September 20, 2004 DRAFT 1
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/ Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
Re: RIN Number 3064-AC50
Dear Mr. Feldman:
In response to the notice of proposed rulemaking published in the
Federal Register of August 20, 2004, the New York Bankers Association is
submitting these comments on the regulations implementing the Community
Reinvestment Act (CRA). Our Association strongly supports increasing the
asset size threshold for eligibility for the streamlined CRA examination
from the current $250 million to $1 billion, irrespective of whether a
bank is affiliated with a holding company. It is important to remember
that the streamlined examination is not an exemption from CRA, but
simply relief from overly burdensome regulatory requirements. We do not
object to the expanded definition of community development to include
additional activities in rural areas nor to the addition of a community
development standard in the streamlined examination for banks between
$250 million and $1 billion in assets. Our Association is comprised of
the community, regional and money center banks of New York States, which
have aggregate assets in excess of $3 trillion and more than 280,000 New
York employees.
The Federal Deposit Insurance Corporation (FDIC) is proposing
revisions to the regulations that implement CRA that would: 1) change
the definition of “small bank” to raise the asset size threshold to $1
billion regardless of holding company affiliation; 2) add a community
development activity criterion to the streamlined evaluation method for
small banks with assets greater than $250 million and up to $1 billion;
and 3) expand the definition of “community development” to encompass a
broader range of activities in rural areas.
In comments filed in 2001, our Association urged that the $250
million asset limit on streamlined examinations be increased. We noted:
Whereas only a few years ago, banks with assets below $250 million
accounted for more than 90% of all institutions, today they account for
a far smaller percentage. We would therefore recommend, first, that the
agencies delete the limitation of the small bank definition to banks
that are in holding companies with less than $1 billion in assets, and,
second, that the asset definition for small banks be increased to $1
billion. The limitations in the small institution examination to those
not part of a holding company of more than $1 billion is not consistent
with banking reality. A community bank does not cease to be a community
bank by becoming part of a larger holding company. Moreover, we are
unaware of any institutions that choose their form of corporate
organization (whether a branch or a separate charter) in order to
minimize their CRA compliance burden.
In addition, the $250 million definition for small institutions
certainly is inapplicable to a State like New York, where institutions
many times larger are competing against some of the largest depositories
in the nation.
Again in April of this year we supported an increase to $1 billion in
the asset size of institutions that would be eligible for the
streamlined examination.
By increasing the asset definition for banks subject to the
streamlined examination procedure to $1 billion, the agencies would
continue to subject $1.697 trillion (98%) of the $1.733 trillion in
assets in insured institutions in New York to a full-scope CRA
examination. This percentage would still greatly exceed the national
percentage of under 90% of assets covered by the full-scope CRA
examination requirement if the agencies’ proposal is adopted.
The difference in cost, time and burden between a full-scope CRA exam
and the streamlined examination to which smaller institutions are now
subject is significant. Many smaller institutions that are not currently
eligible for the streamlined examination report that, as the FDIC’s own
data indicates, the cost of a full-blown CRA exam may be three times
that of a streamlined exam. The added cost detracts directly from the
resources that community banks have available to serve their local
communities. Increasing the size of institutions eligible for the
streamlined examination from $250 million to $1 billion would, we
believe, better serve an objective of the FDIC of reducing bank
regulatory burden with very little impact on the assets that would
continue to be subject to the full-scope examination. In New York,
increasing the asset size of eligible banks to $1 billion would free
approximately 45 State non-member banks and thrift institutions from the
costs of the full-blown CRA examination (fully a quarter of these
institutions in the State).
Our Association also supports inclusion of activities in rural areas
in the community development examination standard. Banks located in
rural areas of New York State are engaged in a full range of activities
in support of their local communities. Without the support of their
financial institutions, many rural communities would have difficulty
thriving. We believe that including activities in rural areas in the
streamlined examination criteria would more accurately reflect the
community development activities of banks in such areas.
We also do not object to the inclusion of a community development
criterion in the streamlined examination for banks between $250 million
and $1 billion in assets. As the FDIC indicated, the agencies have
always considered community development activities as part of the CRA
evaluation process. Banks over $250 million in assets who are currently
subject to the full-blown CRA examination are required to demonstrate
their loans to, investments in, and services available to their
assessment areas. The new community development standard will provide
banks newly subject to the streamlined examination the opportunity to
continue to demonstrate their commitments to community development.
For these reasons, the New York Bankers Association supports this
proposal and urges the FDIC to adopt it.
Sincerely,
Michael P. Smith
