Regulatory Roundup

OPEN FOR COMMENT

Fair Credit Reporting Act Compliance

A proposal by the bank and thrift agencies to require financial institutions that share certain consumer information with affiliates to send "opt out" forms to customers. The proposal, required by the Gramm-Leach-Bliley Act, would clarify provisions of the Fair Credit Reporting Act, which requires banks to give customers the chance to opt out but does not specify how this should be done. To be published soon in the Federal Register with comments due 45 days later.

Subprime Residuals

A proposal by the banking and thrift agencies that would require banks to keep $1 of capital for every $1 of subprime residuals. The proposal also would limit the concentration of residuals to 25% of Tier 1 capital. A residual, also known as a "retained interest," is the interest a bank keeps when it securitizes and sells pools of high-risk loans. Published Sept. 27. Comments due Dec. 26.

Reserves for Loan Losses

A proposal by the banking and thrift agencies that banks may reserve for loan losses by estimating future defaults. The proposed guidelines came as part of the agencies' agreement with the Securities and Exchange Commission to clarify the accounting rules for loan-loss reserves. Published Sept. 7. Comments due Nov. 6.

False Claims

A proposal by the Federal Deposit Insurance Corp. that would give the agency authority to impose civil penalties on anyone who submits a fraudulent claim in connection with employment matters, contracting activities, or the buying of assets. A bank that falsified any part of its application to buy assets of another bank would be liable. Published Aug. 29. Comments due Oct. 30.

Home Loan Bank Capital

A proposal by the Federal Housing Finance Board to make the capital structure of the 12 Home Loan banks more risk-based.

The proposal would enforce provisions of the Gramm-Leach-Bliley Act. Published July 13. Comment deadline extended to Nov. 20.

Thrift Conversions

A proposal by the Office of Thrift Supervision to modify the way mutual thrifts and their holding companies are examined and supervised by the agency. The rule also would establish procedures for the conversion of a mutual thrift to a stockholder-owned thrift. Published July 12. Comment deadline extended to Nov. 9.

RECENT ACTIONS

Credit Card Disclosures

The Federal Reserve Board amended its Regulation Z to require that credit card solicitations contain more prominent disclosure of annual percentage rates, fees, and other charges. Among other things, the rule requires that the APR appear in 18-point type. The rule was published on Oct. 3. It is effective immediately, but compliance is not mandatory until Oct. 1, 2001.

Privacy Protections

The Office of Thrift Supervision began requiring examiners to monitor thrifts' progress toward compliance with the Gramm-Leach-Bliley Act's privacy regulations this month. This week the agency began distributing a list of questions that examiners will ask compliance officers in an effort to determine the institutions' preparedness.

The OTS will incorporate the checks into regularly scheduled compliance exams. Institutions that do not have such exams scheduled before compliance becomes mandatory on July 1, 2001, will be monitored with off-site checks, most likely by telephone.

The notice, including the questions, can be viewed at www.ots.treas.gov.

ACTIONS EXPECTED SOON

Capital Requirements

The banking and thrift agencies are expected to release in late October a preliminary proposal that would simplify capital requirements for community banks.

The proposal would include three options for a simplified system: a standard capital-to-assets leverage ratio, a simplified risk-based ratio, and a modified leverage ratio that includes risk-based elements.

Most banks in the country would probably be eligible for the simplified standards. Agency officials said they expect to hold discussions on the proposal by early next year.

Pooling of Interests

The Financial Accounting Standards Board is expected to issue a rule barring companies from accounting for mergers and acquisitions by combining their balance sheets in the so-called pooling of interests method.

The FASB prefers the purchase method, under which the acquiring company calculates the difference between the price paid and the actual book value of the acquired company, and writes off any difference as goodwill over 20 years or more. The rule, originally expected by yearend, is now scheduled for release late in the first quarter.

Thrift Oversight

The Office of Thrift Supervision is expected to issue a proposal in the next few months that would require thrift holding companies to notify the agency when they significantly increase debt or engage in a major new activity.

The proposal would call for savings and loan holding companies and non-thrift subsidiaries to notify the agency before they renew, guarantee, or issue substantially more debt, or before they significantly increase consolidated assets or reduce capital below a specified level.

Call Reports

The three federal banking agencies are expected within the next two months to unveil final changes to the quarterly call reports, including new data on subprime lending and asset securitization. The changes would take effect in the first quarter.

Deposit Insurance Reform

The FDIC is expected to offer proposals on deposit insurance reform early next year. The agency has already released an "options paper" detailing possible legislative changes relating to the nature and size of the insurance funds, the pricing of premiums, and the amount of coverage.

The FDIC is expected to hold roundtable discussions in the fall to narrow options and help produce specific proposals. Options include moving to a "user fee" system under which all institutions would pay a small, steady annual premium, changing the risk-based pricing plan to include market information, and increasing the coverage limit to $200,000 per account. Released Aug. 8. Available at www.fdic.gov. No comment deadline was set.

Loan-Loss Reserves

The American Institute of Certified Public Accountants is expected by late this year to present guidelines for bank accounting of loan-loss reserves to the FASB.

An early draft of the proposal indicates that the institute will recommend that banks not be allowed to hold any unallocated reserves and that they disclose their methods of identifying troubled loans. If approved by the FASB, the proposal would be put out for public comment.

Lending Guidelines

A policy statement is expected late this year or early next year from a task force of 11 federal agencies, including the Fed and the Justice Department, that would outline how regulators could use existing laws to crack down on predatory lending.

An early draft indicated that the task force is defining specific activities that are illegal and is considering a wide range of sanctions, from denial of CRA credit to criminal prosecution, to discourage them.

Market Discipline

A report is expected by yearend from a private-sector working group on the best practices for the disclosure of information about risks being taken by banks and securities firms. Former Chase Manhattan Corp. chairman Walter V. Shipley is heading the group, which federal bank and securities regulators formed April 27.

The panel's recommendations will be ready for financial services firms to use in preparing their reports on 2000 performance, which should come out in February.

While the group's conclusions will not be binding, they could, if adopted, be incorporated into examiner guidelines and head off future rules from agencies determined to keep closer tabs on complex companies.

COMMENTS CLOSED

Insurance Consumer Protections

A proposal by the banking and thrift agencies to establish consumer protection rules applying to insurance sales practices, solicitations, advertisements, or offers for insurance by depository institutions or on behalf of them. The proposal would enforce provisions of the Gramm-Leach-Bliley Act. Published Aug. 21. Comments were due Oct. 5.

Thrift Financial Report

A proposal by the Office of Thrift Supervision to modify the quarterly thrift financial report, including new data on subprime lending. The changes would take effect in the first quarter. Published Aug. 4. Comments were due Oct. 3.

Strategic Plan

A request for comment by the Office of Federal Housing Enterprise Oversight on its strategic plan for the years 2000-2005, which is intended to "clarify OFHEO's mission and guide its activities." Published Aug. 4. Comments were due Sept. 13.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER