CDBA Submits Comment Letter to CDFI Fund on CDFI Bond Guarantee Program

Monday, April 8, 2013

On April 8, 2013 the membership of the Community Development Bankers Association submitted a comment letter to the CDFI Fund in response to the Community Development Financial Institution Fund’s (CDFI Fund) request for public comment on the Interim Final Rule implementing the CDFI Bond Guarantee Program (CBGP). The Interim Final Rule was published in the Federal Register on February 5, 2013. We thank the CDFI Fund for the opportunity to comment and urged the U.S. Department of Treasury to implement the program in a manner that enables the entire, diverse CDFI sector to use the program for the benefit of distressed communities across the country.

Our comments focused primarily on explaining how the CBGP presents an opportunity to enable CDFI banks to significantly expand provision of credit in Low-and Moderate-Income (LMI) communities given the program's design and a rapidly changing and restrictive bank regulatory environment. Among the recommendations, our highest priority is ensuring that the Use of Bond Proceeds and Secondary Loan Requirements are consistent with allowing CDFI banks to use proceeds as Tier 1 capital if approved by the Federal banking regulatory agencies. As such, we asked for the US Treasury’s and CDFI Fund’s support as we seek an exception to the Basel III rule for the CBGP. A second tier set of recommendations was focused on ensuring the CDFI Bond Program proactively mitigates potential conflicts with other regulatory rules that might otherwise prevent CDFI bank participation. A third tier set of recommendations focused on issues of general concern regarding the program's structure and requirements. Like our colleagues in other sectors of the CDFI industry, overall program fees and other costs are the greatest concern. The subsequent recommendations were listed in descending priority order in the letter.