Bank trade groups are urging the Office of the Comptroller of the Currency to redefine "small bank" so that more institutions may qualify for streamlined Community Reinvestment Act exams.
Only banks with assets of $250 million or less are eligible for the special exams, which require less paperwork and less preparation than standard exams.
In letters to the agency this week, the American Bankers Association and the Independent Community Bankers of America recommended that the threshold be boosted to $1 billion.
"The regulation does not distinguish between a $251 million bank and a $251 billion bank," wrote ICBA president Robert N. Barsness. "Both institutions are subject to the same CRA review standards, ... but the burden falls disproportionately on the $251 million bank."
The Comptroller's Office is soliciting comments on proposals to ease community banks' regulatory burdens. The proposals, unveiled in May, included streamlining rules for opening branches, raising lending limits, improving corporate governance procedures, and simplifying capital standards.
The agency also seeks comments on a plan that would make it easier for banks to buy back stock. Doing so could help reduce the number of shareholders and, in turn, let more banks convert to subchapter S corporations. Comment letters on that proposal are due Aug. 13.
Comptroller of the Currency John D. Hawke Jr. has promised to be more responsive to community banks. This month, he named longtime examiner Stuart A. Scherer to a new post, director of community bank activities.
Beyond the small-bank threshold, trade groups also weighed in on CRA investment testing.
The ABA suggested relaxing requirements for small banks in the area of "innovative" or "complex" investments. Because small and large banks frequently compete for a limited pool of investments, small banks often are forced to look outside their markets to satisfy CRA requirements.
"This would seem to fly in the face of the original purpose of CRA, which was to make certain that funds were reinvested in the local community," wrote Cristeena G. Naser, an ABA attorney.
Though the trade groups focused chiefly on CRA issues, comment letters from individual bankers zeroed in on lending limits.
Federal law prohibits national banks from making loans to a single borrower that exceed 15% of unimpaired capital. Some bankers asked the OCC to raise the limit so they can compete more easily with larger institutions or similar-size, state-chartered banks that do not have the same lending ceiling.
Illinois' lending limit for state banks is 20% of capital. California's is 25%, and Oklahoma's is 30%.
"The most important beneficial change for community banks would be to increase the lending limit so that national banks may be more competitive with state banks," wrote Sylvan L. Franklin, president and chief executive officer at $176 million-asset Herget National Bank of Pekin, Ill.
Other small bankers opposed raising the lending limit.
Daniel Roberts, president of $23 million-asset Merchants National Bank in Carson, Calif., said small banks are better off sharing large loans with other banks than taking on the risk themselves. Raising the lending limit, he said, would only lead to less sharing and, subsequently, more bank failures.
"Our bank would not be in existence today-nor would we have survived the last recession-if the legal lending limit for national banks had been set at 25%," Mr. Roberts wrote.