Open for Comment
A proposal by the Federal Deposit Insurance Corp. that would dictate how it would end part of its Temporary Liquidity Guarantee Program. Under the plan, the FDIC would choose one of two options: to let an optional federal guarantee for bank debt expire as planned on Oct. 31, or allow a six-month window to back debt on an "emergency" basis. Expected to be published soon in the Federal Register, with comments due in 15 days.
A proposal by the banking and thrift regulators that would implement a June ruling by the Financial Accounting Standards Board that financial institutions must bring many off-balance-sheet assets back on to their books. Under the plan, regulators would require banks to immediately hold higher capital when the rule goes into effect next year. Expected to be published soon in the Federal Register, with comments due in 30 days.
A proposal by the Federal Reserve Board that would amend Regulation Z to improve disclosures for closed-end mortgages, home equity lines of credit and originator fees. The plan would require a recalculation of annual percentage rates for certain mortgages, prohibit brokers from receiving certain types of payments and require lenders to give borrowers more notice before reducing their home equity line. Published Aug. 26 in the Federal Register, with comments due Dec. 24.
Credit Card Rules
An interim rule by the Federal Reserve Board to implement provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009. The rule requires lenders to provide more notice of an increase in credit card rates or change in terms. Published July 22. Comments due Sept. 21.
Bank Failures I
Federal and state regulators shut five banks in Iowa, Missouri, Arizona and Illinois on Sept. 4, raising the number of failures this year to 89.
All of the collapses were relatively small, with a combined $1.1 billion of assets, but they were expensive for their size. The four failures were estimated to cost the Deposit Insurance Fund $401 million.
The failures were: the $458 million-asset Vantus Bank of Sioux City, Iowa; the $345.6 million-asset Platinum Community Bank of Rolling Meadows, Ill.; the $212 million-asset InBank of Oak Forest, Ill.; the $105 million-asset First State Bank of Flagstaff, Ariz.; and the $16 million-asset First Bank of Kansas City, Mo.
Treasury Secretary Tim Geithner on Sept. 3 called for an agreement on comprehensive new international capital standards for banks by the end of 2010, with implementation by the end of 2012.
In a letter to the Group of 20 finance ministers, Geithner laid out eight principles to increase capital for all banks. He said even higher standards are necessary for systemically important firms. Under the plan, all banks' capital requirements would rise, while larger banks in particular would face enhanced requirements.
Bank Failures II
Federal and state regulators on Aug. 28 failed three banks, with assets totaling $1.9 billion, in California, Minnesota and Maryland. The failures are expected to cost $687 million.
The failures were: the $1 billion-asset Affinity Bank in Ventura, Calif., the $459 million-asset Mainstreet Bank in Forest Lake, Minn., and the $452 million-asset Bradford Bank in Baltimore.
The FDIC issued its second-quarter earnings report on Aug. 27, detailing the industry's $3.7 billion loss, and raising concerns about future profitability. The Quarterly Banking Profile cited a 33% rise in loss provisions from the year-earlier quarter — to $67 billion — and huge writedowns on asset-backed commercial paper as main drivers for the decline.
The report said the agency's problem bank list rose 36%, to 416, while assets held by those banks jumped by roughly a third, to $300 billion. The DIF fell to $10.4 billion as the FDIC set aside an additional $11.6 billion for expected failures. The ratio of reserves to insured deposits fell to 0.22%, a 5-basis-point drop from the first quarter.
The FDIC issued final guidelines on Aug. 26 dictating restrictions on private-equity investors that buy failing banks. The agency dialed some of the requirements back from a July proposal, reducing the minimum capital ratio for private-equity firms to 10%, easing cross-guarantee requirements and removing certain restrictions related to investors' being a "source of strength" for their banks.
The FDIC voted Aug. 26 to extend its Transaction Account Guarantee program until June 30. The voluntary program — part of a broader FDIC plan launched at the height of the financial crisis to protect bank liquidity — gives unlimited insurance for non-interest-bearing checking deposits. The agency also increased fees for institutions that want to remain in the program.
