Open for Comment
SAR Sharing
A proposal by the Financial Crimes Enforcement Network that would let banks share suspicious activity reports with certain affiliates. The proposal would permit sharing within a corporate organizational structure, provided the affiliate is subject to regulation by Fincen or the federal banking agencies. Published March 9 in the Federal Register, with comments due June 8.Convertible Debt
An interim rule by the Federal Deposit Insurance Corp. to include a new type of debt issuance in the agency's temporary program to cover senior unsecured debt. Under the rule, the program would protect debt that is set to convert into equity. Published March 4. Comments due March 19.
Assessment Increase I
An interim rule by the FDIC to impose an emergency 20-basis-point deposit insurance premium, assessed on institutions' second-quarter domestic deposits.
The rule would also allow the agency to impose subsequent special assessments of up to 10 basis points — with agreement from the administration and the Federal Reserve Board — if losses to the Deposit Insurance Fund continued. FDIC officials said they had no other options, because letting the fund continue to decline could undermine public confidence. Published March 3. Comments due April 2.
Deposit Rate Limits
A proposal by the FDIC to clarify deposit rate limits for institutions that are not well capitalized.
The rule would let adequately capitalized banks and thrifts taking brokered deposits pay rates based on a national average of bank and thrift rates.
These rates are now capped according to rates on Treasury securities, which are uncharacteristically low.
By more clearly defining "normal market area," which helps determine rate caps, the regulation also aims to rein in banks that have used vagueness in the current rules to pay rates that are too high. Published Feb. 3. Comments due April 6.
FHLB Capital
An interim rule by the Federal Housing Finance Agency to reform the capital classifications of the Federal Home Loan banks. Under the rule, Home Loan banks are considered "undercapitalized" if their capital is between 3% and 4% of assets, "significantly undercapitalized" with ratios between 2% and 3%, and "critically undercapitalized" if the ratio falls below 2%. Published Jan. 30. Comments due April 30.
GSE Holdings
An interim rule by the FHFA to let Fannie Mae and Freddie Mac increase their mortgage portfolios to $850 billion by yearend. The rule also would require the government-sponsored enterprises to slash their portfolios, starting at the end of next year, until they reach $250 billion. Published Jan. 30. Comments due June 1.
Overdraft Programs
A proposal by the Fed to require institutions to let customers opt out of overdraft programs before charging them one-time fees on automated teller machine withdrawals or debit card transactions. Published Jan. 29. Comments due March 30.
Recent Actions
First Priority Report
The FDIC's inspector general faulted the agency for not responding more aggressively to commercial real estate loan problems at a small Florida bank before its Aug. 1 failure. In the report, released March 9, the inspector general said the agency "conducted timely examinations" and off-site monitoring of the $241 million-asset First Priority Bank and then acted against it, starting with the delay of branch approvals in 2006. But the report also found that supervisory actions against the bank were not always timely and effective.Bank Failures I
Regulators shut the $173 million-asset Freedom Bank of Commerce, Ga., on March 6. The FDIC said Northeast Georgia Bank in Lavonia would assume all $161 million of the failed bank's deposits and buy 96% of its assets at a $13.6 million discount. The FDIC and Northeast Georgia will share in losses on $96.5 million of assets.
Assessment Increase II
FDIC Chairman Sheila Bair said March 5 that she would reduce a planned special premium of 20 basis points if Congress passed a bill letting the agency borrow more from the Treasury Department. The borrowing authority is currently set at $30 billion. Observers say the premium could go as low as 10 basis points.
Loan Modification Guidance
The Treasury and federal banking regulators released guidelines March 4 on how banks should conduct loan modifications. Under the guidelines, lenders and servicers must follow a "waterfall" approach to lower payments, work case by case to determine if a borrower is at imminent risk of default and conduct additional underwriting for many loans.
