OPEN FOR COMMENT
Predatory Lending I
A proposal by the Federal Reserve Board to toughen measures against abusive lending practices. The plan would lower the annual percentage rate on mortgages that are covered by the Home Mortgage and Equity Protection Act, to eight percentage points above the rate for Treasury securities. The current threshold is 10 points. The proposal also would include the cost of single-premium credit life insurance as part of the points and fees test for HOEPA. To be published shortly, with comments due March 16.
New Bank Powers
A proposal by the Fed that would grant financial holding companies the right to act as real estate brokers and managers. The proposals would be among the first set of new powers authorized as financial in nature under the Gramm-Leach-Bliley Act of 1999. Comments due 45 days after publication in the Federal Register, which is expected soon.
Payday Lending
A proposal by the Office of the Comptroller of the Currency that would let the agency raise exam fees for banks that strike partnerships with payday or title lenders. Expected to be published shortly.
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 management. Published Dec. 6. Comments due Jan. 22.
Credit Union Incidental Powers
A proposal by the National Credit Union Administration that would expand the products federally chartered credit unions may offer directly to members to include Internet banking services, individual retirement accounts, and stored value products such as prepaid phone cards. Published Nov. 24. Comments due Feb. 22.
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 Nov. 3. Comments due Feb. 1.
Thrift Applications
A proposal by the OTS to streamline applications processing. The proposal would require a pre-filing 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.
Thrift Bylaws
A proposal by the Office of Thrift Supervision to create optional bylaws that savings associations could adopt without regulatory approval. 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. Comment deadline extended to Feb. 9.
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.
RECENT ACTIONS
Finder Powers
The Fed on Wednesday issued a rule authorizing financial holding companies to act as finders, or intermediaries, that bring together buyers and sellers of financial or nonfinancial products for transactions the buyers and sellers negotiate themselves. The Fed declared the practice financial in nature under the Gramm-Leach-Bliley Act of 1999.
Loan-Loss Reserves
The American Institute of Certified Public Accountants standards committee on Monday approved the outline of a plan to standardize banks loan-loss reserving practices. The proposal backed down from an earlier plan that would have severely limited banks ability to hold funds in reserve against future loan losses. The new plan would let banks reserve against loans when they have observable data that indicate a probable loss. The plan, which is still being completed, is expected to be put out for comment next year.
Pooling of Interests
The Financial Accounting Standards Board announced Dec. 6 that it had reached a tentative decision to modify a controversial September 1999 proposal that would bar the so-called pooling-of-interests method of accounting for mergers and acquisitions. The revision would let companies carry goodwill on their books as an asset unless it becomes impaired indicating a decline in value. Any impairment of goodwill would have to be charged against earnings. A final rule is expected no earlier than the end of March.
Securities Collateral Provisions
The banking agencies published an interim rule Dec. 5 that revises the way capital is held in deals where banks borrow securities and post cash collateral. Under the new rule, the amount of cash collateral in a securities borrowing transaction is excluded from the borrowers adjusted risk-weighted assets in keeping capital. The rule would affect 17 large banks.
Thrift Financial Reports
The OTS on Nov. 22 approved changes to the thrift call report that require financial institutions to start providing information on subprime and high loan-to-value loans, beginning with the third-quarter 2001 data. Most other new thrift and holding company data requirements will kick in with the first-quarter report, including reporting on residual interests in financial assets.
Consumer Insurance Protections
The banking and thrift agencies approved a joint rule that requires financial institutions to start warning consumers that insurance products sold by banks are not federally guaranteed like deposits and may lose value. The rules also bar banks from requiring loan applicants to buy insurance products as a condition of approval. Published Dec. 4. Effective April 1.
Predatory Lending II
The FDIC released guidelines Nov. 20 designed to help banks avoid the purchase of predatory loans, either directly or in securitized pools. The guidelines recommended that banks investigate the loan originators reputation, practices, underwriting policies, and compliance programs. Published on the agencys Web site at www.fdic.gov. Comments due by Dec. 17.
ACTIONS EXPECTED SOON
CRA Sunshine
Bank and thrift regulators are close to issuing a rule enforcing the so-called Community Reinvestment Act sunshine provision of the Gramm-Leach-Bliley Act. The rule would detail how banks and community groups must publicly report the terms of certain CRA agreements.
Home Loan Bank Capital
At its Dec. 20 meeting, the Federal Housing Finance Board is expected to vote on a proposal 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.
Subordinated Debt
Treasury Department officials said a study on the value of subordinated debt is nearing release. The study, mandated by the Gramm-Leach-Bliley Act, is meant to determine whether requiring banks to issue subordinated debt would increase the influence of market discipline on bank risk-taking. Also, it will examine the usefulness of ratings on bank debt as a signal to regulators of an institutions financial condition.
Credit Union Study
A Treasury study on credit unions business lending activities is expected to be released shortly.
Money Laundering
The Treasury 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 Clinton 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.
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. Released Aug. 8. Available at www.fdic.gov. No comment deadline was set.
