WASHINGTON -- Wholesale banks appear to come out ahead of the game in Community Reinvestment Act reform.

Large institutions that don't deal directly with consumers, such as Delaware-based credit card banks and New York-based investment houses, will no longer be subject to the ill-fitting 12 assessment factors in the current rules.

These banks also won't be subject to the lending, service, and investment tests proposed for commercial banks in the new regulations.

Gary S. Hattem, managing director at Bankers Trust New York Corp., is satisfied with CRA reform.

"They've really done a good job capturing the strengths of what wholesale banks can bring to CRA," Mr. Hattem said.

Under the proposal, examiners would grade wholesale banks on three factors: number and size of loans to the community, use of innovative development programs, and responsiveness to local needs.

In fact, the rules appear so favorable, said one community activist, that other banks may try to qualify for treatment as wholesale institutions.

"I think a lot of banks are hoping to get this [designation]," said Charles Grice, executive director of the Community Reinvestment Institute.

Richard Whiting, general counsel to the Bankers Roundtable, warned that regulators must be clear about which banks qualify as wholesale.

"It would be awful if a bank thought it was being treated as a wholesale bank and the regulators came in and said, nope, we changed your designation two weeks ago," he said.

The new rules also would require wholesale banks to delineate a service area, just as retail institutions must. But it would give them equal credit for loans outside the area as long as the amount doesn't exceed lending within the community.

"The best thing about it is that wholesale banks are now recognized by the regulators," New York banking attorney Warren Traiger said. "Right now people are trying to read through the lines and figure out how the 12 assessment factors apply to a bank that is only doing trade export credits for trade to Asia."

But Mr. Traiger, who represents 30 foreign-owned wholesale banks, said some definitions in the proposal worry him.

For example, the regulation states that a wholesale bank is an institution "not in the business of extending home mortgage, small business, small farm, or consumer loans to retail customers,"

Mr. Traiger said the definition could prevent trust banks from being classified as wholesale banks because they often extend mortgage loans to customers as a special favor.

Mr. Traiger and Mr. Whiting both questioned a requirement that wholesale banks service needs that retail banks aren't already meeting. That could force wholesale banks to make loans below the market rate, they said.

Wholesale banks want assurances from the regulators that CRA credit will continue to be given if a community development project attracts other investors.

Wholesale banks also want credit if their financing enables a small business to grow into a large enterprise.

Stephen M. Cross, the deputy comptroller of compliance management, said the agencies can address these concerns in the examiner guidelines.

"We can't be too narrow or too broad," Mr. Cross said of the regulation. "If we are too narrow, we choke off valid opportunities. But if we are too broad, we invite abuse."

While not wanting to make a blanket statement, Mr. Cross said the agencies will not argue with wholesale banks that try to meet the needs of the community. But, he added, regulators will not let banks whitewash their records. But community groups are still wary.

"I think the community development test needs to be tightened up to apply more clearly to low- and moderate-income areas," said Allen Fishbein, general counsel to the Center for Community Change.

John Taylor, executive director of the National Community Reinvestment Coalition, said the rules should allow banks to designate a national service area.

"[But] we need to make sure the wholesale banks don't make investments to the exclusion of where they are located," Mr. Taylor said.

Comments on the proposed rules are due Monday.

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