Question & Answer

Question: I understand that in the new CRA examination, the examiner will compare our performance to that of similarly situated banks. We are the only bank in town. What is a similarly situated bank?

Answer: We don't yet have clear answers for you, but there are several things to take into account. First, the new rule clearly recognizes the diversity of banks. The regulatory agencies have been careful in drafting the regulation and examination procedures to prevent the rule from forcing banks to be alike. This makes it important for you to know your niche. Be prepared to identify the business strategy of your bank and explain how that is carried out in the bank's products and services. Providing this information will help examiners identify banks of approximately your size doing business under similar circumstances.

In looking for similarly situated banks, the regulators will look for banks of comparable size that do business in similar markets. The regulators recognize that there are no clear answers here. We recommend that you look for what you consider to be similarly situated banks and use these in your self-assessment. Your choices may guide your examiner in identifying similarly situated banks.

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 6, 4/96