|
Contact: Michael Stevens
February 4, 2010 Obama Administration Publishes Rules for
CDFI Investments
The Obama Administration released details of a program to use $1 billion
in Troubled Asset Relief Program funds to invest in Community
Development Financial Institutions that target more than 60 percent of
their small business lending and other economic development activities
to underserved communities. Under the program, these CDFIs could receive
capital investments at a dividend rate of 2 percent, compared to the 5
percent rate that was offered under the Capital Purchase Program. They
may apply to Treasury for investments of up to 5 percent of
risk-weighted assets. For CDFIs that might not otherwise be recommended
for participation by their regulators, Treasury will offer matching
capital investments, up to 5 percent of risk-weighted assets, against
private investments on a dollar-for-dollar basis, provided that the
combined amount would return the institution to a viable position. CDFIs
that participated in the Capital Purchase Program will be eligible to
transfer those investments into the new program. More information
February 4, 2010 Boston Federal Reserve Paper Examines Fair
Value Accounting
A research paper published by the Federal Reserve Bank of Boston found
fair value accounting was not a significant trigger for the financial
crisis. The paper by Sanders Shaffer analyzed a sample of large banks to
try to measure the strength of the link between fair value accounting,
regulatory capital rules, pro-cyclicality and the financial crisis.
Shaffer concluded that fair value was not a clear link for most banks in
the sample with other factors playing a greater role in putting stress
on the banks’ regulatory capital. All banks in the sample were
well above the capital adequacy thresholds at the start of the market
crisis and the use of fair value accounting did not push any of the
banks out of the well capitalized designation. The paper found that
provisioning for loan losses was clearly the most significant source of
capital depletion for the sample banks in 2008. More information
February 4, 2010 Governor Warsh Outlines Regulatory Reform
Priorities
Substantial expanding regulatory oversight of the largest and
most systemically significant financial institutions will not be enough
to prevent another crisis, said Federal Reserve Governor Kevin Warsh.
Speaking to the New York Association for Business Economics, Warsh said
previous public policy failures need to be recognized and
addressed. For example, he said, Fannie Mae and Freddie Mac were
given license and direction to take excessive risks, were given
conflicting missions and governed by competing masters. Warsh also
called on policy makers to focus more on “what constitutes
effective prudential supervision, rather than be diverted to the less
consequential discussion as to who should perform it.” He called
for a new resolution authority to include well understood bankruptcy
protocols as much as possible. “A system must be designed so that
market discipline works -- not to the exclusion of regulatory discipline
-- but in support of it,” Warsh said. He said such a system
will require more financial disclosures with greater understanding of
asset quality and funding sources; will need to encourage robust
competition and avoid giving select incumbents permanent funding
advantages; and will need to mandate stronger capital and liquidity
buffers, more effective boards and more rigorous risk-management
practices. More information
February 2, 2010 Federal Reserve Creates Web Site for Bank
Director Education
The Federal Reserve launched a Web site to help new bank directors learn
how they may work to ensure the safety and soundness of their
institutions. The Web site -- BankDirectorsDesktop.org -- also provides
a refresher course for experienced board members. The Fed designed
the Web site for directors of community banks. It features online
training and other resources to help directors better understand the
issues and challenges associated with serving on a bank's board. "Many
people who are asked to serve on bank boards have little training or
experience to prepare them for their new roles," said Patrick M.
Parkinson, director of the Federal Reserve's Division of Banking
Supervision and Regulation. "This Web site has been developed with new
directors in mind, but there is plenty of useful information for those
who have already spent time on bank boards." More information
|