Magazine article American Banker

In Shift, Small Banks Favor Giving N.Y. a Role in CRA Plans

Magazine article American Banker

In Shift, Small Banks Favor Giving N.Y. a Role in CRA Plans

Article excerpt

Small banks last week offered an olive branch - or at least a twig - to New York regulators pushing to overhaul the state's Community Reinvestment Act.

The trade group for state-chartered banks said it now supports having the banking department participate in the development of community reinvestment plans.

Last fall, the New York State Bankers Association had proposed that the agency review reinvestment plans, but not wield power to approve them.

New York's law, which Derric D. Cephas, superintendent of banks, described as "clearly inadequate" in many areas, has been up for revision since November. At Thursday's hearing, witnesses were asked to explain the details of written proposals they submitted last fall.

Coordination Urged

Michael P. Smith, executive director of the bankers association, proposed Thursday that banks develop the reinvestment plans in concert with regulators and community groups, and that implementing a plan would constitute compliance.

The group's new position "represents a subtle but significant shift, because their first proposal would have allowed them [banks] to design anything they wanted," said Warren Traiger, a New York lawyer serving as special counsel to the panel.

He said the trade group's proposal reflected "a realization that the regulator train is leaving the station, and you want to be on it - not waving goodbye."

Like other banking witnesses, Mr. Smith opposed using a numerical formula - like a ratio of local loans to local deposits -- to gauge the adequacy of a bank's lending in poor or medium-income neighborhoods. …

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