ICBA - Publications - ICBA Files Letter on Streamlined CRA Exams

ICBA Files Letter on Streamlined CRA Exams

APRIL 9, 2004


ICBA Files Letter on Streamlined CRA Exams

The ICBA filed its comment letter this week with federal bank regulators strongly supporting the proposal to increase the asset size limit for the streamlined small bank CRA exam from $250 million in assets to $500 million and eliminating the separate holding company size limit. More than 1,300 community banks would benefit from the proposal.

The ICBA urged the agencies to go even further and increase the cutoff to $2 billion, or at least $1 billion, noting that when the highly successful streamlined CRA examination was adopted in 1995, banks with approximately 17% of industry assets were eligible small banks. Due to changing industry demographics, increasing eligibility to $1 billion would only cover slightly more than 15% of today's industry assets, still less than the percentage of assets covered in 1995.

The ICBA applauded the agencies for taking this important step toward reducing 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-a factor that helped move the proposal. The full text of the ICBA letter is available at www.icba.org.

Key House Members Support Proposal. Seven members of the House Financial Services Committee also wrote to the banking regulatory agencies urging them to increase the asset limit for the streamlined exam to $1 billion. The representatives commended "the agencies for proposing this expansion [to $500 million] as "it is well known that small institutions incur a disproportionately high regulatory cost when subjected to the large retail institution exam." They stressed that even though a $1 billion cutoff (instead of $500 million) would only increase the amount of assets covered by the streamlined exam by $362 billion, it would provide badly needed regulatory relief to 524 more community banks.

The representatives-Richard Baker (R-LA), Capital Markets subcommittee chairman; Spencer Bachus (R-AL), Financial Institutions subcommittee chairman; Walter Jones (R-NC); Ron Paul (R-TX); Doug Ose (R-CA); Jeb Hensarling (R-TX); and Ed Royce (R-CA)-also recommended expanding the types of community development activities that qualify under the investment test for larger institutions.

Community Bankers Show Strong Support. At press time, nearly 350 comment letters had been filed on the CRA proposal. Not surprisingly, community activists opposed the proposed small bank asset limit increase, calling it an "exemption" from CRA requirements. However, more than half of the letters were from community bankers expressing strong support for the proposal. Thanks to all the ICBA members who answered the call to support the proposal!!