OCC Says Pa. Auction Law Doesn't Apply to CD Program

WASHINGTON - A Pennsylvania law regulating auctioneers does not apply to a national bank that auctions certificates of deposit over the Internet, the Office of the Comptroller of the Currency said Monday.The Comptroller's Office said federal law would, if challenged in court, override Pennsylvania's auction laws that require auctioneers, whether they are individuals or corporations, to be licensed and keep detailed records.

A Pennsylvania-based national bank, which the OCC would not identify, posed the question of preemption in December.

"State licensing laws such as the Pennsylvania auction law, to the extent that they are found to apply to the bank's online activities, present several potential conflicts with federal law. … We believe that federal law would preempt the state laws," OCC Chief Counsel Julie L. Williams wrote in response to the Pennsylvania bank's inquiry.

"The OCC has clearly established that a permissible activity is equally authorized regardless of whether it is conducted in a traditional manner or through an electronic medium. Thus ... the bank's online auction program is permissible under well-settled authority."

Since 1994, the Comptroller's Office and the Office of Thrift Supervision have issued 67 opinions that federal law would preempt state and local laws.

- Michele Heller

FDIC Points Out Commercial Credit Quality Concerns

WASHINGTON - Despite a booming economy, commercial credit quality has begun to show signs of stress, according to the Federal Deposit Insurance Corp.In its quarterly "Regional Outlook" released Monday, the FDIC said the level of commercial and industrial loan chargeoffs increased 63% in the 12 months that ended Sept. 30, rising to 0.5%. Still the agency noted that the level of net chargeoffs are still at historically low levels.

The report also noted increased "corporate indebtedness, signs of corporate stress, and adverse trends in corporate bond defaults" and warned that "banks and the financial markets appear to be assuming increased levels of risk." In the event of an economic slowdown, the report said, these concerns could potentially lead to increased loan losses.

The report also cautioned lenders to be aware of the growing importance of global trade, noting that "several industries are highly exposed to changing global economic conditions." Vulnerable industries cited by the FDIC include transportation equipment, industrial machinery, electronic equipment, and leather products.

The quarterly reports, which also provide snapshots of activity in the agency's eight regions, are available on the FDIC's Web site at www.fdic.gov/bank/analytical/regional/ro20001q/na/index.html.

-Eric Winig

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