Cra's 25th Anniversary: The Past, Present, and Future
This paper focuses on the past, present, and future rules and regulations implementing CRA as developed, applied, and enforced by the federal bank and thrift regulators. The past rules and regulations refer to those in effect during the law's first 18 years, through 1995, when CRA underwent its first major reform. The present CRA rules and regulations were adopted then, with the mandate that they would be reviewed for possible reform in 2002. The future rules and regulations are being drafted now by the regulators, based on their review of approximately 400 public comments; the reform recommendations should be released sometime during the second half of 2002. The future of CRA's legacy as arguably the perfect fair market regulation in a world of Compassionate Capitalism will depend upon the direction of these reforms. Optimal public policy by the bank and thrift regulators in this regard must represent the ideal balance between competing consumer and industry interests. This paper represents the first comprehensive analysis of the public comments and concludes with specific recommendations that will lead to optimal public policy.
The Impact of the Growth of Large, Multistate Banking Organizations on Community Bank Profitability
Especially since the passage of the Riegle-Neal Act in 1994, community banks increasingly face large, multistate holding company (MSHC) rivals in the local markets in which they operate. These large MSHCs more often operate through interstate branches, rather than through the offices of a separate subsidiary headquartered in-state. Disagreement persists about the likely effects of this trend on community banks. If large absolute size, or an interstate branch form, confer competitive advantages, the profitability of community banks should be lower in markets where they face such rivals. On the other hand, a number of observers cite possibly offsetting advantages associated with small size, such as a greater ability to offer valued personal service. To date, virtually no empirical studies have focussed on this issue. A panel data set of community banks is constructed to investigate this issue. This data set consists basically of all " single market " banking organizations more than three years old, with total assets of $500 million or less, in each year over the 1995-1999 period. This analysis focuses on community banks in MSA markets, where the presence of larger, multistate competitors is significant. Pre-tax return on average assets is used as the measure of profitability. The intended aim of the analysis is to determine if and how community bank profitability is influenced by several different characteristics of competing MSHCs. The characteristics examined include their absolute size, the location of their headquarters (in-state or out-of-state), and the organizational form characterizing their out-of-state operations (interstate branches vs. in-state offices of out-of-state bank subsidiaries). The empirical results suggest that the profitability of community banks tends to be lower, the greater the market presence of MSHCs. This effect appears to vary with both MSHC absolute size and organizational form. In particular, the estimated coefficients on measures of out-of-state MSHC operations conducted through interstate branches are consistently negative and significant. * The opinions expressed here are those of the author and do not necessarily represent those of the OCC or the Treasury. The author would like to thank Amy Millen for editorial assistance.
Fiscal Transparency in EU Accession Countries Progress and Future Challenges
This paper discusses the findings of fiscal transparency reports on standards and codes (ROSCs) for most EU accession candidate countries. Emphasis is given to the need to establish effective and accountable medium-term budget frameworks to establish policy credibility and anchor adjustment programs to meet EU fiscal goals. Adoption of budgeting and accounting standards consistent with the IMF Government Finance Statistics Manual 2001 framework will also help link budget decisions to EU standards of fiscal reporting. More consistent and comprehensive coverage of off-budget activities is needed for assessing fiscal risk and sustainability. Finally, local government issues need to be addressed by many of these countries since EU fiscal goals are set with reference to general government. Progress in all of these areas can be monitored by keeping fiscal ROSC assessments up to date.