BankNotes ...

Administration to Consider A One-regulator System for Banking Industry

Posted by Wendell Brock on Thu, Jun 04, 2009

The Wall Street Journal has reported that the Obama administration will recommend an overhaul of the current bank regulatory system to replace several regulators with one super-agency. The plan is said to involve the creation of a systemic regulator and a new consumer protection agency as well.

Currently, banks can be chartered as national banks, state banks, federal savings banks or state savings associations. Each type of charter involves a different set of regulators. For example, national banks are regulated by the Office of the Comptroller of the Currency or OCC. Federal savings banks, however, are regulated by the Office of Thrift Supervision or OTS. State banks can be jointly regulated by the state and either the FDIC or the Federal Reserve Board (FRB). State-chartered thrift holding companies and state savings associations, however, are regulated by the state and OTS. The bank’s organization group selects the type of charter and chartering group within its bank application during the formation process.

Competing agencies create gaps and leniencies

Critics of the current system argue that this regulator mélange lacks comprehensive, systemic oversight and creates regulatory gaps that have been exploited by financial companies.

Also at issue is whether the current system sufficiently motivates regulators to provide careful oversight. New banks represent new funding for regulators; since bank organizers tend to gravitate towards the regulator of least resistance, regulators actually benefit on some level from offering greater leniency.

A systemic regulator would eliminate this competition for leniency. The agency would be tasked with identifying and addressing regulatory gaps in areas such as mortgage banking, hedge funds, credit default swaps and other specialty financial products. As well, the entity would be responsible for recognizing risks and problems within financial companies that are heavily entrenched in the industry—to properly manage or even avoid failures of Lehman’s magnitude.  

ABA warns of ending dual-bank system


A single-agency system would require the unification of oversight functions currently managed by the OCC, OTS, FDIC and FRB. In a letter written to Treasury Secretary Timothy Geithner, ABA President and CEO Edward Yingling expressed the banking industry’s opposition to this concept. According to Yingling, such a system would favor federal banks over state banks, and eventually lead to the end of the dual banking system. The dual banking system, says Yingling, isn’t the enemy; it creates competition and stimulates innovation in financial products and evolution of regulatory systems.

Yingling also argues that the proposed model is based on the U.K.’s Financial Services Authority, which was not able to avert that country’s financial crisis.

The single regulator concept is still just a subject of debate on Capitol Hill. Senator Christopher J. Dodd and Representative Barney Frank have both spoken out against the idea. Press reports indicate that the administration will publicize a proposal later this month.

Topics: FDIC, regulators, Banking industry, OCC, OTS, FRB, super-agency

Feds Make a Change to Bank Capital Rules

Posted by Wendell Brock on Fri, Dec 19, 2008

The OCC, Federal Reserve Board, FDIC and OTS have collectively approved a final rule that permits banking organizations to reduce the goodwill deduction to tier 1 capital by the amount of any associated deferred tax liability. Banks, savings associations and bank holding companies are allowed to adopt this rule for the reporting period ending December 31, 2008.

 Prior to the adoption of this rule, the tier 1 capital calculation required banking organizations to deduct the full carrying amount of goodwill and other intangible assets resulting from a taxable business combination. This full deduction, however, was inconsistent with other aspects of the tier 1 capital computation. Other intangible assets acquired in nontaxable transactions, for example, could be deducted from tier 1 capital net of any associated deferred tax liability.

In a taxable business combination, the deferred tax liability arises from differences between tax treatment and book treatment of the asset. And, that deferred tax liability is not routinely settled for financial reporting purposes; it remains until the goodwill is written down, written off or otherwise derecognized. If the entire amount of the goodwill is impaired, the banking organization would also derecognize the associated deferred tax liability for financial reporting purposes. Therefore, the banking organization’s maximum exposure to loss with respect to the goodwill asset would be the full carrying value of that goodwill less the deferred tax liability. The spirit of this rule change is to improve the tier 1 capital computation by reflecting the banking organization’s actual exposure to loss with respect to goodwill arising from taxable business combinations. Also, the banking organization that deducts goodwill net of the associated deferred tax liability from tier 1 capital may not net that deferred tax liability against deferred tax assets for the computation of regulatory capital limitations on deferred tax assets.

 Comments largely positive

 On September 30, 2008, the regulatory agencies published a notice of proposed rulemaking requesting comments on this change. Of the thirteen comments received, only two opposed the change. Five comments suggested that the rule be adopted and available to banking organizations for the reporting period ending on December 31, 2008. The agencies have agreed with this request.

 Some of the comments also requested that the change be applied to other intangible assets as well, but did not provide sufficient data or analysis to support that request.

