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ICBA Applauds Fed for Raising Small BHC Policy Statement Threshold

Washington, D.C. (February 28, 2006)—The Independent Community Bankers of America (ICBA) commended the Federal Reserve for raising the asset size threshold from $150 million to $500 million for determining whether a bank holding company qualifies under the Federal Reserve Small Bank Holding Company Policy Statement.

“Over many years, ICBA has consistently fought for raising the asset size threshold and we commend the Federal Reserve for taking this action,” said Karen Thomas, ICBA executive vice president and director of government relations. “This will reduce the regulatory reporting burden for many small bank holding companies and encourage their formation and expansion.  It further builds a tiered regulatory system that recognizes community banks should be subject to less complex rules than larger institutions.”

In 1989, ICBA petitioned the Federal Reserve to raise the asset size threshold and in a 1996 letter, the association urged the Board to define small bank holding companies as those with assets of $500 million or more and increase the debt-to-equity ratio threshold of 1:1 from 3:1 under the Policy Statement.  Most recently, in 2005, ICBA urged the Federal Reserve to set the limit at $1 billion in assets.

The policy statement facilitates the transfer of ownership of small community banks by permitting debt levels at small BHCs that are higher than what would typically be permitted for larger BHCs.   ICBA believes that it is not until a bank holding company reaches the $1 billion asset level that it has the necessary access to equity markets to enable it to finance an acquisition with a lower proportion of debt-to-equity.

The ICBA-backed “Community Banks Serving Their Communities First Act” (S.1568, H.R. 2061) provides for raising the asset threshold under the policy statement to $1 billion.