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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...

Credit Evaluation School, San Diego, May 7-11:  The Credit Evaluation School follows a blended learning model. It is delivered over a 5-month period utilizing the most effective and efficient delivery channels. Over this period, the examiner will receive all of the required training and experience necessary to review and evaluate credit. The program follows a “dance card” concept utilized by many states. In addition, the examiner will have the benefit of the instructor serving as a “coach” throughout the program. 

Certified Operations Examiner School, San Diego, May 7-11:  The full program is delivered over a 7 to 9 month period utilizing all of the EFSBS delivery channels. Over this period the examiner will receive all of the required training and experience necessary to be in charge of an operations examination. 

State-Federal Supervisory Forum, Savannah, GA, May 21-23:   The State Federal Supervisory Forum is an annual gathering of senior executives in key leadership positions with state and federal regulatory agencies. 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 18-20:  The 2012 Examiners Forum is designed to bring together Senior Certified Examiners and other "seasoned" examiners to discuss current and emerging issues. 

Senior School, Indianapolis, IN, June 25-29:  Senior School is designed to meet the specific leadership training needs of state financial regulators who are rising into supervisory and/or management positions within their departments, serve as an examiner-in-charge in the field, or currently hold a managerial position within the agency. The behavioral science and management techniques presented are developed and honed each year to apply to the unique and evolving needs of financial regulatory personnel. 

“Hopefully, you will appreciate this style update…. We now support the modern usage of hopefully: it’s hoped, we hope.” – a tweet from the Associated Press, April 20

The recent news that the Associated Press Stylebook now accepts “hopefully” as meaning “it is hoped” was another signal of the degeneration of the English language. Yes, languages need to evolve, but not always in the direction of abomination. We have worked hard to learn to never split infinitives, to avoid run-on sentences that leave the reader as confused as the writer, to say “nauseated” instead of “nauseus,” and so on and so forth. Ad nauseum, we might add. Thus we are hopeful that the majority of editors will continue to avoid misusing “hopefully.” As Churchill said, it is something up with which we cannot put.

SIGTARP Report: Community Banks Face Growing Challenge Exiting TARP

The Special Inspector General of the Troubled Asset Relief Program (SIGTARP) released its quarterly report to Congress Wednesday highlighting the challenges community banks face in exiting the Troubled Asset Relief Program (TARP).

According to the SIGTARP report, of the 707 banks that participated in the TARP Capital Purchase Program, 351 have yet to exit the program (as of March 31, 2012). And while some of the remaining institutions are regional banks, a large majority are community banks. The largest banks have long exited the program.

“The speed and manner in which banks and thrifts have exited [TARP] – or not– provides insights into the capital raising, regulatory, and competitive challenges faced by the nation’s banking industry and especially its smallest institutions,” the report stated.  “Their business models are very different from those of the mega-banks. So are the challenges they face.”
The report points out that one of the biggest obstacles small institutions face in exiting TARP is access to new capital. Because of this, many banks have relied on other federal government programs. SBLF, for example, helped 137 banks exit TARP.  Another 28 banks exited TARP by converting the government’s investment into another program within TARP, the Community Development Capital Initiative. In 22 cases, banks exited TARP either by Treasury selling its investment in an institution at a loss, or by merging with other TARP banks. Sixteen banks exited TARP after failing.

Furthermore, of the banks that remain in TARP, 46 percent (as of March 31) are not current in making dividends and interest payments and one-third have missed five or more dividend payments. Additionally, 32 percent have faced formal enforcement actions by their regulators. 

In concluding, the SIGTARP report made recommendations to the U.S. Treasury Department for helping community banks exit TARP. It recommended that Treasury, along with federal regulators, develop a clear TARP exit path for community banks, prepare to deal with banks that cannot repay, and assess whether Treasury should renegotiate TARP terms for those community banks that will not be able to exit the program prior to the dividend rate increase in late 2013.

The SIGTARP report is available online here.


FOMC Maintains Existing Policy, Changes Tune on Growth Estimates

The Federal Reserve’s Federal Open Market Committee (FOMC or Committee) announced Wednesday plans to stand pat on its existing policies aimed to stimulate the economy, and changed its forecast on economic growth estimates over the coming quarters.

Shortly after ending its two-day meeting on monetary policy, the FOMC released a statement affirming the central bank’s intention to maintain its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities, and continuing through late 2014, or longer, near-zero interest rates.

“The committee expects economic growth to remain moderate over coming quarters and then to pick up gradually,” the statement said. But while the FOMC does expect “moderate growth,” Fed officials increased their growth estimates for 2012. “The economy will expand at a 2.4 percent to 2.9 percent pace this year,” the central bank said, up from its January projection of 2.2 percent to 2.7 percent. At the same time, Fed officials also lowered their growth estimates for 2013 and 2014. They predicted that the economy would expand 2.7 percent to 3.1 percent in 2013, and 3.1 percent to 3.6 percent in 2014.

The FOMC’s economic projections statement is available here.


10 Questions with Ken Kobylowski

The CSBS Questionnaire, based upon the 19th century parlor game made famous by French novelist Marcel Proust, reveals another side of Ken Kobylowski, Acting Commissioner of the New Jersey Department of Banking and Insurance.

Ken was nominated as Commissioner of the New Jersey Department of Banking and Insurance by Governor Christie on January 30, 2012 and assumed his responsibilities as Acting Commissioner on February 13, 2012.  Ken joined the Department in February 2010 as Chief of Staff and added the role of Acting Director of Banking in October 2011.  Prior to his government service, Ken was in private law practice, concentrating his practice on banking and real estate transactional matters.  Ken began his career as a bank analyst at the Federal Reserve Bank of New York.  He earned his undergraduate degree from Seton Hall University and his law degree from New York Law School.  Ken is married and he and his wife have two children, ages 11 and 8.

