look a variety of criteria, including branch locations and closings, the availability and effectiveness of alternative systems for delivering retail financial services, and the range of services provided and how they are tailored to the needs of consumers in the assessment area in question. CFSI would like to see more rigorous and performance-based measures taken into consideration in the service test, including consideration of who is actually served, and specific standards and benchmarks for retail banking services.

Thank you for the opportunity to comment on this important matter. Please contact me if you have any questions or require further information.

Sincerely,