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| Upcoming Events |
Model Examination Guidelines User School (Web-based), October,
November & December sessions open for registration: Developed by AARMR and
CSBS, this school is designed to assist mortgage regulators and mortgage industry
compliance personnel implement the examination procedures for the Guidance on
Nontraditional Mortgage Product Risks (Guidance) and the Statement on Subprime
Mortgage Lending (Statement).
Online Courses Beginning October 5: Asset Liability
Management II, Fraud Identification Training, IT Systems Examination, Real Estate
Appraisal Review, Money Service Business Examiner Course.
Examiner Education Forum, November 2-4, 2009, Charleston, SC:
A forum for banking department training directors to discuss trends and needs
in examiner training.
Practical Commercial Credit Skills for Examiners, November 16-17,
2009, Frankfort, KY: A two day program designed for experienced bank examiners
for the purpose of enhancing their abilities to analyze and communicate credit-risk
issues associated with commercial loans.
Supervisors Symposium, December 7-11, 2009, Washington, DC:
Bankers Advisory Board meeting, CSBS Board Meeting and Supervisors Symposium. | |
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October 2, 2009
|  | "I'm not bossy. I just
know what you should (not) be doing.” – Bumper Sticker
This
week, the U.S. Department of Transportation held a two-day summit to point out
the dangers of distracted driving. In our minds, it should be a no-brainer that
a driver should not be text-messaging behind the wheel. However, we seem to have
a texting epidemic going on and getting worse. Quite frankly, we are astonished
to see people going down the highway at 60 mph, their thumbs flying over the keyboards
on their "handheld mobile devices", their eyes not on the road at all. A few days
ago, we heard a radio interview with a teenage girl who had two serious accidents
while text-messaging while driving. She actually admitted being addicted to the
practice. The Transportation Department estimates that 6,000 people were
killed in distracted driving accidents last year, not only in car wrecks but also
in public transportation accidents. Legislation is making the rounds on Capitol
Hill to encourage states to pass laws making texting or e-mailing while driving
illegal. But such a law in the District of Columbia is ignored as much as it's
obeyed. Laws are well and good, but common sense would be better. As Sen. Amy
Klobuchar (D-Minn.) so aptly stated, "No text message is so urgent that it's worth
dying over."
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| Dodd Wants Agency Consolidation,
Taking Fed and FDIC Out of Supervision | | Senate Banking Committee Chairman
Christopher Dodd (D-Conn.) continued to push for consolidation of federal regulators
as a part of the industry reform package.
“Last week I suggested
further consolidation of bank regulators would make a lot of sense. We could
combine the Office of the Comptroller of the Currency and the Office of Thrift
Supervision while transferring bank supervision authorities from the Federal Deposit
Insurance Corporation and the Federal Reserve, leaving them to focus on their
core functions.”
However, the chairman also called for the continuation
of the dual banking system. At a hearing on Tuesday, Dodd also recognized the
important role played by community banks. “Community banks did not cause
this crisis, and they should not have to bear the cost or burden of increased
regulation necessitated by others. Regulation should be based on risk -- community
banks do not present the same type of supervisory challenges their large counterparts
do,” he said.
CSBS opposes regulatory consolidation as Sen. Dodd
suggests.
President and CEO Neil Milner stated, “Regulatory
consolidation leads to industry consolidation. A monolithic regulator would threaten
economic growth and stability by undoing the diversity of the banking industry.
The natural tendency of a single financial regulator would be to tailor its regulatory
policies and supervisory approach to its largest institutions, disadvantaging
smaller institutions, most which are state-chartered. Regulatory consolidation
does nothing to address our number one risk – too big to fail.”
Sen.
Dodd’s statement
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| FDIC Proposes Prepayment of Assessments | | The FDIC on Tuesday issued a proposal to require banks
to prepay their estimated quarterly risk-based assessments for the fourth quarter
of 2009 and for all of 2010, 2011 and 2012 to bolster the Deposit Insurance Fund.
FDIC estimated that the total prepaid assessments collected would be approximately
$45 billion. The FDIC Board also voted to adopt a uniform three-basis point increase
in assessment rates effective on Jan. 1, 2011, and extend the restoration period
from seven to eight years. FDIC Chairman Sheila Bair said the industry has the
liquidity to prepay assessments with banks holding more than $1.3 trillion in
liquid balances as of June 30. FDIC said this approach should have less effect
on bank lending than a one-time special assessment. While prepaid assessments
would be mandatory for all institutions, FDIC could exempt an institution from
the requirement if would affect the safety and soundness of the institution. The
proposal also would allow institutions to request exemption from payment under
certain circumstances. The proposal has a 30-day comment period. For
more information, see news release.
