Public Comment, Expanded Exam Cycle Rules, Independent Community Bankers of America

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Public Comment, Expanded Exam Cycle Rules, Independent Community Bankers of America

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May 10, 2007 Office of the Comptroller of the Robert E. Feldman, Executive Currency Secretary 250 E Street, SW Federal Deposit Insurance Corporation thMailstop 1-5 550 17 Street, NW Washington, DC 20219 Washington, DC 20429 November 9, 2005 Attention: Comments/Legal ESS Attention: Docket ID OCC-2007-0007 Jennifer J. Johnson, Secretary Regulation Comments Board of Governors of the Chief Counsel’s Office Federal Reserve System Office of Thrift Supervision th20 Street an Constitution Avenue, 1700 G Street, NW NW Washington, DC 20552 Washington, DC 20551 Attn: OTS-2007-0006 Docket No. R-1279 Re: Expanded Examination Cycle for Certain Small Insured Depository Institutions Dear Sir or Madam: 1The Independent Community Bankers of America (ICBA) appreciates the opportunity to offer comments on the interim rules to implement the examination provisions of the Financial Services Regulatory Relief Act of 2006 (FSRRA). The examination provisions of FSRRA permit insured depository institutions that have 1 1The Independent Community Bankers of America represents the largest constituency of community banks of all sizes and charter types in the nation, and is dedicated exclusively to representing the interests of the community banking industry. ICBA aggregates the power of its members to provide a voice for community banking interests in Washington, resources to enhance community bank education and marketability, and profitability options to help ...

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Robert E. Feldman, Executive

Secretary

Federal Deposit Insurance Corporation

550 17

Street, NW

Washington, DC 20429

Attention: Comments/Legal ESS

Board of Governors of the

Federal Reserve System

Street an Constitution Avenu

Washington, DC 20551

Docket No. R-1279

Jennifer J. Johnson, Secretary

Regulation Comments

Chief Counsel’s Office

Office of Thrift Supervision

1700 G Street, NW

Washington, DC 20552

Attn: OTS-2007-0006

Re: Expanded Examination Cycle for Certain Small Insured Depository

Institutions

Dear Sir or Madam

The Independent Community Bankers of America (ICBA)

appreciates the

opportunity to offer comments on the interim rules to implement the examination

provisions of the Financial Services Regulatory Relief Act of 2006 (FSRRA).

The

examination provisions of FSRRA permit insured depository institutions that have

1 1

The Independent Community Bankers of America represents the largest constituency of community banks of all

sizes and charter types in the nation, and is dedicated exclusively to representing the interests of the community

banking industry. ICBA aggregates the power of its members to provide a voice for community banking interests

in Washington, resources to enhance community bank education and marketability, and profitability options to

help community banks compete in an ever-changing marketplace.

With nearly 5,000 members, representing more than 18,000 locations nationwide and employing over 265,000

Americans, ICBA members hold more than $876 billion in assets $692 billion in deposits, and more than $589

billion in loans to consumers, small businesses and the agricultural community. For more information, visit

ICBA’s website at www.icba.org.

May 10, 2007

Office of the Comptroller of the

Currency

250 E Street, SW

Mailstop 1-5

Washington, DC 20219

November 9, 2005

Attention: Docket ID OCC-2007-0007

up to $500 million in total assets, and that meet certain other criteria, to qualify

for an 18-month (rather than 12-month) on-site examination cycle.

Prior to

enactment of FSRRA, only institutions with less than $250 million in total assets

were eligible for an 18-month on-site examination cycle.

Background

Section 605 of FSRRA, which became effective on October 13, 2006, amended

section 10(d)(4)(A) of the Federal Deposit Insurance Act to raise, from $250

million to $500 million, the total asset threshold below which certain 1-rated

insured depository institutions may qualify for an 18-month (rather than a 12-

month) on-site examination cycle.

ICBA strongly supported raising the asset

threshold for well-managed community banks and Section 605 of FSRRA is

similar to a provision included in the ICBA-backed Communities First Act.

Subsequently and with the strong support of ICBA, a technical amendment was

passed by Congress to allow the banking agencies to authorize by regulation that

certain 2-rated institutions with total assets of $500 million or less would be

eligible for an 18-month examination cycle as well.

ICBA’s Position

ICBA strongly supports the interim rules which will allow a community

bank with assets of up to $500 million to qualify for an 18-month exam

cycle if the bank received a composite rating of outstanding or good at its

most recent examination.

Besides raising the asset threshold, the rules clarify

that an institution’s composite condition will be considered “outstanding” if it

received a composite rating of 1 and “good” if it received a composite rating of 2

under the Uniform Financial Institutions Rating System, commonly referred to as

“CAMELS”. The rules also clarify that a small institution meets the statutory “well

managed” criteria for an 18-month cycle if the institution, besides having a

CAMELS composite rating of 1 or 2, also received a rating of 1 or 2 for the

management component of the CAMELS rating at its most recent examination.

The agencies estimate that these interim rules will increase the number of

insured depository institutions that may qualify for an extended 18-month

examination cycle by approximately 1,089 institutions, for a total of 6,670 insured

depository institutions. By reducing their regulatory burden, these well-managed

institutions will now have more resources to serve their customers and

communities.

ICBA believes that these rules will also allow the banking agencies to

better focus their supervisory resources on those institutions that present

capital, managerial, or other issues of supervisory concern, while

concomitantly reducing the regulatory burden on small, well capitalized

nd well managed community banks.

FDIC data indicates that between 1985

nd 2000, banks with a composite CAMELS rating of 1 or 2 were more than

hree times less likely to fail over the next five-year period than institutions with a

lower composite CAMELS rating. With better off-site monitoring activities, the

agencies can now spend less time on on-site examinations of well capitalized

and well managed community banks.

Conclusion

ICBA strongly supports the interim rules which will allow community banks with

assets of up to $500 million to qualify for an 18-month exam cycle and

commends the agencies for issuing them. These rules will reduce the regulatory

burden on approximately 1,089 community banks that qualify under the

expanded exam cycle, allowing them to better devote resources to serving their

customers and communities. The rules will also allow the banking agencies to

focus more of their resources on those institutions that present capital,

managerial and or other issues of supervisory concern.

ICBA appreciates the opportunity to comment on these interim rules.

If you have

any questions about our letter, please do not hesitate to call me at 202-659-8111

or at

Chris.Cole@icba.org

Sincerely,

Christopher Cole

Regulatory Counsel

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