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ICBA Still Concerned Over Final CRE Guidance

Association Welcomes Positive Changes, Remains Worried About Unintended Effects

Washington, D.C. (December 6, 2006)—The Independent Community Bankers of America (ICBA) appreciates the federal banking agencies for making constructive changes and clarifications-including several ICBA had recommended-to final examiner guidance on concentrations in commercial real estate lending. However, ICBA is concerned, even with the final adjustments, that the guidance, particularly the numerical thresholds, will prove detrimental to America's communities and the nation's economy.

"Whether the guidance will be detrimental or not depends on how examiners apply it and how community banks react to the guidance," said Karen Thomas, ICBA executive vice president and director of government relations. "If it causes community banks to pull back unnecessarily from sound commercial real estate lending activities, it would harm the nation's economy-the opposite of what the guidance attempts to achieve."

Thomas said ICBA will continue to monitor the effects of the guidance and how it is applied in evaluating the safety and soundness of concentrations in commercial lending real estate portfolios. "Rather than issue new guidance, ICBA would have preferred that regulators simply rely on existing standards which have proven to be effective in steering banks through weak commercial real estate markets," she said. "Ensuring appropriate risk management practices is the goal of the new guidance, not reduced economic activity and growth. ICBA remains concerned about the potential for the guidance to cause unintended consequences."