Open for Comment
A proposal by federal banking and thrift regulators that would require all mortgage originators to register with a national licensing database.The plan would carry out a part of the Secure and Fair Enforcement for Mortgage Licensing Act, which was passed last year. The law says any originator, including employees of a bank, other depository institution or nonbank lenders, should register with the Nationwide Mortgage Licensing System and Registry. Each originator would be assigned a unique identification number that would remain unchanged for the duration of his or her career. Published June 9 in the Federal Register, with comments due Aug. 10.
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 activities subject to Bank Secrecy Act rules. Published May 12. Comments due Sept. 9.
The Treasury announced June 9 that it would allow 10 of the largest financial institutions to repay $68 billion of Troubled Asset Relief Program funds. Companies allowed to repay were: Northern Trust Corp., BB&T Corp., Morgan Stanley, State Street Corp., JPMorgan Chase & Co., U.S. Bancorp, American Express Co., Capital One Financial Corp., Goldman Sachs Group and Bank of New York Mellon Corp.Capital Plans
The Federal Reserve Board said June 8 that the 10 banking companies required to submit capital plans as a result of last month's stress tests had done so. The central bank offered no details of the plans. When the government tested the 19 largest bank holding companies, 10 were found to need $74.6 billion of capital and were required to submit a plan for filling their capital holes. The plans must be implemented by Nov. 8.
Bank Failures I
Illinois regulators closed the $214 million-asset Bank of Lincolnwood on June 5 and sold its deposits and most of its assets to Republic Bank of Chicago.
The Republic Bancorp Co. unit agreed to assume all $202 million of Bank of Lincolnwood's deposits and buy about $162 million of its assets. The failure, the industry's 37th and Illinois' sixth this year, is estimated to cost the Federal Deposit Insurance Corp. $83 million.
The FDIC said June 5 that it would liquidate Silverton Bank rather than selling the failed Atlanta institution to a bidder. Silverton, the largest institution specializing in correspondent banking, was seized May 1. The FDIC had chartered a bridge bank to manage Silverton's operations while it explored efforts to sell the bank back to the private sector. Instead, the agency said that a whole-bank acquisition no longer appeared feasible, and that it will wind down the bank and begin to sell off parts individually.
The FDIC said June 3 that it has postponed a planned test of its Legacy Loans Program but will still test-drive parts of it this summer.
As first envisioned, the plan would match $1 of both private and government equity with as much as $6 of FDIC-guaranteed debt to let investment funds buy a bank's troubled loans. But the FDIC said "renewed investor confidence in our banking system" made auctions for an open bank's assets unnecessary.
The FDIC is still planning to test the program through a sale of assets seized from failed banks. Buyers would still have access to FDIC-guaranteed debt — but not government equity — to test the program's funding mechanism, the agency said.
The FDIC finalized a rule May 29 that will tighten deposit rate restrictions on institutions short on capital while loosening rules for healthier banks. The rule aims to streamline restrictions on institutions that are below well-capitalized status, correcting ambiguities that allowed some banks to escape such constrictions. With some exceptions, rates will be capped at 75 basis points over an average of what all institutions pay nationally.
The FDIC announced May 29 that it would create an Advisory Committee on Community Banking that would advise the agency on a broad range of policy issues that have a particular impact on community banks and areas served by them.
The FDIC finalized a rule May 29 amending its Temporary Liquidity Guarantee Program. The rule gives institutions four more months — until Oct. 31 — to issue debt covered by the agency, but it adds fee surcharges to banks using the extended program. The rule also establishes that fees from the program, which previously had been kept separate from the Deposit Insurance Fund, can be used to build the fund's reserves.
The FDIC finalized two rules May 29 that implement the Fair and Accurate Credit Transactions Act. One rule requires companies that provide data to credit bureaus to establish written policies ensuring the accuracy of the information. The other requires companies providing credit data to investigate disputes in which a consumer claims the information is inaccurate.
On May 27 the FDIC released its Quarterly Banking Profile, which said banks earned $7.6 billion in the first quarter but raised several warning signs. The report said almost 4% of all loans were noncurrent at March 31, and it cited a 1.94% chargeoff rate for the quarter. The agency's list of "problem" banks grew 21%, to 305, and assets held by these institutions jumped 38%, to $220 billion.
The FDIC approved a final rule May 22 that will charge banks a special assessment based on their assets, rather than deposits — the first time in the agency's history it has made such a rule. The agency will charge banks a one-time premium in the second quarter of 5 cents for every $100 of assets minus Tier 1 capital. For banks and thrifts with large asset portfolios, the assessment will be capped at 10 basis points of their domestic deposits.
The asset-based calculation is expected to hit the largest banking companies — including JPMorgan Chase and Citigroup Inc. — harder than a regular assessment based on domestic deposits.
The premium is necessary because the DIF continues to decline. FDIC reserves dropped 25% in the first quarter, to $13 billion. The ratio of reserves to insured deposits fell 9 basis points, to 0.27%, its lowest point since the end of the savings and loan crisis.
Bank Failures II
On May 22 regulators shut two Illinois banks: the $536 million-asset Strategic Capital Bank in Champaign and the $437 million-asset Citizens National Bank in Macomb. The Strategic Capital failure is expected to cost the DIF $173 million, while the Citizens National closure is likely to cost $106 million.
Bank Failures III
Regulators seized BankUnited FSB on May 21 and immediately sold its operations to a team of investors headed by John Kanas, the former head of North Fork Bank.
The $13 billion-asset Coral Gables, Fla., thrift's failure was the largest so far this year and is expected to cost the DIF nearly $5 billion.
The Office of Thrift Supervision said BankUnited was "critically undercapitalized and in an unsafe condition to conduct business." The agency said there were "no viable alternatives to return" the thrift to profitability.
The Treasury's Office of the Inspector General released a report May 21 that said the OTS had allowed several thrifts to backdate capital infusions.
The Treasury released a plan May 15 to regulate over-the-counter derivatives. The plan would force all standardized OTC contracts to be traded on regulated exchanges and cleared. Customized contracts that are traded off-exchange would be subject to record-keeping and reporting requirements.
Actions Expected Soon
The Fed is considering whether to require banking companies to get customers' permission before charging overdraft fees. Under a proposal issued late last year, the Fed said it was considering if overdraft protection should be an opt-in or opt-out feature. It is unclear when the central bank will finalize its plan.
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" if their ratio is between 2% and 3% and "critically undercapitalized" if the ratio falls below 2%. Published Jan. 30. Comments were due May 15.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. Comments were due June 8.
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 enterprises to slash their portfolios, starting at the end of next year, until they reach $250 billion. Published Jan. 30. Comments were due June 1.