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CSBS Examiner

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


 In This Issue...

 Upcoming Events...

Mini BSA/AML Boot Camp, April 4-5:  As the name implies, this intensive two day experience is designed to fast forward your Bank Secrecy Act and Anti-Money Laundering Compliance knowledge and increase your value to your organization or regulatory agency.

Online Courses starting May 2:  Asset Liability Management II, Fraud Identification Training, and Real Estate Appraisal Review.

CSBS State-Federal Supervisory Forum, May 15-18:  The Forum will be held at the Westin Seattle, 1900 Fifth Avenue, Seattle, WA 98101.  REGULATORS ONLY.

Online Courses starting May 31:  Managing the Investment Portfolio and Bank Financial Analysis.

Senior School, June 20-24, San Diego, CA:  Senior School is designed to meet the specific leadership training needs of state bank regulators who are rising into management positions within their departments or as an examiners-in-charge in the field. 

Lady Astor: “If you were my husband, I’d poison your coffee.”
Winston Churchill: “Madam, if you were my wife, I’d drink it.” 

As a rule, we generally endorse the broad and (these days) much-neglected principles of civility and high-road discourse. But there are times when invective and gossip hit the spot perfectly. Few politicians these days are blessed with the ability to deliver real-time barbs, or perhaps their communications coaches warn them off. A role model who springs to mind is Alice Roosevelt Longworth, whose favorite needlepoint throw pillow read: “If you can’t say something nice, come sit beside me.”


ICBA Annual Meeting Tackles “Too Big To Fail” and Dodd-Frank 

The Independent Community Bankers of America (ICBA) held its annual meeting in San Diego this week where the organization established its legislative and regulatory priorities for 2011, elected officers for the coming year, and heard from regulators and experts on an array of issues now facing community banks. 

Speaking to reporters, ICBA President and CEO Camden Fine indicated the biggest banks in the country remain “too big to fail,” but he is hopeful the Dodd-Frank Act can lessen the threat these firms pose to the entire financial industry in the future.  Fine called these institutions a “cancer on the body of the financial system” which pose tremendous risks to the system because of their size, the significant risks they take, and their inability to effectively manage those risks. 

In her presentation, FDIC Chairman Sheila Bair asserted her belief that Dodd-Frank gave regulators needed tools to address the too-big-to-fail problem “by extending the FDIC’s resolution process to large, systemically important financial institutions.”  Bair received a warm welcome from the ICBA, and gave credit to the organization for its participation and accomplishments during the legislative debate around Dodd-Frank.  “Dodd-Frank is not a perfect law,” Bair said.  “There are many things in it that I would like to change.  But, on balance, it is a good law and one which I think will strengthen, not weaken, community banks.” 

Elizabeth Warren, White House and Treasury Department special adviser, also addressed the group and assured community bankers that the Consumer Financial Protection Bureau (CFPB) would focus its efforts not on community banks, but on nonbank financial companies.  “I often make the point that the financial crisis began one lousy mortgage at a time,” Warren said.  “You and I know that those mortgages were seldom originated by America’s community banks.” 

Federal Reserve Chairman Ben Bernanke also spoke at the convention and strove to assure the audience that the Fed would attempt to protect community banks as it finalizes its debt-interchange rule.  “In our rule-writing we will do everything we can and use all the powers we have to try and make sure that the carve-out [for community banks] is effective,” he said. 

Acting Comptroller of the Currency John Walsh further encouraged the Federal Reserve to ensure community banks are truly exempt in their final rule.


Fed Completes Stress Tests; Banks to Restart Dividend Payments 

Last week the Federal Reserve Board announced it has completed the Comprehensive Capital Analysis and Review (CCAR), the cross-institution study of the capital plans of the nation’s largest 19 bank holding companies.  As a direct result of the completion of the CCAR, some institutions may restart or increase dividend payments to shareholders, an indicator that it may be “business as usual” for some of the biggest firms in the country.   

