WASHINGTON - Small bankers gripe about the Community Reinvestment Act more than any other regulation, according to Karen M. Thomas, regulatory counsel for the independent Bankers Association of America.
The reason, the lawyer says, is fairly simple: It's the most expensive one with which to comply.
According to a study prepared for the trade group by Grant Thorton last January, about one third of the $3.2 billion small banks spend each year to comply with regulations is directly attributable to CRA.
Money for Mapping
Coding maps to show which loans are going to what neighborhoods alone costs $57 million.
Ms. Thomas, who has been with the IBAA for a little less than a year, tells the story of one rural bank that used a commercial road map with overlays to delineate its community and its lending patterns.
"The examiners said it wasn't good enough. So the bank got a professional service to prepare some maps which cost $400. Then the examiners were satisfied." she said.
As a result of tales like that one. the IBAA has developed a low-cost mapping service for small banks.
Two-Tier System
But the real solution, the IBAA says, is a tiered system of CRA enforcement, with rural banks being treated much differently than larger urban banks.
"If you look at non-urban bank and it has a reasonable loan-to-deposit ratio vis a vis its peer group and it makes most of its loans locally and there's no evidence of discrimination, then that bank should undergo no further CRA scrutiny," she said .
Ms. Thomas said that examiners must realize the differences between communities, like rural versus urban, and the different kinds of banks, like large versus small.
The CRA guidelines fob examiners now recognize that smaller banks aren't as sophisticated in tracking CRA as large banks and can't be all things to all people, she said.
"Yet when the examiners come in, it doesn't seem to be borne out."
Will it change?
Incentive Plan
"We remain hopeful," Ms. Thomas said. "But as Ken (Ken Guenther, IBAA executive director) has already said, how this comes out will be fairly indicative of the way the Clinton administration views banks,"
Another idea being promoted by the IBAA is to give banks an incentive for having an outstanding CRA rating, said Ms. Thomas. A bank with the top rating would not be examined for CRA as often as other banks, and they wouldn't be required to assemble as much documentation.
"Right now there is no incentive, just a stick that applies to banks that want to expand," she said.
Another IBAA idea is to amend the rules that require directors to write memos describing CRA meetings so that lower-level management can file such reports.
"That's a lot less costly than having a board member or your CEO be the one who is writing the memos for your files," she said.
Ms. Thomas started her law career in a small practice that served bankers. She later was a partner in a firm of Dann & Thomas. She left it to join the IBAA because she wanted to get back to dealing with banking issues.
