Upstate New York Citizen Group Opposes FDIC’s Decision to Increase the Asset Threshold for the CRA Large Bank Exam to $1 Billion

Proposed Rule Change Turns Back the Clock on Community Investment - Citizens Ureg to Contact FDIC by October 20

The Utica/Central New York Citizens in Action, which represents the interests of low- and moderate-income communities in Central New York, said today that a proposed rule change by the Federal Deposit Insurance Corporation (FDIC) to offer “streamlined” testing under the Community Reinvestment Act (CRA) to institutions up to $1 billion in assets, without regard to any holding company assets, will harm affordable housing and community and economic development in low moderate income communities. Comments from community groups and citizens are due to the FDIC by October 20.

“The impact of this change in CRA regulations on inner-city and rural areas would be significant,” said John Furman, President of the Utica/Central New York Citizens in Action. “For example, in our area of Upstate New York, the Bank of Utica, Oneida Savings Bank, and SBU Municipal Bank would be considered small banks under the proposed new definition and thus exempt from CRA rules. This would discourage banks from continuing to participate in affirmative lending programs. This would have a devastating effect on economically depressed regions like Central New York.”

”It is critical that including community organizations and the general public submit comments to the FDIC opposing the proposed change by October 20,” continued Furman. "The FDIC has already received a record 7,000 comments, but the majority are from small banks supporting the FDIC's proposal. The Fed and the OCC are watching closely to see whether community groups care. This is an important moment for maintaining and expanding bank involvement in communities.”

Under current rules, small banks with assets under $250 million undergo a limited CRA exam that covers only some basic lending activities. Larger banks undergo a full CRA exam that covers lending, investments, and services. Now the Federal Deposit Insurance Corporation (FDIC) has proposed to allow all banks with assets under $1 billion to have the limited exam. Only 4% of FDIC-regulated banks would face a full CRA exam. This change would harm low- and moderate-income communities, and leave some states with no banks subject to a full CRA exam. The Office of Thrift Supervision (OTS) has already finalized a similar rule. The two other regulators, the Federal Reserve Board and the Office of the Comptroller of the Currency, are considering a similar change. Other changes could also follow.

“The FDIC’s proposed rule change is very disappointing,” said Furman. “The FDIC now wants to eliminates any regulatory incentive for 1100 banks to include LMI persons in their community services and investments.” From the FDIC’s own data it appears that some states – Wyoming and Idaho -- would have no banks with a CRA impetus to invest in and also provide services to their communities, noted Furman, while others – Vermont, Alaska, and Montana – would only have one.

Mr. Furman urged citizens to send comments to the FDIC website via
http://www.fdic.gov/regulations/laws/federal/propose.html Comments may also be faxed to 202-898-8788 or emailed to comments@fdic.gov.

”It is really quick and easy to send comments, said Furman. “Just visit the FDIC website and find "Community Reinvestment 12 CFR Part 345". Click on ‘Submit Comment’ and type in your comment. Your comment can be very simple. For example: ‘I oppose the FDIC's proposal to allow banks with assets above $250 million to be examined as small banks under the Community Reinvestment Act. This policy would reduce lending, investments and services in low-income communities.’

“The great untold story of CRA is of all the partnerships between banks and nonprofits that have generated affordable housing by leveraging dwindling government subsidies with private capital,” said Furman. “Some insured institutions will continue to invest in and provide services to low- and moderate-income communities without a Federal requirement, but the question is whether even they will do so at the very same level, if community investments and services are no longer required.”

The Utica Citizens in Action is a multi-issue community organization concerned with issues such as community reinvestment, economic justice, living wages, affordable and accessible health care, quality public education, and sustainable development.