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| FDIC Provides Assessment Q&A | | FDIC on Wednesday published a question and answer document
on its proposal to replenish the Deposit Insurance Fund by having insured institutions
prepay their assessments. The proposal would require banks to prepay their estimated
quarterly risk-based assessments for the fourth quarter of 2009 and for all of
2010, 2011 and 2012 to bolster the Deposit Insurance Fund. FDIC estimated that
the total prepaid assessments collected would be approximately $45 billion. In
the document, FDIC explained that it wanted to reserve borrowing from Treasury
for emergencies, when unforeseen events require an unexpected large cash outflow.
FDIC said the Deposit Insurance Fund’s current liquidity needs do not represent
an emergency and can be planned for and met by industry resources. To account
for the prepayments, FDIC explained that each institution would record the entire
amount of its prepaid assessment as a prepaid expense (an asset) as of Dec. 30,
2009, the date the payment would be made. As of Dec. 31, 2009, and each quarter
thereafter, each institution would record an expense (charge to earnings) for
its regular quarterly assessment and an offsetting credit to the prepaid assessment
until the asset is exhausted. FDIC said it is projecting that the Deposit Insurance
Fund will incur approximately $100 billion in failure costs over the period 2009
through 2013. See
FAQs
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| Chairman Frank Revises Consumer
Protection Bill | | Prior to Wednesday's hearing to gather
additional viewpoints on the proposed Consumer Financial Protection Agency (CFPA),
House Financial Services Committee Chairman Barney Frank (D-Mass.) released revised
draft legislation (H.R. 3126) reflecting a number of changes in response to concerns
raised by industry and consumer groups. CSBS has analyzed the revised bill, noting
provisions of interest to state bank regulators. The revised legislation changes
the structure of the agency from a five person board to a single director, advised
by an oversight board to include the Fed, FDIC, national bank supervisor, NCUA,
FTC, HUD, and state representation by the chair of the FFIEC State Liaison Committee.
In his revised bill, Chairman Frank inserted specific exemptions for certain
types of non-financial firms such as retailers, accountants, tax preparation services,
real estate brokers and agents, etc. He also added registration requirements for
nonbanks that provide consumer financial products. The revised bill also changes
funding requirements from appropriations and fees and other assessments to having
the Federal Reserve transfer 10 percent of total expenses and sets up separate
funds within Treasury to cover CFPA expenses for banks vs. nonbanks. He also set
up a dispute resolution mechanism and removed the original requirement that mandated
financial institutions providers to offer "plain vanilla" products. The revised
bill maintains the original version's elimination of federal preemption of state
consumer protection laws and allows states to go beyond federal standards. CSBS's
support of the measure is contingent on these provisions (elimination of federal
preemption and preservation of the "floor not ceiling" provisions) and maintaining
a significant role for state regulators in terms of coordination and consultation
in rulemaking and examinations. Additionally, CSBS supports examination
by the prudential regulator. Chairman Frank has indicated he plans to mark
up the bill the week of October 12.
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| Committee Holds Hearing on Proposed GAO Audit of Federal Reserve |
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The
House Financial Services Committee convened last Friday for a hearing on H.R.
1207. the Federal Reserve Transparency Act of 2009. The bill, sponsored by Rep.
Ron Paul (R-Texas) calls for a full and complete audit of the Federal Reserve
by the Government Accountability Office, reported to Congress by the end of 2010.
The Federal Reserve Board's General Counsel Scott Alvarez testified at Friday's
hearing, noting that a wide range of Federal Reserve policies and functions currently
are subject to GAO audit. However, he spoke in opposition to efforts that would
grant the GAO authority to audit the monetary policy and related activities. "We
think that monetary policy must be done in an independent manner and believe it
is most effective without second guessing," Alvarez said. "If the bill were passed
today we are concerned that there would be loss of confidence by investors and
the public which would hurt our ability to make policy, to ensure price stability
and maximize employment." Alvarez noted that since the System began operations
in 1924, the Federal Reserve has published its balance sheets every week, showing
the assets and liabilities of the Reserve Banks, both individually and on a consolidated
basis. Also, the Federal Open Market Committee releases a statement describing
its monetary policy decisions immediately after each regularly scheduled meeting
and publishes detailed minutes of each meeting three weeks later. Alvarez also
discussed enhanced efforts to publish information about the Fed's policy programs
and financial activities. "The Congress purposefully -- and with good reason --
chose to exclude from GAO review only two highly sensitive areas: one is monetary
policy deliberations, decisions, and actions, including open market and discount
window operations; and the other is Federal Reserve transactions for or with foreign
central banks, foreign governments, and public international financing organizations...to
ensure that the Federal Reserve Board could 'independently conduct the nation's
monetary policy.' " The legislation has garnered 295 cosponsors this session.
