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WASHINGTON-Three federal banking regulators issued final regulations on Community Reinvestment Act amendments last week that would lessen the reporting burden for most banks. The banking trade associations have applauded the move, while the credit union groups have questioned how they can champion this at the same time they are trying to impose CRA on credit unions. The Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency jointly issued a new rule that would raise the bar for the `small bank’ examination qualification to $1 billion in assets without regard to holding company affiliation. Additionally, a new category of `intermediate small banks,’ between $250 million and $1 billion in assets, was created to “encourage meaningful community development lending, investment and services by these banks,” according to a press statement. Banks of this size would no longer have to collect and report CRA loan data, but examiners will continue to evaluate bank lending activity, which will be disclosed to the public. Intermediate small banks will be evaluated under two separate tests: the small bank lending test and the new, flexible community development test. The community development test evaluates loans, investments and services with an eye toward the community’s needs and the bank’s capacity. Interim CRA exam procedures for these banks will be in place by Aug. 1. The definition of community development is expanded to include activities that revitalize or stabilize designated disaster areas and distressed or underserved rural areas. Designated distressed or underserved rural areas will be listed on the Federal Financial Institutions Examination Council Web site at www.FFIEC.gov/cra. The new regulation also explains when discriminatory or other illegal credit practices will impact the bank’s CRA rating. These rules will take effect Sept. 1. “Smaller banks will now be able to use valuable and scarce human and financial resources in truly understanding and meeting the needs of their communities rather than trying to prove compliance with broader examination requirements,” America’s Community Bankers President and CEO Diane Casey-Landry stated. However, she added that expanding the community development test was unnecessary but better than the previous tests for intermediate small banks. Casey-Landry also stated that ACB prefers Office of Thrift Supervision amendments, which are more liberal than the other regulators’ changes. Representatives from the Independent Community Bankers of America also were grateful but said more could be done. “Although more needs to be done to help reduce the overwhelming compliance burden that is driving many community banks to merge or sell to larger institutions, this is a great first step,” David E. Hayes, ICBA Chairman and president and CEO of Security Bank of Dyersburg, Tenn., said, “ICBA welcomes this move by the agencies. We urge the banking regulators to continue to build a tiered regulatory system to ease the crush on our nation’s community banks.” – [email protected]

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