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CSBS Examiner

A weekly report of events affecting the state banking system from the Conference of State Bank Supervisors

12/2/2011 

 In This Issue...

 Upcoming Events...

Supervisors Symposium & Board Meetings, December 5-9, 2011, Washington, DC

NMLS Annual Conference & Training, February 6-9, 2012, Scottsdale, AZ: The Nationwide Mortgage Licensing System & Registry (NMLS) is conducting the fourth annual NMLS Conference & Training for regulatory and industry system users, education providers, consultants, and other interested parties. Designed for both new and experienced users, the Conference provides an invaluable exchange of information among system users on issues that affect their organization's use of NMLS.  Link: 

State-Federal Supervisory Forum, May 21-23, 2012, Savannah, GA

"The fundamentals just keep marching forward despite the market turmoil. The real economy seems indifferent to the EU debt headlines." – ING Chief Investment Strategist Doug Cote, quoted on cnn.com on Nov. 30, 2011.

Despite wars and rumors of wars, despite the doom and gloom of so many headlines, it appears that after months, or years, of perplexity we may be heading in the right direction. So it was encouraging this week that some of the former prophets of bad news admitted that many trends are upward--not hotly and vibrantly upward--but nonetheless positive. And that’s a good thing as we head into the holidays.

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Rep. Barney Frank Announces Retirement, Calif. Democrat Eyes Committee Seat

After more than 30 years in Congress, Representative Barney Frank (D-Mass.), the ranking member of the House Financial Services Committee, has announced he will not seek re-election in 2012.  Frank, 71, was first elected to Congress in 1980. He has served as the top Democrat on the Financial Services Committee since 2003. As a member of the Committee, Frank has been front-and-center during most of the key financial services debates of the last few decades and was instrumental in enacting the landmark Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) legislation.

The Conference of State Bank Supervisors (CSBS), in the interest of state supervisors, established a working relationship with Frank’s office over recent years. "Representative Frank truly understood and appreciated the value of state regulation and the dual-banking system," said John W. Ryan, CSBS President and CEO. "He is a very passionate, dominant force in banking and an excellent legislator."

With Frank retiring, Rep. Maxine Waters (D-Calif.) appears to be the front-runner to serve as the top-ranked Democrat on the Committee, as she is currently the second senior Democrat on the Committee. By tradition, the most senior Democrat on the Committee assumes the top Democratic slot. First elected to the House in 1990, Waters has been a champion for greater regulation of mortgage servicers and greater foreclosure mitigation efforts.  House Democratic leaders will determine Frank’s replacement January 2013.

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Standard & Poor’s Cut Rating of Top U.S. Banks

After instituting new standards for grading 37 financial institutions, Standard & Poor’s announced Tuesday it was downgrading 15 banks, including some of the biggest and best-known banks in the United States.

Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase all saw their ratings drop by one notch. Among the eight largest banks in the U.S. under review by S&P, only Boston-based State Street was spared.

With the overhauled method of grading financial institutions, S&P plans to keep close watch on bank capital levels, the overall health of the economy in the institution’s home country, and whether that country’s government will step in to bail out firms in times of extreme stress.

S&P left 20 other banks unchanged and actually increased the ratings on two Chinese firms: the China Construction Bank and the Bank of China.

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Colorado and Delaware Banking Departments Receive Certificates of Accreditation  

The Colorado Division of Banking and the Delaware Office of the State Bank Commissioner have both received certificates of accreditation, certifying that both departments maintain the standards and practices in state banking supervision set by the Conference of State Bank Supervisors’ accreditation program.

"I am pleased that the Division has received reaccreditation," said Colorado Commissioner Fred Joseph.  "This honor recognizes the work and effort of the Division's staff."

The Colorado Division of Banking was first accredited by CSBS in January 1991 and has maintained its accreditation for 20 years. The Delaware Office of the State Bank Commissioner was first accredited by CSBS in December of 1996 and has maintained its accreditation for 15 years.

CSBS accreditation seeks to strengthen state banking departments and to demonstrate the high quality of state banking departments to the general public, the federal banking agencies, Congress, and other state banking departments.

The accreditation process begins with the completion of an extensive self-evaluation questionnaire on all department operations: administration and finance, personnel, training, examination, supervision, and legislative powers. Next, an external review team comprised of veteran state and federal regulators performs an on-site review and presents its findings to an audit team and to the Performance Standards Committee, the members of which vote on the reports of the review team and the audit team.

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Around the States

NJ: The New Jersey Department of Banking and Insurance (DOBI) Assistant Division Director Nancy E. Graves presented a financial literacy program to 15 students from a local high school and recognized them for their volunteer work. The class covered how to establish and preserve good credit, set up a budget, open checking and savings accounts and guard against identity theft. The honorees are Junior Achievement (JA) High School Heroes who teach elementary students about money. In addition to providing financial literacy remarks, Graves presented certificates of recognition to the volunteers. Read more

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Around the Agencies

CFPB: The CFPB issued a report on its first three months of collecting credit card complaint data while also asking the public for feedback on a proposed policy for releasing consumer complaint data in the future. "When consumers contact us, we get a snapshot of how the consumer finance markets are working," said Raj Date, special advisor to the Secretary of the Treasury on the CFPB. "And we are learning that there is a lot of consumer confusion about credit card terms. We will continue to work with consumers, credit card companies, government agencies and others to improve consumer education and ensure CFPB’s regulation, supervision, and enforcement efforts are effective." Read more

