CRA Exemption for Small Banks, Shield for Big Ones in House Bill

WASHINGTON - Legislation to exempt small banks from the Community Reinvestment Act and shelter from protests all banks with good reinvestment records was introduced this week.

Rep. Bill McCollum, R-Fla., on Tuesday introduced a bill that would excuse from CRA compliance banks in towns with fewer than 25,000 people as long as the institution's holding company has less than $100 million in assets.

"We are pleased that McCollum is revisiting that issue," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America. "There is less justification for applying CRA to community banks than there is to big banks; if you're a small bank and you're not lending to your community, you will not survive."

The bill also includes a "safe harbor" provision: Any bank that received one of the two highest CRA ratings within two years prior to a new application could not have the application denied on the basis of current CRA compliance.

Exempting small banks from the CRA would be a step backwards for credit availability in small communities, according to Woody Widrow, vice president of the National Community Reinvestment Coalition.

"We are definitely against it," Mr. Widrow said. "A lot of our membership is in rural communities. One of the tools they have of increasing access to credit is CRA."

Not surprisingly, some trade groups primarily representing big banks opposed the measure, too.

"If you do a good job, how you're treated shouldn't be reflected by what size the bank is," said Alfred Pollard, senior director of the Bankers Roundtable.

A similar measure was introduced in 1991 by Rep. Paul E. Kanjorski, D- Pa., as part of the Bush administration's banking reform bill. The provision was approved by the House Banking Committee's financial institutions subcommittee, but the full committee voted against the provision.

Rep. Chalmers Wylie of Ohio, the committee's senior Republican at the time, agreed to a compromise that struck the Kanjorski amendment from the bill. In return, a measure sponsored by Rep. Joseph P. Kennedy 2d, D-Mass., that would have applied CRA standards to interstate branching also was dropped.

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