FOR IMMEDIATE RELEASE
ICBA Applauds Revised CRA Rule
Calls Effort “Great First Step”
Washington, D.C. (July 19, 2005) - The Independent Community Bankers of America (ICBA) strongly welcomes the federal bank regulators' revisions to the Community Reinvestment Act (CRA) rule that promises to greatly ease the regulatory burden that effects smaller community institutions and their customers.
"Increasing the threshold for small banks to $1 billion recognizes the changes in the industry since the CRA streamlined exam was adopted in 1995 and eases the burden for the community banks that need it most," said Karen Thomas, ICBA executive vice president, government relations. "While simply extending the streamlined exam to banks up to $1 billion would do more to ease burdens, the added community development test for banks between $250 million and $1 billion will be much more flexible than the existing investment test used for large banks. It will allow community banks to devote resources, including lending and services, to benefit their communities, instead of forcing investments outside their communities."
The revisions adopted today by the agencies will also help rural communities and areas affected by natural disasters. By expanding the definition of community development activities to include support of infrastructure in distressed rural communities, the agencies recognize that community development is more than an urban phenomenon. Rules designed to benefit the inner city do not work in all communities.
"Although more needs to be done to help reduce the overwhelming compliance burden that is driving many community banks to merge or sell to larger institutions, this is a great first step," said David E. Hayes, ICBA Chairman and president and CEO of Security Bank of Dyersburg, Tennessee. "ICBA welcomes this move by the agencies. We urge the banking regulators to continue to build a tiered regulatory system to ease the crush on our nation's community banks."
ICBA has been a long-time proponent for increasing the threshold for the streamlined exam. A 2002 ICBA study by the accounting firm Grant-Thornton entitled "The High Cost of Community Bank CRA Compliance: Comparison of 'Large' and 'Small' Community Banks" showed that compliance costs more than double when a community bank becomes subject to the large bank CRA exam process. The study also found that increasing the small bank size limit would not undermine the purposes of CRA, but would free larger community banks from unnecessary costs, improve their productivity and enhance their ability to meet the credit needs in their communities.