"Be sincere; be brief; be seated." – Franklin D. Roosevelt
We read with interest this week that the Federal Reserve Board has launched its own official Twitter channel: @federalreserve. The venerable institution states that tweets will include press releases, speeches, testimony and the like. The central bank certainly is au courant and in good company. Reportedly the presidential candidates are all tweeting energetically, with at least one relying on Twitter for major fundraising. Whatever the medium, it seems to us that FDR’s basic communications advice is worth heeding. So we are sincerely brief, and now we’re being seated.
California Commissioner Haraf Steps Down …
On Monday, William S. Haraf, Commissioner of the California Department of Financial Institutions (DFI), announced his resignation as commissioner, effective today.
Haraf’s career has spanned state government service, commercial and investment banking, the executive branch of the federal government, academia, and a think tank. Prior to his appointment as commissioner in 2008, Haraf was a consultant with the Promontory Financial Group and a visiting professor in the Graduate School of Management at the University of California at Davis. During his tenure with the California DFI, Haraf also held several offices with CSBS, including Chairman-Elect. Haraf also represented state bank regulators on the Financial Stability Oversight Council. Appointed to the position by his fellow state bank regulators, Haraf was the first state bank regulator to serve on the FSOC.
"Bill Haraf is an exemplary state regulator and is a leader among his peers," said John P. Ducrest, Commissioner of the Louisiana Office of Financial Institutions and Chairman of CSBS. "Bill served the state of California and the state system of supervision with distinction. I have deeply appreciated his friendship and counsel and wish him the best in his new endeavors."
… Governor Brown Appoints Barnes
Also on Monday, Teveia Barnes was appointed Haraf’s successor.
Prior to her appointment by Governor Jerry Brown, Barnes was a partner at Foley and Lardner LLP since 2005. Prior to her stint at Foley and Lardner, Barnes served as president and executive director at Lawyers For One America beginning in 1999. She has also worked at the Bank of America National Trust and Savings Association in various positions. Barnes earned her Juris Doctorate degree from New York University School of Law.
"CSBS is pleased to welcome Teveia Barnes as the new California Commissioner," said John W. Ryan, President and CEO of CSBS. "She has an impressive legal background and financial industry experience. CSBS looks forward to working with Commissioner Barnes and her talented staff at the Department of Financial Institutions."
Kentucky DFI, Federal Agency Coordination Key to Restoring Storm-Damaged Banks
It’s been two weeks since the deadly EF-3 tornado ravaged the small town of West Liberty, Kentucky, destroying several homes and businesses in its path, including three local banks.
"It basically destroyed the entire town," said Charles Vice, Commissioner of the Kentucky Department of Financial Institutions (DFI). "Assessments indicate only about 10 to 15 percent of the buildings are salvageable. And I think that estimate is high."
The tornado hit the town of West Liberty late Friday afternoon on March 2, severely damaging three state banks: Commercial Bank, which operated its sole location out of downtown West Liberty; Bank of the Mountains, which is also headquartered in West Liberty; and The Citizens Bank, headquartered in Moorehead, Kentucky, but which operated a branch in West Liberty that was also destroyed. But with the help of DFI, the Federal Reserve and surrounding area banks, these banks were back to serving the residents of West Liberty by early the next week.
"When I learned the magnitude of damage the banks had experienced, I contacted the St. Louis Federal Reserve and had them send out a message through their Emergency Contact System to let other banks in all of Kentucky know that West Liberty had been hit hard and we need help," Vice said. "Within two hours of the message going out I got calls from 30 banks in the area asking how they could help."
DFI coordinated with several banks in the region to help the damaged banks get back to serving the community. "We had about three banks lined up with $2 million in cash reserves ready to go in the event of high withdrawals. And several others were on stand-by to deliver equipment. The overwhelming support was amazing," Vice said.
The Federal Deposit Insurance Corporation (FDIC) and the Kentucky Bankers Association (KBA) also played a significant role in helping banks open for business. The FDIC amended the branch application process to allow banks to quickly set up temporary locations after the storm and the KBA made a commitment to deposit $250,000 timed deposits in each bank to provide additional liquidity.
"Getting the banks opened quickly gave a lot of comfort to the surrounding community and provided some stability and an area that was completely unstable," Vice said.
As the town of West Liberty continues its recovery, the local banks will be right there to help them along the way. Each bank has committed to rebuilding in the community and to working with local residents as they recover from financial hardships due to the storm.
The FDIC has announced a series of steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Kentucky affected by severe storms. The Financial Institution Letter is available at here.
Federal Reserve Reveals 2012 Stress Test Results
The Federal Reserve Board (Board) released summary results of its annual stress tests this week, showing a majority of the country’s largest banks would be able to meet capital standards set by the Board even during a financial crisis.
The Federal Reserve’s stress test, also known as the Comprehensive Capital Analysis and Review (CCAR), evaluated whether 19 of the largest U.S. banks would have sufficient capital in times of severe economic and financial stress to continue to lend to households and businesses. The supervisory stress scenario included a peak unemployment rate of 13 percent, a 50 percent drop in equity prices, and a 21 percent decline in home prices. Under this hypothetical scenario, total bank losses were estimated to be $534 billion over nine quarters.
Despite the significant hypothetical declines, the Board reports that 15 of the 19 banks maintained capital ratios above the regulatory minimum levels. Bank of New York Mellon Corp., State Street Corp., and American Express Co. all produced the strongest results when it came to surpassing the five percent minimum of Tier 1 capital with highs of 13%, 12.5% and 10.8%, respectfully. Citigroup Inc., SunTrust Banks Inc. and Ally Financial Inc. fell below the required minimum with a low of 4.9%, 4.8%, and 2.5%.
