WASHINGTON - House Republicans have called on federal regulators to quadruple the size of banks and thrifts eligible for streamlined Community Reinvestment Act exams.
"We strongly encourage the agencies to raise the threshold to $1 billion" of assets, wrote seven House Financial Services Committee members in a March 17 letter about a proposal to raise the limit and make other changes to the CRA rules.
Comments on the plan were due today.
Banks and thrifts with assets of $250 million or less are evaluated under a streamlined exam that considers only a bank's lending recording; larger institutions must meet investment and service tests too.
In January the four bank and thrift regulators proposed doubling the limit and eliminating a requirement that a bank with under $250 million in assets be given the large-bank exam if it is part of a holding company whose assets top $1 billion.
The GOP lawmakers - Reps. Spencer Bachus of Alabama, Doug Ose and Ed Royce of California, Richard Baker of Louisiana, Walter Jones of North Carolina, and Jeb Hensarling and Ron Paul of Texas - wrote that the purpose could be accomplished even with the exemption.
"If the $1 billion threshold is adopted, approximately $7.68 trillion will remain under the large retail exam," they wrote. "This is a difference of only 524 institutions and $362 billion of industry assets. … Such an amendment will provide relief to an additional 524 institutions while ensuring that 85% of total industry assets are covered under the large retail exam."
The regulators' proposal would add 1,104 banks and thrifts with $384 billion of assets to the 6,981 with $630 billion of assets already under the shorter exam, according to data from the Federal Deposit Insurance Corp.
The lawmakers' position mirrors that of the Independent Community Bankers of America.
"We believe $500 million is a good first step, but $1 billion would be a better step," said Robert Rowe, a regulatory counsel at the ICBA. "Small banks are integral to their communities, so they live CRA, but they are being crushed by regulatory burden. They still will have to comply with CRA, but unless you do something to let up the regulatory burden, you won't have community banks."
