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FDIC CRA Proposal Will Provide Reg Burden Relief

Washington, D.C. (Aug. 16, 2004) - The Independent Community Bankers of America (ICBA) welcomes today's proposal by the Federal Deposit Insurance Corp. (FDIC) to join the Office of Thrift Supervision (OTS) in expanding eligibility for a streamlined small-bank CRA examination to banks with up to $1 billion in assets-an action ICBA has advocated for more than five years.

"Community banks, unlike credit unions, are still subject to CRA exams, but this step by the FDIC would free many community banks from some of the unnecessary regulatory and paperwork burden posed by the large bank CRA examination," said ICBA Chairman Dale Leighty, president and chairman of First National Bank of Las Animas, Colo. "With the FDIC's action, these community banks can redeploy more resources toward their customers and communities." Studies show the examination and data collection burdens for community banks associated with the large bank CRA exam can be more than double those of the smaller bank exam.

"ICBA also appreciates the FDIC's recognition that the investment test of the large bank exam is flawed for community banks," said Leighty. "While we prefer the existing streamlined exam criterion, the proposed new community development criterion for banks between $250 million and $1 billion in assets provides more flexibility than the large bank investment test and addresses the unique characteristics of rural areas. ICBA members have been serving their communities - supporting and engaging in community development efforts-for years."

The streamlined CRA exam is frequently mischaracterized as an "exemption" from CRA. Community organization representatives also erroneously suggest that rural communities would lose community development capital if local institutions do not have to comply with the same CRA examination that applies to multi-billion dollar banks that operate coast-to-coast.

"That is simply wrong," said ICBA President and CEO Camden Fine. "These individuals also complain about losing access to local decision-makers when community banks are taken over by larger banks-yet they want to keep in place requirements that unnecessarily add to community banks' regulatory burden, making it more difficult for them to remain independent and provide a competitive alternative for consumers and small businesses."

The Community Reinvestment Act was enacted to encourage banks to make loans to all parts of the communities where they collect deposits, including low- and moderate-income neighborhoods. The FDIC's proposal does not change that, but provides some relief from the regulatory burden that is threatening to drown community banks in a sea of red tape.

The ICBA urges the Office of the Comptroller of the Currency and the Federal Reserve to reconsider their decision not to expand eligibility for streamlined CRA exams and to follow the lead of the OTS and the FDIC in reducing regulatory burden.