"Strong capital levels are critical to ensuring that banking organizations have the ability to lend and to continue to meet their financial obligations, even in times of economic difficulty," the Federal Reserve stated in a press release.
This is the first time since the financial crisis that the Federal Reserve has made public the results of the annual stress test. Banks that failed to meet the minimum capital requirements under the scenario will be required to raise their capital levels. The full summary of the Federal Reserve’s 2012 Comprehensive Capital Analysis and Review is available at here.
Around the States
AL: CSBS announced that the Alabama Banking Department (the Department) has received a certificate of accreditation, certifying that the Department maintains the standards and practices in state banking supervision set by CSBS’s accreditation program. "This reaccreditation represents the standards of the department," said John Harrison, Superintendent of Banks of the Alabama Banking Department. "We have a team that operates at a high level and because of that I was confident in the department’s ability to meet the standards of the CSBS accreditation program and become reaccredited." Read more.
ME: The Maine Bureau of Financial Institutions, together with a coalition of government, nonprofit and corporate leaders, are announcing the 3rd Annual "Fostering Financial Literacy in Maine Schools Conference" and calling on K-12 educators to consider attending this resource-rich learning opportunity on April 26th at the Augusta Civic Center. Organized under the auspices of the Maine Jump$tart Coalition for Personal Financial Literacy, the conference will feature state and national experts offering teachers, counselors and community educators specialized resources and best practices designed to include financial education in the K-12 and post-secondary experience. Read more.
Around the Agencies
AGENCIES: The Justice Department announced the filing of the $25 billion state-federal foreclosure settlement Monday with the U.S. District Court in D.C. The settlement documents provide details of the servicers’ financial obligations under the agreement, which include payments to foreclosed borrowers and more than $20 billion in consumer relief; new standards the servicers will be required to implement; and the oversight and enforcement authorities of the independent settlement monitor, Joseph A. Smith, Jr. Read more.
CFPB: The Consumer Financial Protection Bureau (CFPB) has issued a proposed rule that would codify protections for privileged information submitted to the CFPB by the financial institutions it regulates. The proposed rule is intended to provide supervised entities further assurances that providing privileged information to the Bureau will not adversely affect the confidentiality of such information. Read more.
FHFA: Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco released a 2012 Conservatorship Scorecard, which provides the implementation roadmap for the new FHFA Strategic Plan. The FHFA also announced details on the new 2012 executive compensation programs at the GSEs which reduces top executive pay by nearly 75 percent since conservatorship, eliminates bonuses, and establishes a target for new CEO pay at $500,000. Read more.
FinCEN: The Financial Crimes Enforcement Network (FinCEN) has released the new Registration of Money Services Business, FinCEN Report 1071, through the agency’s BSA E-Filing System. The new report, which will be used by all money services businesses, facilitates registration by foreign-located MSBs and providers of prepaid access. Read more.
OCC: The OCC has issued its final cost of funds reports, which provide information about funding costs covering the six-month period ending December 31, 2011, for institutions formerly regulated by the Office of Thrift Supervision (OTS). The data in the report are derived from the OTS Monthly Cost of Funds Survey System, which savings associations that were regulated by the OTS as of July 20, 2011, continued to file through December 31, 2011. Read more.
TREASURY: Starting now through April 13, high school-aged students from across the country can test their knowledge about personal finance through the U.S. Treasury’s third annual National Financial Capability Challenge. The annual challenge enhances students’ financial capability by strengthening their understanding of saving, budgeting, and investing, among other central personal financial concepts. All students who finish first or second at their school or place in the top 20 percent nationwide will receive official award certificates, and top students will be recognized by the Obama Administration. Read more.
ICBA: The Independent Community Bankers of America announced its top legislative and regulatory priorities for the coming year during its 2012 National Convention in Nashville, Tenn. ICBA’s top priorities for 2012 include: tax and regulatory disparities between community banks and credit unions, the extension of TAG, mortgage lending policies, improving bank examinations, CFPB reforms and more. Read more.
March 20-21: Join your fellow state banking regulators in meetings with congressional and regulatory leaders on Capitol Hill during 2012 Washington Fly-In. Read more.
March 25-28: The federal bank regulatory agencies, the Federal Reserve Bank of San Francisco, and the Community Development Financial Institutions Fund will host the 2012 National Interagency Community Reinvestment Conference in Seattle, Washington. Keynote speakers include Elizabeth A. Duke, member of the Board of Governors of the Federal Reserve System; Cyrus Amir-Mokri, assistant secretary for Financial Institutions at the U.S. Department of the Treasury; Donna Gambrell, director of the U.S. Department of the Treasury Community Development Financial Institutions Fund; Martin J. Gruenberg, acting chairman of the FDIC; and John Walsh, acting comptroller of the OCC. Read more.
"It has been an honor to work with California’s dynamic financial marketplace and serve two governors as California’s Commissioner of Financial Institutions."
– William S. Haraf, in a March 12 public notice announcing his resignation.
Editor’s Note: If you are receiving The Examiner by fax and prefer to receive it by e-mail, please contact Catherine Woody at email@example.com If you do not wish to receive any further fax communications by CSBS you may call (202) 296-2840 or reply by fax to (202) 296-1928 and request that you be removed.
Catherine Woody, Editor
Rockhelle Johnson, Writer
Edward Smith, Contributing Editor