 

Other miscellaneous changes

 The OCC is also adopting other miscellaneous changes as noted in the proposed rule, including:

 

·         Clarification of the current treatment of intangible assets acquired due to a nontaxable purchase business combination

·         Replacement of the term “purchased mortgage servicing rights” with “servicing assets”

·         Clarification of OCC’s interpretation of existing regulatory text

·         Amendment of the goodwill definition to conform to GAAP

 

To review the full text of the final rule, please click here (http://www.fdic.gov/news/board/08DEC15rule4.pdf).

Topics: Bank, FDIC, OCC, OTS, capital, savings associations, tax liability, asset

SunTrust Bank Acquires the Insured Deposits of First Priority Bank, Bradenton, Florida

Posted by Wendell Brock on Sat, Aug 02, 2008

FOR IMMEDIATE RELEASE
August 1, 2008
Media Contacts:
Andrew Gray (Cell: 202-494-1049)
David Barr (Cell: 703-622-4790; Office: 202-898-6992)

First Priority Bank, Bradenton, Florida, was closed today by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with SunTrust Bank, Atlanta, Georgia, to assume the insured deposits of First Priority.

The six branches of First Priority will reopen on Monday as branches of SunTrust Bank. Depositors of the failed bank will automatically become depositors of SunTrust. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. For the time being, however, customers of both banks should use their existing branches until SunTrust can fully integrate the deposit records of First Priority.

Over the weekend, customers of First Priority can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of June 30 2008, First Priority had total assets of $259 million and total deposits of $227 million. At the time of closing, there were approximately $13 million in uninsured deposits held in approximately 840 accounts that potentially exceeded the insurance limits. This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers.

Customers with accounts in excess of $100,000 should contact the FDIC toll free at 1-800-837-0215 to set up an appointment to discuss their deposits. This phone number will be operational this evening until 9:00 p.m. EDT; on Saturday from 8:00 a.m. to 8:00 p.m. EDT; and on Sunday and thereafter from 8:00 a.m. to 6:00 p.m. EDT.

In addition to continued access to their insured deposits, depositors of First Priority with amounts exceeding the insurance limits will receive a payment of 50 percent of their uninsured balance from the FDIC as receiver. The FDIC will mail these payments directly to the customers early next week; the amounts will not appear in their account balances at SunTrust Bank.

Customers who would like more information on today's transaction should visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/firstprioritybank.html. Beginning Monday, depositors of First Priority with more than $100,000 at the bank may visit the FDIC's Web page, "Is My Account Fully Insured?" at http://www2.fdic.gov/dip/Index.asp to determine their insurance coverage

SunTrust agreed to assume the insured deposits for no premium. In addition to assuming the failed bank's insured deposits, SunTrust Bank will purchase approximately $42 million of the failed bank's assets. The assets are comprised mainly of cash, cash equivalents and securities. The FDIC, however, entered into a separate agreement with LNV Corporation, Plano, Texas, to purchase $14 million in First Priority's assets. LNV Corporation is a subsidiary of Beal Bank Nevada, Las Vegas, Nevada. The FDIC will retain the remaining assets for later disposition.

The cost to the FDIC's Deposit Insurance Fund is estimated to be $72 million. First Priority is the first bank to fail in Florida since Guaranty National Bank, Tallahassee, on March 12, 2004. This year, a total of eight FDIC-insured institutions have been closed.

Topics: Bank Failure, Bank Regulators, OCC

Mutual of Omaha Bank Acquires All Deposits of First National Bank of Nevada and First Heritage Bank, N.A.

Posted by Wendell Brock on Fri, Jul 25, 2008

 
All Insured and Uninsured Deposits Transferred to Acquiring Bank

FOR IMMEDIATE RELEASE
July 25, 2008
Media Contact:
In Washington: Andrew Gray
(202) 898-7192
angray@fdic.gov

In Arizona: David Barr
Cell: (703) 622-4790
dbarr@fdic.gov

First National Bank of Nevada, Reno, Nevada, and First Heritage Bank, N.A., Newport Beach, California (owned by First National Bank Holding Company, Scottsdale, Arizona), were closed today by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC) was named receiver. The FDIC entered into purchase and assumption agreements with Mutual of Omaha Bank, Omaha, Nebraska, to take over all of the deposits and certain assets of the First National Bank of Nevada, Reno (also operating as First National Bank of Arizona, which recently merged into it), and First Heritage Bank, N.A., Newport Beach, California.