CSBS Examiner:  What are you currently reading?
Kobylowski: “No Surrender: A World War II Memoir” by James J. Sheeran

CSBS Examiner:  What are the current themes of your speeches or public statements?
Kobylowski: My speeches focus on how well New Jersey state-chartered banks and financial institutions fared during the economic downturn due to sound management adhering to sound banking principles, as well as the effectiveness of state-based regulation.

CSBS Examiner:  Which words or phrases do you most overuse?
Kobylowski: I use “without question” and “at the end of the day” way too much.

CSBS Examiner:  What is your greatest fear?
Kobylowski: My greatest fear is doing something that embarrasses my family.

CSBS Examiner:  Which talent would you most like to have?
Kobylowski: I would love to be able to throw a baseball 95 miles an hour (and being left-handed it could have led to an entirely different career).

CSBS Examiner:  Which living person do you most admire?
Kobylowski: I most admire my wife.
CSBS Examiner:  What do you consider your greatest achievement?
Kobylowski: My greatest professional achievement is being nominated by Governor Christie to serve as Commissioner of the New Jersey Department of Banking and Insurance.
CSBS Examiner:  What is your most treasured possession?
Kobylowski: My most treasured possession is my wedding ring.
CSBS Examiner:  What other state regulator do you look to for perspective?
Kobylowski: I look to many other regulators for perspective (including those outside of the financial sector).
CSBS Examiner:  What is your motto?
Kobylowski: My motto is “treat others the way you want to be treated.”

Around the States

IL: To further Governor Pat Quinn’s commitment to protect Illinois families and communities from foreclosure, the Illinois Housing Development Authority (IHDA) helped kick off the free Help for Homeowners Community Event this week. This is the latest initiative the Quinn administration has participated in to help Illinois homeowners. Another initiative the Quinn administration has participated in is the statewide Illinois Foreclosure Prevention Network (IFPN). IFPN was launch February and approximately 21,600 homeowners have been connected to the myriad resources available through the Network. The collaboration between IHDA, the Illinois Department of Financial and Professional Regulation (IDFPR) and Illinois Department of Employment Security provides access to counseling services to homeowners. Read more

Around the Agencies

AGENCIES: The Federal Deposit Insurance Corporation (FDIC) and U.S. Small Business Administration (SBA) have announced new resources to support small businesses across the nation.  FDIC Director for Depositor and Consumer Protection Mark Pearce and SBA’s Deputy Associate Administrator for Entrepreneurial Development Michael Chodos released Money Smart for Small Business, a training curriculum for new and aspiring business owners.  Developed in partnership between both agencies, this curriculum is the latest offering in the FDIC’s Money Smart program. Read more.

CFPB: The Consumer Financial Protection Bureau (CFPB) launched a public inquiry into how consumers and financial services companies are affected by arbitration and arbitration clauses. “Arbitration clauses are found in many contracts for consumer financial products,” said CFPB Director Richard Cordray. “We want to learn how arbitration clauses affect consumers, and how effective arbitration is in resolving consumers’ issues. This inquiry will help the Bureau assess whether rules are needed to protect consumers.” Read more.

FDIC: The FDIC’s Advisory Committee on Economic Inclusion met Thursday to discuss the results of its Model Safe Accounts Pilot program; opportunities for banks offering mobile financial services to meet the needs of unbanked and underbanked consumers; and differences in consumer protections for debit, credit, and prepaid cards. The Committee also welcome four new members. Read more.

FHFA: U.S. house prices rose 0.3 percent on a seasonally adjusted basis from January to February, according to the Federal Housing Finance Agency’s monthly House Price Index. While prices in January were unchanged according to initial estimates reported in the last HPI release, the January result has been revised downward to reflect a 0.5 percent decrease. For the 12 months ending in February, U.S. prices rose 0.4 percent, the first 12-month increase since the July 2006 - July 2007 interval. The U.S. index remains 19.4 percent below its April 2007 peak and is roughly the same as the January 2004 index level. Read more.

FRB: The Federal Reserve Board announced the formation of the Model Validation Council, which will provide the FRB with expert and independent advice on its process to assess the models used in stress tests of banking institutions. In addition, the Federal Reserve announced it will host a two-day symposium to discuss best practices in stress testing.  Read more.

Around D.C.

CRFB: The Committee for a Responsible Budget (CRFB), a bipartisan, non-profit organization committed to educating the public about issues that have significant fiscal policy impact, launched this week a new and improved version of its online “Stabilize the Debt” budget simulator. The new version has additional features that help to reflect the current budget debate. Read more.

FREDDIEMAC: Freddie Mac released its U.S. Economic and Housing Market Outlook for April showing that recent employment and housing data may be more noise than a break in momentum due to the unseasonably warm winter.  Read more.

Upcoming Events

May 7-11:  The CSBS Credit Evaluation School will be held in San Diego.  The school follows a blended learning model and is delivered over a five-month period utilizing the most effective and efficient delivery channels.  Read more.

May 7-11:  The CSBS Certified Operations Examiner School will be held in San Diego.  The full program is delivered over a seven-to-nine month period utilizing all of the CSBS Education Foundation delivery channels.  Over this period examiners will receive all of the required training and experience necessary to be in charge of an operations examination.  Read more.

Closing Comment

"We remain entirely prepared to take additional balance sheet actions as necessary to achieve our objectives. Those tools remained very much on the table and we would not hesitate to use them should the economy require that additional support."

– Federal Reserve Chairman Ben Bernanke, in an April 25 news conference on U.S. monetary policy.

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

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