Currently, participating institutions pay 10 cents for every $100 guaranteed. The extension will require banks to pay one of three possible fees — 15, 20, or 25 basis points — depending on an institution's riskiness.
Federal regulators on Aug. 21 shut Guaranty Bank, a $13.5 billion-asset Texas thrift.
BBVA Compass, a Birmingham, Ala., subsidiary of Banco Bilbao Vizcaya Argentaria of Spain, has agreed to buy Guaranty. BBVA Compass has agreed to take on $12 billion of the Austin thrift's assets and has entered into a loss-sharing agreement with the FDIC for $11 billion of them.
The FDIC estimated that the Guaranty failure will cost the insurance fund $3 billion.
Bank Failures III
Regulators also shut three other banks on Aug. 21. The failures were: the $617 million-asset CapitalSouth Bank in Birmingham, Ala., the $167 million-asset First Coweta Bank in Newnan, Ga., and the $143 million-asset Ebank, also in Georgia.
The Fed and Treasury announced Aug. 17 that they would extend the Term Asset-Backed Securities Loan Facility into 2010. The central bank will make loans against newly issued asset-backed securities and older commercial mortgage-backed securities until March 31. The program's lending against newer commercial MBS will run through June 30.
The programs, which are designed to jump-start lending in consumer and business sectors, had been slated to expire at yearend.
Just days after federal authorities launched a probe of alleged accounting irregularities at Colonial BancGroup Inc., its $25 billion-asset bank collapsed on Aug. 14. Regulators executed the fifth-largest failure of all time — and the biggest this year — taking over Colonial Bank in Alabama and selling most of its operations to BB&T Corp.
Branch Banking and Trust agreed to assume all $20 billion of Colonial's deposits, the FDIC said. The agency said the resolution was estimated to cost $2.8 billion to the Deposit Insurance Fund.
Bank Failures IV
State and federal regulators also closed four other banks on Aug. 14. The failures were: the $1.5 billion-asset Community Bank of Nevada; the $158 million-asset Community Bank of Arizona in Phoenix; the $124 million-asset Union Bank in Gilbert, Ariz.; and the $13.7 million-asset Dwelling House in Pittsburgh.
Actions Expected Soon
The Treasury plans to announce financial incentives for servicers soon to pursue short sales and deeds in lieu of foreclosure for troubled homeowners who do not qualify for the Obama administration's loan modification program. In a short sale, a home is sold for less than is owed on the mortgage, whose holder accepts a discounted payoff. It is often considered less costly than a foreclosure.
Under the Treasury plan, which is expected to be announced this month, servicers would get a $1,000 "success fee" when a short sale is completed, according to short-sale experts who have been briefed on the policy.
The home seller would receive up to $1,500 to assist with relocation expenses, similar to the "cash for keys" programs that various servicers offer.
The growing number of failures this year, nearly four times their total for all of 2008, has pushed the chances of a second special deposit insurance premium to a near certainty.
The FDIC charged banks a 5-basis-point premium based on assets minus Tier 1 capital in the second quarter, but has given itself authority to charge such a premium in the third and fourth quarters. Observers are split on how high the assessment will be, but most said the agency must charge another premium in order to keep DIF reserves from exhaustion.
The Fed is considering whether to require banking companies to get customers' permission before charging overdraft fees. Under a proposal issued late last year, the Fed said it was considering whether overdraft protection should be an opt-in or opt-out feature.
BSA for Nonbanks
An advance notice of proposed rulemaking by the Financial Crimes Enforcement Network soliciting comment on how to require mortgage brokers and other nonbanks to comply with the Bank Secrecy Act.
Fincen asked whether nonbanks should have to file suspicious activity reports as banks do. The agency suggested that BSA rules for nonbanks could first apply to their residential mortgages and then Fincen could consider expanded rules for other types of loans. Published July 21. Comments due Aug. 20.