Regulatory Roundup

PRIVACY: Proposal by federal regulators implementing the consumer privacy provisions of the Gramm-Leach-Bliley Act of 1999. Among other things, comments are requested on what customer information should be deemed "public" and therefore not subject to privacy protection. Not published in the Federal Register yet, but available on-line at http://www.occ.treas.gov/ftp/regs/npr0203.pdf. Comments due March 31. Expected effective date Nov. 13.COMPLEX NONPROFITS: Proposal by the National Credit Union Administration to define "complex" credit unions, as required by the financial reform law enacted Nov. 12. Under the proposal, credit unions judged to have "complex" operations would be subject to higher capital requirements than their simpler peers. To be published in the Federal Register. Comments due 60 days after publication.

ELECTRONIC BANKING: Advance notice of proposed rulemaking by the Office of the Comptroller of the Currency designed to update its policies on electronic banking. Published Feb. 2. Comments due April 3.

NEW HOLDING COMPANIES: In-terim rule by the Federal Reserve Board establishing the method by which bank holding companies and foreign banks operating in this country may file for treatment as financial holding companies under the Gramm-Leach-Bliley Act of 1999. Published Jan. 25. Effective March 11, but comments due March 27.

NEW SUBSIDIARIES: Proposal by the OCC to create national bank financial subsidiaries that could engage in a broader range of activities. Published Jan. 20. Comments due Feb. 14. Effective March 11.

HOME LOAN BANKS: Proposal by the Federal Housing Finance Board that the system's debt be issued in the name of the Home Loan banks rather than the agency's Office of Finance, which may also serve as a centralized administrator of Home Loan bank programs that invest in mortgages made by member banks and thrifts. Published Jan. 4. Comments due March 6.

FAIR VALUE: Preliminary proposal by the Financial Accounting Standards Board to make fair-value accounting mandatory for virtually the entire bank balance sheet. Under this form of accounting, a financial instrument's value is the price it would fetch on the open market. Issued Dec. 14 and published on FASB's Web site at www.fasb.org. Comments due May 31.

ELECTRONIC DISCLOSURES: Interim rule by the Fed to let banks send savings account statements electronically, effective Sept. 1. Revised proposal to let banks make consumer protection disclosures on-line to borrowers. Published Sept. 14. Comment deadline extended to March 3.

CAPITAL RULES: Proposal by the Basel Committee on Banking Supervision to update the 1988 international risk-based capital accords. Rather than basing capital requirements on the type of asset a bank holds, the requirements would be based on the riskiness of the bank's borrowers, as determined by a rating agency such as Standard & Poor's. Issued June 3. Two supplementary papers, addressing the use of market discipline to promote capital adequacy and banks' use of internal risk rating systems to set capital requirements, were published Jan. 18. All documents published on the Bank for International Settlements' Web site at www.bis.org. Comments due March 31.

FANNIE/FREDDIE CAPITAL: Proposal by the Office of Federal Housing Enterprise Oversight to create risk-based capital standards for Fannie Mae and Freddie Mac. Published April 13. Comment deadline extended a second time, to March 10.

CREDIT REPORTING: The Federal Financial Institutions Examinations Council on Jan. 18 noted that some institutions have stopped reporting certain customer data, including lines of credit, outstanding balances, and information on subprime borrowers, to credit bureaus. It warned that lenders using credit bureau reports when making loan decisions should develop strategies to make up for the missing data.INSURANCE PREMIUMS I: The Federal Deposit Insurance Corporation on Feb. 4 sent a letter to bank executives about a change to the risk-based premium system. Until now, well-capitalized institutions with Camels ratings of 1 or 2 have almost automatically been branded 1-A, the top rating in the nine-box matrix the FDIC uses to set deposit insurance premiums. Under the agency's revised approach, call report data and examiner know-how will be used to cull through these institutions and identify "outliers" that will be bumped down to the 1-B category and forced to pay 3 cents per $100 of insured deposits. The new approach will be in effect for the second-half 2000 premiums.

INSURANCE PREMIUMS II: The FDIC reduced to 15 days, from 30, the time a bank is given to pay its deposit insurance premium after being billed. It also tripled, to 90 days, the time a bank or thrift has to request a review of its premium assessment. Published Dec. 16. Effective April 1.

LOW CAPITAL: The NCUA approved a rule that creates a system of prompt corrective action for credit unions with inadequate capital. Under the rule, credit unions with lower capital levels would be subject to penalties and oversight. To be published in the Federal Register. Effective Aug. 7.

MERCHANT BANKING: Rules ex-pected by March 13 will detail conditions under which banking companies may expand their merchant banking activities.SUBPRIME RESIDUALS: Bank and thrift regulators are considering a proposal that would prohibit banks from counting subprime-based residuals as capital, unless the bank can show there is a market for them. A residual, also known as a "retained interest," is the interest a bank retains when it securitizes and sells an asset.

SUBPRIME LENDING: Bank and thrift regulators are considering a draft proposal by the FDIC to crack down on subprime lending. Under the plan, banks whose subprime portfolios totaled more than 25% of Tier 1 capital would be required to set aside at least twice the usual capital. The FDIC submitted its proposal to the OCC, the OTS, and the Fed on Nov. 19. At a House Banking hearing on Feb. 8, the three other agencies appeared lukewarm on the proposal.

REG-FLEX PROPOSAL: Dennis Dollar, one of three NCUA board members, is expected to propose a regulatory flexibility rule, or Reg-Flex, on March 16. Under the proposal, credit unions with relatively high capital levels would be rewarded with fewer exams, more investment options, and freedom from a rule that indirectly restricts branching.

REG B: The industry continues to wait for the Fed's vote on whether to let banks collect race and gender information and other data identifying consumer loan applicants and borrowers. The revised regulation was published Aug. 4, and the comment period closed Nov. 10. Lawmakers on both sides of the issue have weighed in with the Fed.

HOME LOAN BANKS: In the first half the Finance Board plans to propose a series of regulations - including rules regarding capital, investments, membership, collateral, and Refcorp bond payments - to enforce provisions of the financial reform law. The regulations mirror some parts of an earlier proposal that the agency withdrew after the law was enacted. The most controversial part of that proposal, limits on mortgage-backed securities, might be revised in 2001. An alternative is to be proposed in March: risk-sharing investments, similar to those in three authorized pilot programs, in mortgages originated by member banks and thrifts.

THRIFT RULE: The Office of Thrift Supervision is expected to issue a rule early this year to clarify when a unitary thrift holding company may own more than one thrift but still engage in nonfinancial activities.

SUSPICIOUS ACTIVITY: The Financial Crimes Enforcement Network plans to issue a final rule in March requiring money service businesses such as check cashers to report suspicious transactions made by their customers. Later, the agency plans to issue a similar final rule for casinos and then propose a suspicious-activity reporting rule for securities brokers and dealers. A 1992 law authorizes Fincen to draft suspicious-activity reporting rules for all financial institutions, but it has yet to propose a rule for brokers and dealers that are not part of a bank holding company. Brokers and dealers that are part of a bank holding company are covered by the rules for depository institutions.