In February 2009, the Fed required that dividends be substantially reduced or eliminated altogether to encourage capital plans and strong capital positions which could weather adverse economic conditions.  Since that time, the capital positions of the largest bank holding companies have enjoyed significant improvement, and legislation and regulatory provisions of the Dodd-Frank Act and the Basel III agreement have provided clarity regarding the regulatory environment of these institutions.   

Since last week’s announcement, many companies publicly reported that they had received approval to issue dividends to shareholders.  JPMorgan Chase & Co. plans to issue a 25-cent quarterly dividend.  In addition, PNC Financial Services Group Inc., Fifth Third Bancorp and Citigroup all announced approval for a dividend increase, KeyCorp and SunTrust announced TARP exit plans, and BB&T increased its dividend payments one cent to 16 cents a share.  

However, not all of the firms received approval to issue dividends.  Bank of America made news on Wednesday when it announced the Fed had rejected its plan to increase its dividend.  “The corporation will continue to work with the Federal Reserve and intends to seek permission for a modest increase in its common dividend for the second half of 2011, through the submission of a revised comprehensive capital plan to the Federal Reserve,” B of A said in a regulatory filing this week.  Read more about the Fed’s CCAR


Around the States 

GA: On Monday, the Georgia Department of Banking and Finance issued a cease-and-desist order to a residential mortgage broker company, Lenox Financial Mortgage, LLC. The order came after allegations surfaced that the firm was engaging in residential mortgage brokering and lending activities without a license. Georgia law prohibits any person from directly or indirectly soliciting, processing, placing, or negotiating mortgage loans for others without a mortgage license or exemption from the licensure. Lenox Financial Mortgage, LLC must provide evidence of licensure within 30 days to prevent the order from becoming final.  Read more


Around the Agencies 

FRB: The Federal Reserve Board approved a rule to amend Regulation Z - which implements the Truth in Lending Act - to clarify features of the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) of 2009. The rule is intended to enhance consumer protection for those who use credit cards and to make areas of uncertainty clear to card issuers so they fully understand their compliance obligations. The CARD Act currently requires card issuers to consider a consumer’s ability to make payments before opening a new credit card account or increasing the credit limit on an account.  The board’s amendment would require an issuer to evaluate a consumer based upon individual income or salary as opposed to a consumer’s household income, which was used to determine eligibility in the past. The Fed asserts that the term “household income” is too vague and does not allow an issuer to properly assess a consumer’s ability to make payments. The amendment also provides further clarification on many fee and interest rate provisions such as fees associated with card issuance. The new rule goes into effect on October 1. Read more 

FRB: The Federal Reserve released the 2010 combined annual comparative financial statements for the Federal Reserve Bank, the 12 individual Federal Reserve Banks, the Board of Governors, and the limited liability corporations (LLC) established as a response to stressed financial markets. Total Reserve Bank assets rose by $193 billion from the year prior, increasing the asset total to $2.428 trillion. Most notable, however, was the significant change in the balance sheet. US Treasury security holdings increased by $261 billion, while holdings of federal agency and government-sponsored enterprise (GSE) mortgage-backed securities (MBS) grew by $86 billion. These increases were counteracted by a $96 billion decline in loans to depository institutions and a $23 billion reduction in loans under the Term Asset-Backed Securities Loan Facility. Read more 

FTC: The Federal Trade Commission (FTC) issued its 33rd annual Fair Debt Collection Practices Report, detailing the agency’s efforts to protect consumers from unfair, deceptive, or abusive debt collection practices. The report found a nearly 17.1 percent rise in complaints from the previous year.  In addition, the report noted: an industry-wide investigation into the debt-buying industry; a review of law enforcement actions, consumer and industry education efforts, and research and policy initiatives; the creation of enforcement policy regarding the collection of debts of the deceased; and an upcoming workshop on the consumer protection impacts of advancing technologies in debt collection. The report also mentioned the transfer of Fair Debt Collection Practices Act (FDCPA) administration to the Consumer Financial Protection Bureau (CFPB), as it assumes its authority mandated by the Dodd-Frank Act on July 21. From that point forward, both the FTC and the CFPB will have authority to enforce the FDCPA. Read more  

