FDIC: Proposed Increase in CRA Small Bank Threshold to $1 Billion; 2004

ABA Contact: Paul Smith, (202) 663-5331
Published: 69 Federal Register 51611; August 20, 2004
Comments Due: September 20, 2004
Disposition: Filed

Update: This FDIC proposal has been replaced by the March 11, 2005, FDIC, FRB, OCC proposal. See comments due May 10, 2005 reg chart item.

FDIC proposes to increase the streamlined evaluation method applicable to small banks from those with assets of $250 Million to $1 Billion. The OCC and the FRB have said that they will withdraw their proposals to relieve the regulatory burden of CRA on small banks. The FDIC's proposal is the last hope for small banks to obtain relief from the unnecessary regulatory burden of the large bank examination. Comment letters from bankers are urgently needed to make the case for the FDIC to adopt their proposal. ABA has prepared a discussion of the major issues and offered some recommendations on them at our CRA issue page.

In addition to increasing the small bank threshold, the proposal would make two other significant changes:

(1) Add a community development criterion for small banks over $250 million in assets.

The criterion requires institutions to be evaluated on their level of community development loans, investments and services. The criterion would be mandatory, and would be evaluated along with the current streamlined criteria applicable to small banks. Notably, it would permit banks to balance their community development activities based on the opportunities in the market and their own strategic strengths. For example, a covered bank may perform under this community development criterion by engaging in any type or combination of community development activity –lending, investments, or services, as opposed separate tests for all three.

The FDIC specifically requests comment on whether there is another appropriate threshold to use when defining small banks. We ask, as a subset of that question, whether the CD test should apply to all banks between $250 million and $1 billion or should the initial threshold for the CD test be higher, such as $500 million? The FDIC also asks whether the new CD criterion should be made a separate test in addition to the small bank standard. If such a test should be added, how should CD activities be weighted with the small bank performance standard in assessing overall CRA performance?

(2) Expand the definition of community development to include activities in rural areas.

The FDIC said that this proposed change was intended to allow a broader range of activities by banks in rural areas to receive CRA credit. FDIC further asks if "rural" needs to be defined, and if so, how that term should be defined.

2004 Regulations Chart
Federal Register
Comment Letter