ICBA - News - News Release - Higher Streamlined CRA Exam Limit Welcomed
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Higher Streamlined CRA Exam Limit Welcomed

Washington, D.C. (April 12, 2004) - Proposed changes to raise the asset-size limit for the small bank streamlined Community Reinvestment Act (CRA) exam from $250 million to $500 million are welcomed, but should be expanded further, according to the Independent Community Bankers of America (ICBA).

While strongly supporting the proposed changes, the ICBA urged the agencies to consider an increase to $2 billion or, at least, $1 billion in assets to better reflect the current demographics of the banking industry and the realities of today's market.

"The ICBA applauds the federal banking agencies and members of Congress for recognizing that it is time to expand this critical burden-reduction benefit to larger community banks," wrote Karen M. Thomas, executive vice president of ICBA. "These measures would allow more community banks to focus on what they do best-fueling America's local economies."

As of April 9, ICBA members supporting the increase in the asset limit for the streamlined exam filed roughly half of the nearly 350 letters the agencies received. The ICBA noted that increasing eligibility to $1 billion would only cover slightly more than 15 percent of industry assets, even less than the 17 percent covered when the asset limit was set at $250 million in 1995. All banks would still be subject to CRA, but streamlined exams would lift some of the heavy regulatory burden imposed by the large bank exam.

Expanding eligibility for the streamlined CRA examination process is an important step to reduce regulatory burden for community banks. A 2002 ICBA/Grant Thornton study showed that CRA compliance costs can be two or more times greater for "large" community banks than for small ones. In an age of trillion dollar banks, examining a $500 million-asset bank under "large" bank CRA exam procedures does not make sense.

Seven members of the House Financial Services Committee also urged the banking regulatory agencies to increase the asset limit for the streamlined exam to $1 billion. The representatives commended the agencies for proposing the expansion to $500 million in assets because "it is well known that small institutions incur a disproportionately high regulatory cost when subjected to the large retail institution exam."

The committee members pointed out that a $1 billion limit would not have a significant impact on the total amount of industry assets or banks subject to the large bank CRA review, but would provide much needed relief for an additional 524 banks. Legislation (H.R. 3852) introduced by Reps. Richard Baker (R-La.) and Jeb Hensarling (R-Texas) would raise the asset cut-off for streamlined CRA exams to $1 billion.

The full text of ICBA's comment letter is here.