The American Bankers Association is objecting to a Federal Deposit Insurance Corp. proposal that would require some bank directors to report personal securities transactions.
In order to prevent conflicts of interest, bank officers and employees involved in securities activities have been required since 1979 to file quarterly reports on their personal securities trading.
The FDIC's proposal would extend that requirement to bank directors who actively participate in making decisions or recommendations on the purchase or sale of debt and equity securities.
The plan is part of a proposal updating record keeping and confirmation requirements for securities transactions, approved by the FDIC in mid- December. Comment letters were due Jan. 23.
Although the overall FDIC proposal generally conforms with plans by other banking regulatory agencies, its requirement on directors would be a significant departure.
The Office of the Comptroller of the Currency issued a final rule on securities-related reporting requirements in December. The OCC did not extend to directors its requirement to report personal trading, but directors who also serve as officers are covered. The Federal Reserve Board's proposal, pending for more than a year, did not include directors, either.
Of all the items in the FDIC's package, the one requiring some directors to report their personal securities trades has become the biggest bone of contention, said Miguel D. Browne, a deputy assistant director of supervision at the FDIC.
While the banking association supported the FDIC's overall proposal as welcome regulatory relief, the group's comment letter criticized the requirement on directors to report their personal trading, calling the proposal "quite vague," unjustifiably burdensome, and out-of-step with the other banking agencies.
"Banks will not know where to draw the line between directors who are subject to the reporting requirement and those who are not," wrote Sarah A. Miller, the banking group's senior government relations counsel for trust and securities. For instance, she asked if the requirement would fall on a director who helps determine a bank trust department's buy list of securities, even if that director won't know which are ultimately recommended and when and if trades occur.
Because of the ambiguity, directors would dodge assignments to trust committees, and small banks would have an even harder time than usual recruiting directors, Ms. Miller wrote.
The FDIC contends its rule is limited. "I wouldn't think it would affect most bank directors for FDIC-insured institutions," Mr. Browne said.
The Independent Bankers Association of America, whose membership consists mostly of smaller banks, raised no objection.
"The way they worded the proposal, I don't see that it pulls that many directors in," said Robert G. Rowe, regulatory counsel for the association. Only directors with discretionary authority for a specific customer account would be subject to the reporting requirement, Mr. Rowe said.