Committee Chairman Barney Frank (D-Mass.) said that a version of H.R. 1207 would
be included in the regulatory reform legislation coming out of the Financial Services
Committee. For more information, see testimony
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| Agencies Propose Guidance on Correspondent
Risks | | The federal banking agencies issued
proposed guidance on their expectations for identifying, monitoring, managing
and performing due diligence for correspondent concentration risks. The regulators
– FDIC, the Federal Reserve, the Office of the Comptroller of the Currency
and the Office of Thrift Supervision -- generally have considered credit exposures
greater than 25 percent of Tier 1 capital as concentrations, while funding exposures
as low as 5 percent of an institution's total liabilities could be considered
a concentration. The supplemental guidance calls for management to: adopt procedures
for identifying an institution's aggregate credit and funding exposures to other
institutions and their affiliates; specify what information, ratios or trends
will be reviewed for each correspondent; set prudent correspondent concentration
limits, establish ranges or tolerances for each factor being monitored, and develop
plans for managing risks when these limits, ranges or tolerances are met or exceeded,
either individually or collectively; and conduct an independent analysis before
entering into any credit or funding transactions with another financial institution.
The comment deadline is Oct. 26. See notice in the Federal
Register
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| Georgian Bank Closed; S.C. Bank
Takes Over | | The Georgia Department of Banking
and Finance closed Georgian Bank, Atlanta, on Friday and appointed FDIC as receiver.
FDIC entered into a purchase agreement with First Citizens Bank and Trust Co.,
Inc., Columbia, S.C., to assume all of the deposits and all of the assets of the
failed bank. Georgian Bank had total assets of $2 billion and total deposits of
approximately $2 billion. FDIC and First Citizens Bank entered into a loss-share
transaction on approximately $2 billion of Georgian Bank's assets. Georgian
Bank is the 95th bank to fail this year and the 19th in Georgia. Read
more
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| Minneapolis Fed Taps New President | | The Federal Reserve Bank of Minneapolis announced that
Dr. Naryana Kocherlakota will be its next president and chief executive officer
effective Oct. 8. He replaces Gary Stern, who announced his retirement earlier
this year. Kocherlakota is currently a professor of economics at the University
of Minnesota and a consultant to the Federal Reserve Bank of Minneapolis. Previously,
he served as a professor of economics at Stanford University, an associate professor
at the University of Iowa and an assistant professor at Northwestern University.
Kocherlakota has an A.B. in mathematics from Princeton and received his Ph.D.
in economics from the University of Chicago. He has published more than 30 articles
in academic journals. The Federal Reserve Bank of Minneapolis is responsible for
the Ninth Federal Reserve District, which includes Montana, North and South Dakota,
Minnesota, northwestern Wisconsin and the Upper Peninsula of Michigan. Kocherlakota
will serve on the Federal Open Market Committee. For more information see
announcement
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| Around the States | | Connecticut: Connecticut
State Banking Commissioner Howard Pitkin issued a schedule of the maximum fees
that a debt negotiator may legally charge for specific services. The new law,
An Act Concerning Consumer Credit Licensees, makes a number of changes in consumer
credit licensees and goes into effect on Oct. 1. The law expands the definition
of a licensed debt adjuster to include for-profit entities. The definition of
debt negotiation includes debt settlement, foreclosure rescue and short sales.
The law creates a new license for debt negotiators that imposes the same licensing
regime as debt adjusters for application procedures, requirements and enforcement.
The law also imposes additional consumer protection safeguards for all debt adjusters.
