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REASONABLE BALANCE URGED BETWEEN SAFETY AND SOUNDNESS AND COMMUNITY BANKS' REGULATORY BURDEN

 REASONABLE BALANCE URGED BETWEEN SAFETY AND SOUNDNESS
 AND COMMUNITY BANKS' REGULATORY BURDEN
 SAN FRANCISCO, June 19 /PRNewswire/ -- A California community banker today urged bank regulators to strike a reasonable balance between safety and soundness concerns and the regulatory burden that threatens to stall an economic recovery.
 "Heavy-handed regulators have put the 'fear of God' into many bankers, contributing to the credit crunch that is still gripping this nation," said Gene Ulrich, president and CEO of Visalia Community Bank in Visalia, Calif.
 Ulrich, testifying in San Francisco at a field hearing conducted by the Federal Financial Institutions Examination Council, said his bank recently went through an exhaustive regulatory examination process that taxed the ability of his bank to serve its customers.
 "Like most bankers, I believe that bank examinations are necessary if we are to ensure the safety and soundness of our financial system," said Ulrich, who serves on the Independent Bankers Association of America (IBAA) Federal Legislation Committee and is the incoming chairman of the California Bankers Council. "Yet, what is important is to balance the needs of safety and soundness against the burden imposed by the examination process. I find it hard to believe that three sets of different examiners needed three months to assess how my bank is performing."
 In the end, Visalia Community Bank was judged to be healthy, but the lengthy process calls into question the benefits vs. the costs of such extreme regulatory procedures, Ulrich noted. "Banks, particularly healthy ones, should not be subjected to lengthy, repetitive exams from competing agencies," he said. "I say competing because sometimes the examiners from the different agencies reach different conclusions, which cause even more burden for the bank that is forced to work out the differences."
 During his testimony, Ulrich noted that the Community Reinvestment Act "has metamorphosed into something Congress never intended." The focus of CRA today is not on the service banks are providing to their communities, but on the length and breadth of their CRA documentation file.
 "One examiner told a community banker in California that if an activity is not documented then it did not happen," Ulrich said. "Many community banks lack sufficient staff to create the extensive paper trail that has become necessary to prove compliance with CRA."
 Ulrich also pointed out the unfair situation that exists between CRA examinations for large banks and small banks. Branches of large banks that compete with local community banks are not individually examined for CRA compliance, while community banks, which conduct almost all of their business within their locale, must undergo intense CRA scrutiny.
 "My two-office community bank is fully examined for CRA compliance while the branches of Bank of America and First Interstate do not face any scrutiny," Ulrich noted. "This clearly creates competitive inequality between large banks' branches and community banks."
 Oppressive regulation is increasing bank costs and the cost of services to customers, while diminishing the willingness of bankers to make loans, Ulrich said. "The regulatory burden is highly counterproductive and it is my hope that these hearings will be part of an ongoing process to reverse the unfortunate tide that is swamping the banking industry," he added.
 IBAA is the only national trade association that exclusively represents the interests of the nation's community banks.
 -0- 6/19/92
 /CONTACT: Craig Hudson, 714-644-2606, or Diane Casey, 202-659-8111, both of the Independent Bankers Association of America/ CO: Independent Bankers Association of America ST: California IN: FIN SU:


DC -- DC001 -- 1944 06/19/92 13:01 EDT
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Publication:PR Newswire
Date:Jun 19, 1992
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