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CSBS Examiner

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

12/9/2011 

 In This Issue...

 Upcoming Events...

NMLS Annual Conference & Training, Scottsdale, AZ, February 6-9, 2012:  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.   

CSBS State-Federal Supervisory Forum, Savannah, GA, May 21-23, 2012:  Regulators Only.  Participants will discuss current and emerging policy and operational issues affecting state financial regulation and the state/federal regulatory partnership. The program will include formal presentations on a variety of important topics, open forum Q&A sessions, as well networking opportunities.  

Examiners Forum, Portland, OR, June 17-19, 2012:  Designed to bring together Senior Certified Examiners and other "seasoned" examiners to discuss current and emerging issues. 

Deputy Seminar, New Orleans, LA, July 30-August 1, 2012:  The Deputy Seminar is an opportunity for key banking department officials to gather to learn about upcoming issues, share challenges, and learn potential solutions. 

Legal Seminar, New Orleans, LA, August 1-3, 2012:  The Legal Seminar provides a forum for state banking department attorneys, assistant attorneys general assigned to the department, and other regulatory attorneys. 

“Computers are useless. They can only give you answers." – Pablo Picasso

At a business breakfast the other day, some colleagues were chatting about sports scores, and we suddenly realized we all were consulting our iPhones, Droids and BlackBerries rather than actually talking. This is the modern world, after all, where in order to shut down your laptop you must first click on “Start,” which means one has to know the right questions to have any hope of getting the right answers. So it should be no surprise that sometimes we struggle to get the right solutions.
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CSBS Releases White Paper on Challenges Community Banks Face in Raising Capital
 
Community banks have long played a valuable role in the United States economy. They do business far different from larger institutions, they add diversity to the U. S. banking system, and they proved critical in ensuring access to credit during the financial crisis. But today, these institutions face a growing challenge in accessing a resource that is vital for them to thrive – capital.

The Conference of State Bank Supervisors (CSBS) released a white paper this week that defines the issue of capital formation at community banks and raises the awareness of its importance to the financial system.  In the paper, CSBS identifies industry, legislative and regulatory challenges these institutions must overcome to increase access to capital. The paper also identifies areas for  possible solutions to these challenges. 

"I have seen firsthand the challenges smaller banks face in trying to attract capital," said Mark Kaufman, Commissioner of the Maryland Office of Financial Regulation.  "Much has been said about the vital role community banks play in job development and local economic growth, but more must be done to ensure these banks can access the capital they need to thrive."

Regulatory and legislative challenges discussed in the white paper include the Federal Reserve Board’s Policy Statement on Equity investments in Banks and Holding Companies; consolidated capital requirements for holding companies and source of strength standards, both provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and Basel III capital standards. Also discussed is the importance of banks to make self-assessments of the reality in which they operate today. This includes the aptitude of management to build confidence in investors and an honest assessment of the economic prospects for the areas they serve.

CSBS held an on the record “pen and pad” session with reporters upon the release of the “Community Banks and Capital” white paper in Washington, D.C. with state supervisors. The panel included: Louisiana Office of Financial Institutions Commissioner and CSBS Chairman John Ducrest, Maryland Office of Financial Regulation Commissioner Mark Kaufman, and Indiana Department of Financial Institutions Deputy Director James Cooper.

Listen to highlights of the panel discussion here.

The CSBS “Community Banks and Capital” white paper is available here.
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Motion to Consider Richard Cordray as CFPB Nominee Fails in Senate

With a vote of 53 to 45, Senate Republicans blocked a motion to consider the nomination of Richard Cordray to be the first director of the Consumer Financial Protection Bureau (CFPB or bureau) with a filibuster.
Democrats needed 60 votes to end the filibuster and advance the nomination, but they were seven votes shy. 

Republicans vowed not to allow a vote on any nominee to lead the CFPB unless the administration makes a series of structural changes to the bureau. These changes include replacing its director with a commission, subjecting it to the Congressional appropriations process, and establishing a safety-and-soundness check for prudential regulators. They argue that without these changes, a CFPB director would have unchecked powers over consumer and financial products.

The failed vote has some Democrats and consumer groups calling on President Obama to make a potential recess appointment. During a White House news conference after the vote Thursday, Obama did not rule this option out.

