WASHINGTON - Not every bank must comply with the Community Reinvestment Act's new focus on lending, service, and investment.

Regulators, recognizing that the rules might not work universally, have devised special options for small and wholesale banks. And, they've created a strategic-plan option to let larger banks devise their own CRA test.

"The idea is that banks are different and operate in different ways in different communities," said Leonora S. Cross, deputy comptroller for public affairs. "If we have only one method of assessing their performance, it just isn't going to all banks in all circumstances."

The small-bank option provides a streamlined compliance plan for banks with less than $250 million of assets which are either independent or belong to holding companies with less than $1 billion of assets.

The rule shifts the compliance burden from the bank to the regulators. Examiners will review a bank's loan-to-deposit ratio, originations later sold to the secondary market, and community development loans. They also will consider the bank's size, its financial condition, and the credit needs of the community.

Finally, regulators will look at the proportion of loans made within the bank's service area, and the distribution of lending throughout the community and among income levels.

The rules do not require banks to lend evenly throughout their communities. But examiners will evaluate how institutions respond to lending complaints.

Examiners still will rate banks under the small-bank option. But they won't use the rigorous numerical point system required for the lending, service, and investment test.

Rather, banks that are complying will receive a "satisfactory" rating. Those that exceed expectation can receive an "outstanding," while those that not performing adequately are designated either "needs to improve" or "substantial noncompliance."

Banks qualify for the option if they met the asset-size thresholds during the previous year.

"We are very hopeful that when you knock out all this paperwork stuff, it should be very manageable for banks," said Karen Thomas, director of regulatory affairs at the Independent Bankers Association of America. "That's the goal."

Small banks no longer must present marketing records or board minutes, Ms. Thomas said.

"But, you are going to have to know something about your own lending portfolio because you are going to have to direct examiners if they go down the wrong path," she said.

Wholesale banks that do not normally extend home mortgage, small business, or consumer loans have their own special test as well.

Rather than subjecting these credit card, trust, and foreign currency exchange banks to the three-pronged test, examiners will review how the banks meet the credit needs of their designated communities.

The agencies will look at the number and amount of community development loans, the use of innovative investment vehicles, and the response to community credit and development needs.

The agencies clarified that a wholesale bank can receive complete credit for development programs outside its delineated area provided the bank or one of its competitors have satisfied its community's needs.

To qualify, a bank must apply at least three months before an exam. The designation remains until revoked.

"Up to now, regulators have had to jerry-rig a test for commercial institutions to fit wholesale institutions," said Warren Traiger, a New York lawyer who represents a number of wholesale banks. "Now there is a test. That's important."

Two issues, however, are still outstanding, he said. The industry doesn't know what to include in requests for the designation. And, no one knows how regulators will treat nominally wholesale banks that do conduct some residential or consumer lending.

One solution for those nominally wholesale banks could be the third special test - the strategic-plan option. It allows banks to design their own community reinvestment test, with several caveats.

First, plans must include measurable, annual goals. These goals must focus on how a bank is meeting the lending, service, and investment needs of the community. Banks can focus more heavily on any of these areas, provided its in response to a community need.

Second, the rules limit the length of the plans, saying they cannot extend for more than five years.

Finally, the rules require banks to solicit public comment, both informally while they construct the plan and formally once it is completed. Bankers, when they submit the plan to regulators, must include these comments and a description of the bank's outreach efforts.

Regulators will judge whether a bank has satisfactorily met its goals. They will, however, take into consideration circumstances beyond the bank's control.

The rule gives banks a chance to experiment, allowing them to use the plan for a service area while using the standard test in the others. It requires banks to comply with all data collection requirements, including reporting the geographic distribution of small business lending.

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