Open for Comment

MSB Definition
A proposal by the Financial Crimes Enforcement Network that would attempt to clarify which companies qualify as money services businesses.The proposal would revise the definition of money services businesses by describing with more clarity the types of financial activity subject to Bank Secrecy Act rules. Published May 12 in the Federal Register with comments due Sept. 9.

SAR Sharing
A proposal by Fincen 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.

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, the 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. Comment deadline extended to May 15.

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 proposal would also 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.

Recent Actions

Bank Failures I
State regulators seized the $334 million-asset Westsound Bank in Bremerton, Wash., on May 8, bringing the number of failures this year to 33. The Federal Deposit Insurance Corp. estimated the failure would cost $108 million.Stress Tests
On May 7 federal regulators released the results of the stress tests of the nation's 19 largest institutions. Regulators said 10 firms need to raise a combined total of $75 billion over the next six months, while the other 9 were adequately capitalized to withstand a continued downturn in the economy.

The tests give the 10 institutions that need more capital until June 8 to develop a capital plan, and until Nov. 8 to implement it. Some banks have farther to go than others.

Bank of America Corp. needs to raise nearly $34 billion, while Wells Fargo & Co. needs to raise $13.7 billion. GMAC needs to raise $11.5 billion, and Citigroup Inc. needs to raise $5.5 billion. The remaining banks each need to raise less than $3 billion. Most said they would do so quickly through a variety of methods, including stock offerings and asset sales. Regulators will also allow banks to convert preferred shares owned by the government to common stock, which would raise banks' tangible capital.

Holding Companies
Federal Reserve Board Chairman Ben Bernanke said May 7 that the central bank needs authority to dig deeper into the subsidiaries of holding companies ranging from Goldman Sachs to GMAC and American Express. Bernanke said Congress should amend the Gramm-Leach-Bliley Act of 1999 to "help ensure that consolidated supervisors have the necessary tools and authorities to monitor and address safety and soundness concerns in all parts of an organization."

Fed Transparency
Fed Chairman Ben Bernanke said May 5 that he would release more details on how many institutions borrow from the central bank's lending facilities, what kind of collateral they are posting and more information on the private firms that help manage the liquidity programs.

Bank Failures II
Regulators failed three banks on May 1, including the $4.1 billion-asset Silverton Bank.

Silverton, which had been a bankers' bank before switching to a national charter two years ago, had 400 banks as shareholders of its holding company, Silverton Financial Services Inc. Its operations were folded into a bridge bank run by the FDIC.

The failure is estimated to cost $1.3 billion to the Deposit Insurance Fund.

Just after Silverton closed, regulators announced the failure of the $45.1 million-asset Citizens Community Bank in Ridgewood, N.J. The FDIC estimated that the cost to the DIF will be $18.1 million.

State regulators later shut a third bank that night, closing the $299.4 million-asset America West Bank in Layton, Utah. The failure was estimated to cost the DIF $119.4 million.

Talf Extension
The Fed said May 1 it would expand the scope of eligible collateral under the Term Asset-Backed Securities Loan Facility to include commercial mortgage-backed securities, exposing the central bank to more risk as it seeks to repair a market that collapsed during the middle of last year. The central bank will begin accepting commercial mortgage-backed securities next month.

Preemption Hearing
The Supreme Court held oral arguments on April 28 on Cuomo vs. Clearing House, a case that could decide whether state attorneys general have the power to enforce nonpreempted state laws against national banks.

During the hearing, several justices appeared to support the Office of the Comptroller of the Currency's ability to enforce laws exclusively at national banks. The case followed a Supreme Court decision two years ago that reinforced the OCC's preemption powers.

Resolution Powers
In a speech on April 27, FDIC Chairman Sheila Bair called for her agency to gain the power to resolve systemically important institutions. Bair argued the FDIC has more expertise and experience than any current or future agency at cleaning up gigantic nonbanks and outlined how the FDIC might do it.

CTR Guidance
Fincen released guidance April 27 designed to clarify the rules for exempting businesses from currency transaction reports.

A business that engages in multiple business activities may qualify for a CTR exemption as a nonlisted business if no more than 50% of its annual gross revenue comes from one or more ineligible business activities, the guidance said.

Fincen still requires that a bank maintain material and supporting information that supports its decision to exempt the customer after making a "reasonable determination."

Bank Failures III
Regulators closed four banks on April 24 totaling $2.3 billion in assets. The failures — estimated to cost the FDIC roughly $700 million — were the $1.5 billion-asset First Bank of Beverly Hills in Calabasas Calif.; the $489 million-asset First Bank of Idaho FSB in Ketchum; the $185 million-asset Michigan Heritage Bank in Farmington Hills; and the $112 million-asset American Southern Bank in Kennesaw, Ga.

Bank Failures IV
Regulators closed two banks on April 17: the $270.9 million-asset Great Basin Bank of Nevada in Elko, and the $181 million-asset American Sterling Bank in Sugar Creek, Mo.

The FDIC said each failure was estimated to cost the Deposit Insurance Fund $42 million.

Bank Failures V
Regulators shut two banks on April 10: the $2 billion-asset New Frontier Bank in Greeley, Colo., and the $492 million-asset Cape Fear Bank in Wilmington, N.C.

The FDIC estimated that the failure of New Frontier would cost the DIF $670 million, while the Cape Fear collapse is likely to cost $131 million.

Actions Expected Soon

Wamu Report
The inspectors general at the Federal Deposit Insurance Corp. and the Treasury Department have told American Banker they will prepare a joint report analyzing the September failure of Washington Mutual Inc.Though inspector general reports are required when bank failures cause a material loss to the Deposit Insurance Fund, the collapse of the $307 billion-asset Seattle thrift company, whose banking operations were sold off to JPMorgan Chase & Co and are not expected to cost the DIF any money, was not thought to trigger such a report.

But the agencies "recently initiated a joint evaluation of various aspects of the supervision and resolution of Washington Mutual and will issue a report when work is completed," according to a letter from FDIC Inspector General Jon T. Rymer.

Toxic Assets
The FDIC is expected to offer initial loan packages to investors next month as part of a federal plan to expunge toxic assets from banks' balance sheets. The first phase of the agency's Legacy Loans Program will be a pilot sale of loans to test the program's "mechanics" and "allow for public observation and input — consistent with the FDIC's commitment to openness and transparency throughout this process," FDIC Chairman Sheila Bair said last month. She said some banks have said they will participate in the test, which will "help guide and build the foundation for the larger program."

Special Assessment
FDIC Chairman Sheila Bair signaled April 1 that banks and thrifts may pay much less than the 20-basis-point special assessment her agency had proposed to fortify the DIF. FDIC officials had said the assessment could be cut in half if Congress passed a bill more than tripling the agency's borrowing authority, to $100 billion. But Bair indicated a bigger cut may be in the offing.

Comments Closed

Toxic Loans
A proposal by the FDIC to host an auction of legacy loans that could receive bids from public-private investment funds. The FDIC would guarantee debt issued by the funds. Published March 26 on the agency's Web site. Comments were due April 10.

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