FDIC's Reich Defends CRA Proposal
FDIC Vice Chairman John Reich, in a letter to American Banker, defended the regulators' proposal to increase the asset size limit for eligibility for the streamlined small bank CRA exam from $250 million in assets to $500 million. Reich was responding to an American Banker article quoting community advocates who said the proposal would "devastate" and "gut" CRA and referred to the streamlined exam as a "wink-and-nod exam."
Reich stressed that the proposed increase "would not touch the fundamental CRA regulations," and that small banks "undergo exams that are more streamlined but still rigorous." The proposal "responds to another problem that not only threatens smaller banks but the communities they serve: regulatory burden," Reich wrote.
Noting the decline in the number of small banks and the threat regulatory burden poses to their continued survival, Reich stressed that "small banks rise and fall with their neighborhoods and have a vested interest in the development of their communities" (a point ICBA continually emphasizes). Reich also pointed out that while regulatory burden may not be the only factor driving the decline in the number of smaller banks, "it is a critical one."
Reich stated that the CRA proposal aims to reduce regulatory burden "without diluting the CRA or stalling the momentum of community development in our cities and rural areas," contrary to the claims of community activists. (ICBA's comment letter pointed out the irony of community activists complaining when larger institutions that are less responsive to community needs swallow up smaller banks, but opposing steps that would make it possible for smaller banks to remain in their communities.)
The agencies received more than 1,100 comment letters on the CRA proposal (many from community bankers that responded using ICBA's website and sample comment letter).
Thank you, Vice Chairman Reich, for clarifying the rationale for the proposal.