First National Report
The Treasury's inspector general released a report March 3 that said the Office of the Comptroller of the Currency was not tough enough in targeting problems at First National Bank Holding Co. of Scottsdale, Ariz., before its two bank subsidiaries failed in July. The OCC delayed an order against First National in part because an investor was weighing a capital injection, but overall the agency "should have taken formal enforcement action much sooner," the report said.
Noncore Funding
The FDIC sent a letter to state-chartered banks March 3 pressing them to rein in risky funding strategies such as brokered deposits. In the letter, the regulator said healthy institutions using noncore liabilities to fund growth in risky ways should expect heightened attention from examiners and could face higher premiums.
AIG Bailout
On March 2 the government gave American International Group Inc. $30 billion from the Troubled Asset Relief Program. The infusion, the insurance company's fourth, brought AIG's bailout fund total to $70 billion, or 10% of the rescue fund.
Assessment Increase III
The FDIC made several policy changes Feb. 27 that affect regular premiums. It established a premium range of 12 to 16 basis points for healthy institutions, and it finalized new pricing factors that help calculate an individual bank's premium. Under the changes, institutions with a large concentration of brokered deposits and secured debt, such as Home Loan bank advances, could pay higher premiums.
Repaying Tarp
The Treasury released a set of answers to frequently asked questions Feb. 27 on how banks can repay Tarp funds. The department said banks must notify their primary regulator and the Treasury, and then regulators and the Treasury will decide how and if a bank must repay.
Also, banks wanting to repay part of the funds will have to pay a minimum of 25% of the issue price of the preferred stock.
Bank Failures II
Regulators closed banks in Illinois and Nevada on Feb. 27. Illinois regulators closed the $232.9 million-asset Heritage Community Bank in Glenwood. The FDIC said its deposits would be transferred to MB Financial Bank in Chicago. Regulators also closed the $238 million-asset Security Savings Bank in Henderson, Nev. The FDIC said its deposits would be assumed by Bank of Nevada in Las Vegas.
Quarterly Banking Profile
The FDIC's Quarterly Banking Profile released Feb. 26 said reserves in the Deposit Insurance Fund fell 45% during the fourth quarter, to $18.9 billion — the lowest level in 16 years. The agency set aside $22 billion for actual and anticipated failures — double what it set aside in the third quarter. The number of institutions on the problem bank list jumped to 252 with assets of $159 billion.
IndyMac Report
In a Feb. 26 report, the Treasury's inspector general blamed the Office of Thrift Supervision for being slow to respond to problems at failed IndyMac Bancorp. and said the regulator's eventual actions were ineffectual. The report cited IndyMac's reliance on alternative-A loans, poor underwriting and questionable appraisals. However, the report also said the OTS failed to take remedial action when it found problems.
Stress Test
The Treasury revealed the scenarios Feb. 25 for which it would test banks with more than $100 billion of assets to determine whether they have sufficient capital to survive a severe recession. The stress tests, which regulators have begun, would project gross domestic product growth, the unemployment rate and changes in housing prices for a two-year period.
Bank Failures III
Regulators closed $131 million-asset Silver Falls Bank in Silverton, Ore., on Feb. 20. Its $116 million in deposits were assumed by Citizens Bank in Corvallis.
Bank Failures IV
Regulators closed four banks on Feb. 13. The $530 million-asset Riverside Bank of the Gulf Coast in Cape Coral, Fla., the $272 million-asset Corn Belt Bank and Trust Co. in Pittsfield, Ill., the $130 million-asset Sherman County Bank in Loup City, Neb., and the $73 million-asset Pinnacle Bank in Beaverton, Ore., failed.
Actions Expected Soon
Public-Private Asset Plan
The Treasury will release details within weeks on its public-private partnership to purchase toxic assets from banks. The plan is expected to involve multiple facilities and involve funding from the Fed and the FDIC.Executive Compensation
The Treasury is expected to release standards soon implementing and clarifying the executive compensation rules in the stimulus law. The rules stipulate that the top-paid employees at Tarp recipients must halt incentive compensation like bonuses and retention rewards.