Until a CFPB director is confirmed, the bureau cannot write new rules, nor can it supervise nonbanks, including payday lenders, mortgage companies and debt collection agencies.
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Federal Agencies Seek Revisions to Market Risk Capital Rules

The Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a notice of proposed rulemaking (NPR) Wednesday that would amend an earlier NPR proposing modifications to the agencies' market risk capital rules for banking organizations with significant trading activities.  

This week’s NPR marks the agencies’ latest effort to implement Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires federal bank regulators to strip from their rules all references to ratings by nationally recognized statistical ratings organizations (NRSROs), such as Standard & Poor's.

The proposal directly affects 20 or so large banks with trading operations, but also offers some help for smaller banks.

The main impact of the rule however, will be felt by institutions with more than $10 billion in total trading assets and liabilities, or more than 10 percent of their assets in trading liability.

The three agencies have requested comment by Feb. 3, 2012.

Read more here.
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Around the Agencies

CFPB: The CFPB launched a new Know Before You Owe project aimed at simplifying credit card agreements. The CFPB is asking the public to weigh in on a prototype credit card agreement that is shorter, written in plain language, and explains key features upfront so that it is easier for consumers to understand. The CFPB also plans to pilot test the prototype with Pentagon Federal Credit Union, one of the largest credit unions in the country, to get on-the-ground consumer feedback. Read more
  
FDIC: The Board of Directors of the FDIC approved the organizational plan of the Office of Corporate Risk Management (OCRM) that will assess external and internal risks faced by the FDIC. The office will report directly to the FDIC Board and will be managed by Stephen A. Quick, who was appointed as the FDIC's first Chief Risk Officer last July. Acting FDIC Chairman Martin Gruenberg said, "Over the last several years, the FDIC has confronted a variety of complex new challenges associated with the financial crisis, changing landscape of the banking industry, and significant regulatory changes enacted into law. Managing the risks that may arise from these challenges is a significant and continually evolving priority for the agency.” Read more.
 
FDIC: The FDIC has issued its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in September 2011. The CRA is a 1977 law intended to encourage insured banks and thrifts to meet local credit needs, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations. Read more.

FHFA: Fannie Mae’s and Freddie Mac’s foreclosure prevention activity increased in the third quarter of 2011 and total nearly 2 million foreclosure prevention actions since the beginning of conservatorship in 2008. During this period, the Enterprises completed one million loan modifications, helping borrowers stay in their homes. According to the Federal Housing Finance Agency’s third quarter 2011 Foreclosure Prevention & Refinance Report, the increase in completed foreclosure prevention activity in the third quarter was driven primarily by loan modifications and repayment plans. Two-thirds of all borrowers who received loan modifications in the third quarter had their monthly payments reduced by over 20 percent. Read more.

FRB: The Federal Reserve Board has announced the designation of the chairs and deputy chairs of the 12 Federal Reserve Banks for 2012. Each Reserve Bank has a nine-member board of directors.  The Board of Governors in Washington appoints three of these directors and each year designates one of its appointees as chair and a second as deputy chair. The list of chairs and deputy chairs is available here.
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Around D.C.

FANNIE MAE: Amid a spate of positive economic news during the November survey period, consumer sentiment appears to have stabilized from previous levels, with only incremental improvement in the deeply negative housing market sentiment witnessed this summer. According to results from Fannie Mae's November National Housing Survey, home price expectations moved from negative to positive territory for the first time in six months, with respondents expecting home prices to increase by 0.2 percent over the next year. Read more.

FANNIE MAE: Fannie Mae and Neighborhood Housing Services of Phoenix celebrated one year of helping homeowners avoid foreclosure at the Fannie Mae Phoenix Mortgage Help Center. Since opening in December 2010, the Center counseled about 1,500 homeowners, helping more than 900 families avoid foreclosure.  Of those families that successfully avoided foreclosure, 65 percent received loan workouts that allowed them to remain in their homes. Read more.
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Upcoming Events

December 13: Senate Banking Committee hearing on oversight of FHFA. Read more.

December 14: Senate Banking Committee hearing on examining investor risks in raising capital. Read more.
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Closing Comment

“Community banks do a pretty good job in the small business lending sector. That is definitely an area where jobs are created, so it’s an important function that they play. They have that proximity to borrowers that is difficult to replicate with larger banks.” 

– Jim Cooper, Deputy Director, Indiana Department of Financial Institutions, during the CSBS pen and pad session regarding the importance of community banks. 

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Catherine Woody, Editor
Rockhelle Johnson, Writer
Edward Smith, Contributing Editor

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