FHFA: Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco has announced the appointments of Richard B. Hornsby as FHFA’s chief operating officer (COO), and Jon Greenlee, as the agency’s deputy director of the Division of Enterprise Regulation. Mr. Hornsby served at the Federal Reserve Bank of San Francisco for 26 years, holding a variety of senior level management and banking supervision positions. Most recently Mr. Hornsby was group vice president and division head for the Reserve Bank’s Financial Planning and Control and Corporate Administration Divisions. Mr. Greenlee joins FHFA from KPMG LLP, where he was the managing director in the Financial Services Regulatory Advisory Practice. Read more

FHFA: U.S. housing prices rose in the third quarter of 2011, according to the Federal Housing Finance Agency’s seasonally adjusted purchase-only house price index (HPI). The HPI, calculated using home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages, was 0.2 percent higher on a seasonally adjusted basis in the third quarter than in the second quarter. On an unadjusted basis, prices rose 0.7 percent during the quarter. Over the past year, seasonally adjusted home prices fell 3.7 percent from the third quarter of 2010 to the third quarter of 2011. Read more

FRB: The Federal Reserve Board announced the appointment of Michael S. Gibson as director of the Division of Banking Supervision and Regulation, effective January 1, 2012. Gibson is the current deputy director of the Board's Division of Research and Statistics. He succeeds Patrick M. Parkinson, who is retiring after more than 30 years of service with the Board. Read more

FRB: As part of a coordinated effort with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank, the Federal Reserve announced it will take actions to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity. The central banks have agreed to lower pricing on existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. Read more

TREASURY: The U.S. Department of the Treasury announced that two financial institutions have repurchased Troubled Asset Relief Program (TARP) Capital Purchase Program (CPP) investments, delivering a total of $210 million in proceeds for taxpayers. The Bank of Kentucky Financial Corporation (Crestview Hills, Ky.) and First Midwest Bancorp, Inc. (Itasca, Ill.) both repurchased all outstanding CPP preferred shares from Treasury’s original investment in the institutions. Treasury continues to hold warrants to purchase common stock in Bank of Kentucky Financial Corporation and First Midwest Bancorp, Inc. Taxpayers have now recovered more than $258 billion from TARP’s bank programs through repayments, dividends, interest, and other income. That exceeds the original financial support Treasury made through those programs ($245 billion) by approximately $13 billion. Read more

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Around D.C.

CONGRESS: The House Financial Services Committee will convene a hearing Thursday with federal officials and industry experts to evaluate the financial health of the Federal Housing Administration (FHA), the government agency that insures nearly 40 percent of new home mortgages in the U.S. The hearing comes on the heels of an independent auditor’s report released on November 15 that the FHA may need a taxpayer-funded bailout next year if the housing market continues to deteriorate. The report found the FHA has just $2.6 billion in cash reserves, down from $4.7 billion last year. Read more

FANNIEMAE: Fannie Mae and Freddie Mac announced that the government enterprises will suspend evictions of foreclosed single-family and 2-4 unit properties from Dec. 19 through Jan. 2, 2012. During this period, legal and administrative proceedings for evictions may continue, but families living in foreclosed properties will be permitted to remain in the home. "The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure," said Terry Edwards, executive vice president of Credit Portfolio Management of Fannie Mae. Read more

NAR: Commercial real estate markets have been relatively flat this year, but improving fundamentals mean a more positive trend is expected in 2012, according to the National Association of Realtors. Lawrence Yun, NAR chief economist, said there is little change in most of the commercial market sectors. "Vacancy rates are flat, leasing is soft and concessions continue to make it a tenant’s market," he said. "However, with modest economic growth and job creation, the fundamentals for commercial real estate should gradually improve in the coming year." Read more

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Upcoming Events

December 5-9: The CSBS Board Meeting, Bankers Advisory Board meeting, and the 2011 CSBS Supervisors Symposium are being held in Washington, D.C.

December 6: Senate Banking Committee hearing titled "Continued Oversight of the Implementation of the Wall Street Reform Act." Read more

December 7: At noon Eastern CSBS is hosting an on the record "pen and pad session" with reporters to discuss the future of community banks. John Ducrest, Commissioner of the Louisiana Office of Financial Institutions and Chairman of CSBS, Mark Kaufman, Commissioner of the Maryland Office of Financial Regulation, and Jim Cooper, Deputy Director of the Indiana Department of Financial Institutions, will speak to reporters about efforts underway at CSBS to address problems facing community banks and work on legislative and regulatory solutions to these challenges. Read more

December 7: At 10:00 a.m. Eastern the FDIC Board of Directors will hold an open session meeting to vote on a notice of proposed rulemaking on the treatment of a mutual insurance holding company as an insurance company, a designated reserve ratio for 2012, and authorization to publish privacy act system of records notices in the Federal Register. Discussion items on the agenda include a proposed 2012 corporate operating budget, and a notice of proposed rulemaking on risk-based capital guidelines, among other things. Read more

December 7: House Financial Services Committee hearing on Capital Markets and Government Sponsored Enterprises. Read more

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Closing Comment

"U.S. banks have come a long way from the depths of the financial crisis. Bank balance sheets are stronger in a number of ways, and the industry is generally profitable, but the recovery is by no means complete."

– FDIC Acting Chairman Martin J. Gruenberg as reported by the Milwaukee Journal Sentinel on Nov. 22.

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Editor’s Note: If you are receiving The Examiner by fax and prefer to receive it by e-mail, please contact Catherine Woody at cwoody@csbs.org 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

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