Relates to community reinvestment evaluation exemptions

Summary of provisions

Amends the banking law by adding a new § 46 exempting banking organiza- tions with total assets of less than one billion and have received a satisfactory or outstanding rating by their primary federal regulator shall be exempt from the community reinvestment evaluation by the Department of Financial Services

Existing law

According to the Departmental of Financial Services Website: On a bien- nial basis, New York State bank examiners conduct an evaluation, pursu- ant to the Community Reinvestment Act (CRA), of an institution's performance in helping to meet the credit needs of communities, includ- ing those of low or moderate income within its assessment area. An institution's assessment area reflects those areas in which it operates branches, accepts deposits and/or does a significant amount: of lend- ing,. Based on the evaluation, a rating of 1-4 is assigned.

1 - indicates an Outstanding record of helping to meet community credit needs. 2 indicates a Satisfactory record of helping to meet community credit needs. 3 - indicates that the bank Needs to Improve its record of helping to meet community credit needs. 4 - indicates Substantial Non-compliance in helping to meet the credit needs of its community.

These ratings, along with a Performance Evaluation provide the bank and the public an understanding of how well the bank is performing under CRA.

Justification

Community banks are facing challenges from increased regulatory and technology demands. The thousands of pages of new federal regulations from Dodd Frank apply to banks irrespective of size or their business model. Community banks have additional costs and staff to respond to

compliance requirements. This increased regulatory burden reflected in the continuing loss of community banks in New York State. From 1992 to 2011, the number if community banks in New York State has shrunk from 299 to 169. This trend has not dissipated.

There is pressure to consolidate in part to achieve scale to meet compliance requirements in a cost-effective manner.

For banks with assets under $1 billion, this bill would provide an exemption from a Department of Financial Services community reinvestment evaluation if the bank received a rating of satisfactory or outstanding in their most recent community reinvestment examination conducted by the bank's federal regulator. Only 12 states have their own CRA exams. The fact is that it is extremely rare for a community banks under $1 billion is assets to fail to meet the credit needs of their entire communities as required by CRA. Community banks under $1 billion in assets have a limited geographical area to serve and to survive must focus exclusively on the financial needs of their community. In the event of a bank's failure of a federal CRA examination, the bank would be subject to a state examination. The dual examination model when applied to community banks that consistently achieve a rating of satisfactory or outstanding is duplicative. The same issues are reviewed by both the state and federal regulators. One exam would relieve banks of the additional commitment of time, manpower and assets.

This bill would not only benefit community banks by limiting their regu- latory burden but would also enable DFS to use it examiners more effec- tively to focus on institutions with problems in achieving the required results. This measure would be helpful in responding to the regulatory squeeze on community banks with no negative impacts to achieving the goals of CRA.

Legislative history

2015 Session - New Legislation

Fiscal implications

None

Effective date

Sixty days after being signed into law.