The fees structure allows a one-time, initial fee of up to $50, a monthly service
fee of up to $8 for each creditor listed in the debt negotiation service contract
with a cap of $40; and an aggregate fee cap of 10 percent of the consumer’s
debt reduction for unsecured debt and a $500 cap for secured debt. For more information,
see
the department’s news release
Idaho:
Idaho State Treasurer Ron Crane is hosting a free financial conference for women
on Oct. 3 in Boise, said Idaho Department of Finance Director Gavin Gee. The Smart
Women, Smart Money — Idaho Every Woman’s Financial Conference is an
annual event in the state and aims to help women increase their financial knowledge
and skills. The meeting provides interactive workshops, free financial education
materials, motivational presentations, and continuing education credits. Gee said
the Idaho Department of Finance will have a workshop presenter at the conference
to address how to prevent home foreclosures and preserve credit standings. The
department’s booth will have books, brochures and pamphlets available with
information about the basics of saving and investing, mortgages, credit cards,
credit scoring, foreclosure avoidance resources, reverse mortgages, identity theft,
and avoiding investment and financial fraud. For more information, see
announcement
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| Around The Agencies | | FDIC: The FDIC
reminded bankers of foreclosure provisions in the Helping Families Save Their
Homes Act that became law in May. Under the law, a tenant must receive a 90-day
notice before being evicted as the result of a foreclosure. With some exceptions,
the law requires that in the event of foreclosure, existing leases for renters
should be honored to the end of the term of their leases. The exceptions are for
tenants without leases, tenants with leases terminable at will under state law,
or where the owners acquiring the properties will occupy them as primary residences.
In these cases, the tenants must receive notices to vacate the properties 90 days
or more in advance. FDIC said the law does not affect the requirements of any
state or local law that provides longer time periods or other additional protections
for tenants. The law applies to foreclosures after May 20. While the law did not
authorize any agency to write regulations, FDIC said its examiners will monitor
and enforce compliance with the requirements in the same manner as other consumer
protection laws and regulations. See Financial
Institution Letter
Federal Reserve:
The Federal Reserve on Tuesday proposed rules to protect credit card consumers
from costly practices that are prohibited by the Credit Card Accountability Responsibility
and Disclosure Act of 2009. Among other things, the proposal would: prohibit most
increases in rates during the first year after accounts are opened and increases
in rates that apply to existing credit card balances; prohibit creditors from
issuing a credit card to a consumer who is under the age of 21 unless the consumer
has the ability to make the required payments or obtains the signature of a parent
or other cosigner with the ability to do so; require creditors to obtain a consumer's
consent before charging fees for transactions that exceed the credit limit; limit
high fees associated with subprime credit cards; ban creditors from using the
"two cycle" billing method to impose interest charges; and prohibit creditors
from allocating payments in ways that maximize interest charges. The changes will
go into effect on Feb. 22, 2010. The remaining provisions of the credit card law
go into effect on Aug. 22, 2010. The proposal has a 30-day comment period. See
proposal
Federal
Reserve: The Federal Reserve revised the rates and conditions under which
a government agency must reimburse a financial institution for costs incurred
in producing customer financial records under the Right to Financial Privacy Act.
The revisions to Regulation S go into effect on Jan. 1, 2010. One of the most
significant changes allows a substantial increase in personal fees for searching
and processing document requests. The amendments also encourage electronic document
productions by prohibiting a $0.25 per page fee to be charged by a financial institution
for printing electronically stored information unless the requesting agency consents.
The amended regulation also includes a mechanism to update labor rates automatically
every three years. See Final
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| Upcoming Events | | October 6 - The House Financial Services Committee will
hold a hearing on: "Capital Markets Regulatory Reform: Strengthening Investor
Protection, Enhancing Oversight of Private Pools of Capital, and Creating a National
Insurance Office." - 10 a.m., 2128 Rayburn House Office Building.
October
7 - The House Financial Services Committee will hold a hearing on reform of the
over-the-counter derivatives market. - 10 a.m., 2128 Rayburn House Office Building.
October
7 - The Senate Banking Committee will hold a hearing on “Securitization
of Assets: Problems and Solutions.” - 2:30 p.m., 538 Dirksen Senate Office
Building.
October 8 - The House Financial Services Committee will
hold a hearing on: “H.R. 2382, the Credit Card Interchange Fees Act of 2009
and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009.” - 10
a.m., 2128 Rayburn House Office Building.
October 8 - The House Financial
Services Subcommittee on Housing and Community Opportunity will hold a hearing
on “The Future of the Federal Housing Administration’s Capital Reserves:
Assumptions, Predictions and Implications for Homebuyers.” - 2 p.m., 2128
Rayburn House Office Building.
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| Closing Comment | | "State governments have plenty to do these days without
looking for ways to inhibit the activities of national banks. Rather than pointing
fingers over who should or should not protect people, we should redouble our efforts
at state/federal cooperation and work together to develop the type of national
standards that states would rarely need to exceed." - New York Superintendent
of Banks Richard Neiman and North Carolina Commissioner of Banks Joseph A. Smith
Jr., from a letter to the editor in Wednesday's Wall Street Journal.
Mary White, Editor
Teresa Dean, Contributing Writer | |
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