Study Says Large Community Banks Have More CRA Costs

While small community banks received some relief from the burdens of the Community Reinvestment Act through streamlining processes regulators approved in 1995, larger community banks are suffering a disproportionate burden of costs, according to a study for the Independent Community Bankers of America.

The study, which was conducted by Grant Thornton, found that once a community bank reaches over $250 million in assets, its costs for CRA compliance can more than double because the financial institution no longer qualifies to use the simplified processes.

ICBA recommended that eligibility requirements for the streamlined processes be expanded by raising the asset size limit of community banks to at least $1 billion and eliminating the separate asset size qualification for holding companies. It also recommended that large community banks be exempted from the current investment test.

Through questionnaires sent to 1,000 community banks of both small and large size and several case studies, ICBA found that:The mean employee cost for CRA compliance is 36.5 percent higher at large community banks than at those banks eligible for the streamlined process.

In case studies of a small bank that grew to a large size and a small and large community bank in the same holding company, CRA compliance costs were four or more times greater in the large banks than the small ones.

Six times as many large community banks (18 percent) as small banks (3 percent) report that their managerial staff spend more than 60 employee days a year on CRA compliance.

Copyright © 2003 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 3, 6/03