OPEN FOR COMMENT
Securities Loans
A proposal by the banking and thrift agencies to change capital requirements on loans to securities firms. Capital requirements would drop to 20%, from 100%, for loans to brokerage borrowers with good credit ratings and solid supervision. Expected to be published soon, with comments due 45 days afterward.
Capital Requirements
A preliminary proposal by the banking and thrift agencies that would simplify capital requirements for community banks. The proposal includes three options for calculating capital: 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. Federal Deposit Insurance Corp. officials said they expect to hold public meetings on the proposal by early next year. Published Friday. Comments due Feb. 1.
Thrift Bylaws
A proposal by the Office of Thrift Supervision to create optional bylaws that savings associations could adopt without regulatory approval. One of these bylaws would prevent a person under indictment, convicted of certain crimes, or under a bank regulatory enforcement order for dishonest conduct or breech of trust from serving on thrift boards. The proposal would stop short of banning anyone from the industry. Published Nov. 2. Comments due Jan. 2.
Thrift Applications
A proposal by the OTS to streamline applications processing. The proposal would require a prefiling meeting among agency officials and a new thrift applicant, or a company seeking to acquire an existing thrift, to identify any legal or policy issues. Published Nov. 2. Comments due Jan. 2.
GSE Study
A proposal by the Office of Federal Housing Enterprise Oversight to study the financial risks Fannie Mae and Freddie Mac would pose if either government-sponsored enterprise failed or significantly cut back its activities. Published Oct. 30. Comments due Dec. 29.
Thrift Holding Companies
A proposal by the OTS to require some thrift holding companies to notify the agency 30 days before significantly increasing debt, reducing capital substantially, or acquiring certain assets. The proposal also would establish criteria the agency would use to evaluate holding company capital. Published Oct. 27. Comments due Dec. 26.
Fair Credit Compliance
A proposal by federal bank and thrift regulators 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 says banks must give customers a chance to block, or opt out, of the information sharing but does not specify how this should be done. Published Oct. 20. Comments due Dec. 4.
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.
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. Comments due Nov. 20.
RECENT ACTIONS
Call Reports
The Federal Financial Institutions Examination Council on Nov. 2 approved changes to the quarterly Call Reports that banks must file with their primary regulator. The changes, which take effect in the first quarter, are designed to make the reports more uniform, and to provide regulators with more information about activities such as securitizations and trust activities. A requirement that banks detail their subprime lending activity was stripped.
FDIC Penalties
The FDIC issued a rule adjusting the amount it may charge for civil money penalties to account for inflation since 1996. The agency is required by the Federal Civil Monetary Penalty Inflation Adjustment Act of 1990 to adjust the amount every four years. Published Oct. 31.
Community Credit Unions
The National Credit Union Administration amended its chartering and field-of-membership policies to require community credit unions to establish plans on how they will serve low-income communities. The changes are effective Nov. 27 for new community credit unions and Dec. 31, 2001, for existing ones. Published Oct. 27.
ACTIONS EXPECTED SOON
Predatory Lending
FDIC Chairman Donna Tanoue said the agency will release guidelines by the end of the month to help banks steer clear of buying and securitizing predatory loans. The guidelines are expected to advise banks to assess the reputation of originators, look for tell-tale signs of abusive lenders, such as frequent prepayments and high delinquency rates, and scrutinize the number of credit enhancements offered by lenders.
Money Laundering
The Treasury Department is expected to release guidelines by yearend directing banks to give particular scrutiny to transactions involving senior political figures in foreign countries, as a precaution against money laundering. The guidelines are required by the administrations national money laundering strategy, published in March.
Risk-Based Capital Rule
The OFHEO is expected to send a final rule instituting risk-based capital requirements for Fannie Mae and Freddie Mac to the Office of Management and Budget by yearend. OFHEO Director Armando Falcon said that the rule would probably be published early next year. In 1992 Congress ordered the agency to issue a rule that would require it to subject the two GSEs to a stress test to see whether they could survive an economic crisis.
Pooling of Interests
The Financial Accounting Standards Board may further delay 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 is believed to prefer 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. However, the board is considering an alternative favored by the banking industry that would let merging companies book goodwill as an asset but amortize it only if it loses value. As a result, the rule may be further postponed.
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 by yearend to narrow the 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 developing guidelines, for bank accounting of loan-loss reserves, that are to be submitted to the FASB for approval. Originally expected by yearend, the guidelines are now not likely to be finished until sometime next year. 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 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 Community Reinvestment Act 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 disclosing information about risks being taken by banks and securities firms. Former Chase Manhattan Corp. chief executive officer Walter V. Shipley is heading the group, which federal bank and securities regulators formed April 27.
The panels recommendations will be ready for financial services firms to use in preparing their 2000 performance reports, which should come out in February.
COMMENTS CLOSED
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 were due Monday.
