Open for Comment

Appraisal Standards
Proposed guidance by federal banking and thrift regulators that would strengthen the independence of the appraisal process. The guidance seeks to emphasize the importance of the independence of an institution's appraisal and evaluation program, and it requires a paper trail that would support an institution's credit decision. Published Nov. 17 in the Federal Register. Comments due Jan. 20.Deposit Insurance
An interim rule by the Federal Deposit Insurance Corp. to carry out a temporary increase in the standard deposit coverage limit, to $250,000 per account, and to simplify insurance rules for mortgage servicers' accounts. Published Oct. 17. Comments due Dec. 16.

Recent Actions

The Financial Crimes Enforcement Network released a Bank Secrecy Act manual Dec. 9 for money-services businesses.The manual, modeled after the one for financial institutions, contains an overview of anti-laundering requirements, BSA risk management expectations, sound industry practices, and examination procedures.

Money-services businesses have complained that bankers have been severing their accounts since the 2005 release of regulatory guidance labeling their risks.

Bank Failures I
Regulators closed First Georgia Community Bank in Jackson on Dec. 5, making it the 23rd institution to be closed this year.

The FDIC was appointed as the $237 million-asset bank's receiver and said its $197 million of deposits were sold to United Bank in Zebulon. United agreed to pay the FDIC a 0.8% deposit premium and buy $60.6 million of First Georgia Community's assets.

The agency estimated the failure's cost for the Deposit Insurance Fund at $72 million.

CTR Filings
Fincen finalized a rule Dec. 4 to give bankers more leeway in deciding when to file a currency transaction report. The final rule makes it simpler for banks to obtain CTR exemptions.

Beige Book
The Federal Reserve Board said Dec. 3 that government efforts to stabilize the economy have made modest inroads. In the central bank's "Beige Book," the Chicago district singled out the FDIC plan to back bank debt, and the Dallas district said capital infusions by the Treasury Department have been helping bankers lend again.

Fed Facilities
The Fed said Dec. 2 that it will extend three liquidity programs through April 30.

The primary dealer credit facility, the asset-backed commercial paper money market fund liquidity facility, and the term securities lending facility had been scheduled to expire Jan. 30.

The three-month extension means these programs will phase out at the same time as other facilities the Fed has introduced, including the commercial paper funding facility and the money-market investor funding facility.

Fed Chairman Ben Bernanke has repeatedly assured market participants that liquidity programs will remain in place as long as they are needed.

Overdraft Programs
The FDIC released a study Dec. 2 that found overdraft programs have grown rapidly in the last seven years. The study, begun in 2006 to help officials establish policy related to the growth of such programs, said nearly 70% of institutions from a sample initiated a program after 2001. Large banks were more than 50% likely to have had a program already in place in 2001.

ANB Financial
The Treasury's inspector general released a report Dec. 1 that said the Office of the Comptroller of the Currency was slow to handle problems at ANB Financial before it failed in May. The report said the OCC did not issue an enforcement action against the $1.9 billion-asset Bentonville, Ark., company in time to save it and continued to give it high ratings, even though it showed dangerous signs of risky growth.

U.K. Approval
The Fed effectively allowed the U.K. government to become a bank holding company. In a letter dated Nov. 26, the Fed approved a request by U.K. Financial Investments Ltd., which is owned by the U.K. government and manages holdings in banking companies that have been recapitalized with public money, to become a bank holding company.

The approval is connected to U.K. Financial Investments' efforts to get an indirect controlling interest in the U.S. subsidiaries of Royal Bank of Scotland Group PLC. The U.K. government could ultimately acquire as much as 58.1% of Royal Bank's ordinary shares.

The Fed said Nov. 25 that it would begin purchasing the debt of Fannie Mae, Freddie Mac, and the Federal Home Loan banks. The Fed said it will purchase up to $100 billion of debt from primary dealers in auctions set to begin next week. The central bank also plans to purchase $500 billion of mortgage-backed securities guaranteed by Fannie, Freddie, and the Government National Mortgage Association.

The Fed also announced a program jointly developed with the Treasury to lend up to $200 billion to holders of certain triple-A asset-backed securities backed by new and recently originated consumer and small-business loans.

The FDIC said Nov. 25 in its Quarterly Banking Profile that third-quarter bank and thrift earnings plunged 94% from a year earlier, to $1.7 billion. The industry was hurt by the continuing fallout from the housing crisis, sparking a rise in loan-loss provisions and losses on the sale of securities. The number of banks on the troubled bank list rose to 171 with $115.6 billion of assets. The ratio of reserves to insured deposits fell to 0.76%, the lowest level since 1994.

Citi Backstop
The government said Nov. 23 that it would guarantee $306 billion of assets and pump an additional $20 billion of capital into Citigroup Inc. to shore up confidence in the economy and in large banking companies.

Under the government's terms, Citi would agree to take a first loss position on $29 billion of assets. Further losses would be split, with the government taking 90% and Citi taking 10%.

The Treasury would cover the next $5 billion of losses, and the FDIC would cover the next $10 billion. The Fed would cover any amount beyond that in the form of a nonrecourse loan.

Shelf Charter
The OCC said Nov. 21 that it would create a "shelf charter" to help private-equity firms receive preapproval for bank charters. Companies that get the charter would be able to participate in the FDIC's bidding process for failing institutions. The FDIC said a week later that it would begin using a less exhaustive review process to allow more private-equity firms to bid on failed banks.

Bank Failures II
Regulators shut three institutions Nov. 21.

Two troubled Southern California thrifts — the $12.8 billion-asset Downey Savings and Loan in Newport Beach and the $3.7 billion-asset PFF Bank and Trust in Pomona — had their banking operations sold to U.S. Bancorp.

Regulators also shut the $681 million-asset Community Bank in Loganville, Ga.

The three failures are expected to cost the Deposit Insurance Fund $2.3 billion.

FDIC Liquidity Program
The FDIC finalized a rule Nov. 21 implementing its liquidity guarantee to back bank debt and zero-interest deposits. The agency made several changes from a proposal issued a month earlier. It scrapped a uniform 75-basis-point fee for senior debt covered by the program — a fee bankers had said was excessive — and replaced it with a tiered system that prices debt according to its maturity. Assessments for most participants would range from 50 to 100 basis points.

The rule also eliminated certain short-term debt from coverage and clarified that the FDIC will start paying bondholders as soon as an institution stops making payments.

The FDIC released details Nov. 14 about how its plan to give a government guarantee to servicers that agree to engage in systematic loan modifications would work. Under the plan, the government would cover as much as half the losses on certain loans modified by lenders that agreed to standardized procedures. The loss-sharing guarantee would evaporate if the borrower defaulted within the first six payments of the modified loan.The plan must be implemented by the White House.

Actions Expected Soon

Mortgage Rates
The Treasury is expected to announce a plan before Christmas to lower mortgage rates for new home purchases to 4.5%. Details of the plan have not been made public.Unfair and Deceptive
The Fed is expected to finalize rules next week to ban unfair and deceptive credit card practices. They are not expected to be significantly different from proposals unveiled in May. The proposal would ban double-cycle billing, restrict interest rate increases on existing balances, and dictate payment allocation guidelines.

The Fed is expected to pause on a plan to require banks to give customers a chance to opt out of overdraft programs. Such a provision, originally included in the unfair and deceptive acts proposal, is expected to be broken out into its own plan and reissued for comment.

Mortgage Metrics
The OCC and the Office of Thrift Supervision are expected to release a report next week that will show many modified loans redefault a short time later. Comptroller of the Currency John Dugan said Monday that 51% of loans modified in the second quarter were more than 30 days late within six months.

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