Federal Deposit
Insurance Corporation

October 19, 2004

Mr. Robert E. Feldman, Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429

Re: RIN No. 3064-AC50
Proposed Revisions to the Community Reinvestment Act Regulations

Dear Mr. Feldman:

I am writing to support the federal bank regulatory agencies (Agencies) proposal to enlarge the number of banks and savings associations that will be examined under the small institution Community Reinvestment Act (CRA) examination. The Agencies propose to increase the asset threshold from $250 million to $1 billion and to eliminate any consideration of whether the small institution is owned by a holding company. This proposal is clearly a major step towards an appropriate implementation of the Community Reinvestment Act and should greatly reduce regulatory burden on those institutions newly made eligible for the small institution examination, and I strongly support both of them.

When the CRA regulations were rewritten in 1995, the most significant improvement in the new regulations was the addition of the small institution CRA examination, which actually did what the Act required: had examiners, during their examination of the bank, look at the bank’s loans and assess whether the bank was helping to meet the credit needs of the bank’s entire community. It imposed no investment requirement on small banks, since the Act is about credit not investment. It added no data reporting requirements on small banks, fulfilling the promise of the Act’s sponsor, Senator Proxmire, that there would be no additional paperwork or recordkeeping burden on banks if the Act passed. And it created a simple, understandable assessment test of the bank’s record of providing credit in its community: the test considers the institution’s loan-to-deposit ratio; the percentage of loans in its assessment areas; its record of lending to borrowers of different income levels and businesses and farms of different sizes; the geographic distribution of its loans; and its records of taking action, if warranted, in response to written complaints about its performance in helping to meet credit needs in its assessment areas.

It is, in fact, the deletion of the investment test that is the key element to the small bank examination change. The majority of banks, other than multi-billion dollar institutions, do not have access to the sophisticated financial instruments necessary to fulfill this test.

The change being considered will rectify, what I consider, an inherent bias due to the current examination requirements with heavy reliance on the investment test. Community banks with $1 billion or less in assets should be judged by what they do, lending to their communities.

I believe that it is as true today as it was in 1995, and in 1977 when Congress enacted CRA, that a community bank meets the credit needs of its community if it makes a certain amount of loans relative to deposits taken. A community bank is typically non-complex; it takes deposits and makes loans. Its business activities are usually focused on small, defined geographic areas where the bank is known in the community. The small institution examination accurately captures the information necessary for examiners to assess whether a community bank is helping to meet the credit needs of its community, and nothing more is required to satisfy the Act.

In conclusion, I strongly support increasing the asset-size of banks eligible for the small bank streamlined CRA examination process as a vitally important step in revising and improving the CRA regulations and in reducing regulatory burden. I also support eliminating the separate holding company qualification for the small institution examination, since it places small community banks that are part of a larger holding company at a disadvantage to their peers and has no legal basis in the Act. While community banks, of course, still will be examined under CRA for their record of helping to meet the credit needs of their communities, this change will eliminate some of the most problematic and burdensome elements of the current CRA regulation from community banks that are drowning in regulatory red-tape.

Sincerely,

THE EQUITABLE BANK, S.S.B.
John P. Matter
President, Chief Executive Officer
Wauwatosa, WI