SEC: Last week, House Financial Services Committee member David Schweikert (D-AZ) introduced the Small Company Capital Formation Act, intended to modernize the SEC’s Regulation A. The update to Regulation A would guarantee small businesses access to capital by increasing the offer threshold from $5 million to $50 million for company exemption from SEC registration. The bill was introduced just days before Tuesday’s Access to Capital conference held by the Treasury Department, where entrepreneurs, government officials and venture capitalists assembled to discuss how to foster growth and innovation in small companies. Read more 

Treasury: On Monday, the Treasury Department revealed plans to begin disassembling its $142 billion agency-guaranteed mortgage-backed securities (MBS) portfolio. Beginning this month, the Treasury will put up to $10 billion in agency-guaranteed MBS back on the market each month, depending on market conditions.  “We’re continuing to wind down the emergency programs that were put in place in 2008 and 2009 to help restore market stability, and the sale of these securities is consistent with that effort,” said Mary J. Miller, assistant secretary for financial markets. “We will exit this investment at a gradual and orderly pace to maximize the recovery of taxpayer dollars and help protect the process of repair of the housing finance market.” The sale of the securities is one of many components involved in the Treasury’s continued efforts to wind down the emergency programs that were put into place in 2008 and 2009. Due to market improvements, the Treasury anticipates a profit for taxpayers on this investment. Read more 

Treasury: The Treasury Department issued approval of State Small Business Credit Initiative (SSBCI) applications on Monday in Connecticut, Vermont, and Missouri. The newly-distributed SSBCI funding is expected to generate more than $534 million in new small business lending across the three states, in addition to several new jobs. While all states can apply for federal funds under SSBCI, a state must demonstrate that every $1 in federal funding will produce a minimum of $10 in new private lending. As a result, the $1.5 billion commitment by the federal government is expected to prompt no less than $15 billion in private lending across the country. SSBCI funds have also previously been approved in California, Michigan, and North Carolina. Read more


Upcoming Events 

Mar. 28-29: CSBS is hosting the 2011 Washington Fly-In, providing state commissioners with an opportunity to meet with members of their Congressional delegation and senior officials at the FDIC and the Federal Reserve. 

Mar. 29: The FDIC board of directors will meet in open session at 10 am EST to address credit risk retention and resolution plan and credit exposure reports. Read more 

Mar. 29: The Senate Banking Committee will hold a hearing on public proposals for the future of the housing finance system at 10 am EST in room 538 of the Dirksen Senate Office Building.  

Mar. 30-31: The CSBS Board of Directors will be meeting in Washington, DC. 

Mar. 30: The Oversight and Investigations Subcommittee of the House Financing Services Committee will hold a hearing on the cost of Dodd-Frank implementation at 2 pm EST in room 2128 of the Rayburn House Office Building.  

Mar. 30: The Subcommittee on TARP and Financial Services of the House Oversight & Government Reform Committee is scheduled to hold a hearing entitled “Has Dodd Frank Ended Too Big to Fail?” at 9:30 am EST in room 2154 of the Rayburn House Office Building.  

Mar. 31 – Apr 1: CSBS will host its New Commissioner Briefing for new state commissioners and deputies. 

Mar. 31: The Capital Markets Subcommittee of the House Financial Services Committee is scheduled to hold a hearing on GSE legislative proposals at 10 am EST in room 2128 of the Rayburn House Office Building. 

Apr 4-5: CSBS will hold a 2-day intensive boot camp on the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) Compliance in San Jose, CA. The event is not a series of panels, but rather sessions led by highly-experienced BSA experts, incorporating the latest information on enforcement actions, examination issues, and regulatory developments. Read more


Closing Comment 

“We knew the Dodd-Frank Act would result in a bigger federal government, but we’re just now coming to understand the magnitude of its costs to the struggling U.S. economy.”

-- Rep. Randy Neugebauer (R-TX) in a press release announcing a hearing on the impact associated with the Dodd-Frank Act.


Catherine Woody, Editor
Edward Smith, Contributing Editor
Andrea Corson, Contributing Writer

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