The 28 offices of the two banks will reopen on Monday as branches of Mutual of Omaha Bank. All depositors, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Mutual of Omaha Bank for the full amount of their deposits. Depositors will continue to be insured with Mutual of Omaha Bank so there is no need for customers to change their banking relationship to retain their deposit insurance.

Over the weekend, customers of the banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the banks will be processed normally. Loan customers should continue to make loan payments as usual.

Of the 10 institutions that have failed over the past two years, this is the second time in which another bank acquired all of the failing banks' insured and uninsured deposits. Mutual of Omaha Bank's acquisition of all deposits was the "least costly" resolution for the Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the banks' franchises.

As of June 30, 2008, First National of Nevada had total assets of $3.4 billion and total deposits of $3.0 billion. First Heritage Bank had total assets of $254 million and total deposits of $233 million.

Customers who would like more information on today's transactions should visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/fnbnv.html (for First National Bank of Nevada) and http://www.fdic.gov/bank/individual/failed/heritage.html (for First Heritage Bank, N.A.). They may also call the FDIC toll free about both institutions at 1-866-674-8944 and 1-800-523-8089 until 9:00 p.m. Pacific time this evening, and then 8:00 a.m. to 8:00 p.m. daily, thereafter.

In addition to assuming all of the deposits of the banks, Mutual of Omaha Bank will purchase approximately $200 million of assets from the receiverships. Mutual of Omaha Bank will pay the FDIC a premium of 4.41 percent to assume all the deposits. The FDIC will retain the remaining assets for later disposition.

First Heritage Bank, N.A., Newport Beach, California, had three branches; its clientele was comprised primarily of corporations. First National Bank of Nevada, with 25 branches, also operated as First National Bank of Arizona. It is not affiliated with National Bank of Arizona, Zions Bancorporation or its affiliates.

The cost of the transactions to the Deposit Insurance Fund is estimated to be $862 million. The failed banks had combined assets of $3.6 billion, .03 percent of the $13.4 trillion in assets held by the 8,494 institutions insured by the FDIC.

First National Bank of Nevada is the first bank to be closed in Nevada since Frontier Savings Association, Las Vegas, on December 14, 1990. The bank closed most recently in California was IndyMac Bank, F.S.B., Pasadena, on July 11, 2008. This year, a total of seven FDIC-insured banks have been closed.

Topics: Bank Failure, Bank Regulators, OCC

American Banking System to be Overhauled

Posted by Wendell Brock on Fri, Apr 04, 2008

Treasury Blueprint Would Abolish NCUA and NCUSIF

WASHINGTON - Among the long-term recommendations of the Treasury Blueprint would be the creation of a new federally-insured depository institution (FIDI) charter. The FIDI charter would consolidate the national bank, federal savings association, and federal credit union charters and would be available to all corporate forms, including stock, mutual, and cooperative ownership structures. A new prudential regulator, the Prudential Financial Regulatory Agency ("PFRA"), would be responsible for the financial regulation of all FIDIs. In explaining its rationale for a single charter, Treasury wrote "[t]he goal of establishing a FIDI charter is to create a level playing field where competition among financial institutions can take place on an economic basis, rather than on the basis of regulatory differences." The operation of the credit union insurance fund would be assumed by the FDIC, which would be reconstituted as the Federal Insurance Guarantee Corporation.  "Some credit unions have arguably moved away from their original mission of making credit available to people of small means, and in many cases they provide services which are difficult to distinguish from other depository institutions." Treasury Department's Blueprint for a Modernized Financial Regulatory Structure.

http://www.treas.gov/press/releases/reports/Blueprint.pdf

By: Keith Leggett, American Bankers Association 

Topics: FDIC, banks, Credit Unions, OCC, OTS, National Banks, Thrifts

FDIC Approves the Assumption of all the Deposits of Douglass National Bank, Kansas City, Missouri

Posted by Wendell Brock on Fri, Jan 25, 2008

FOR IMMEDIATE RELEASE
January 25, 2008
Media Contact:
David Barr (202) 898-6992
cell: (703) 622-4790
e-mail: dbarr@fdic.gov

The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today approved the assumption of all the deposits of Douglass National Bank, Kansas City, Missouri, by Liberty Bank and Trust Company, New Orleans, Louisiana.

Douglass National, with $58.5 million in total assets and $53.8 million in total deposits as of October 22, 2007, was closed today by the Office of the Comptroller of the Currency, and the FDIC was named receiver.

Depositors of Douglass National will automatically become depositors of the assuming bank. The failed bank's three offices will reopen on Monday as branches of Liberty Bank and Trust. Over the weekend, customers can access their money by writing checks, or by using their debit or ATM cards.

In addition to assuming all of the deposits of the failed bank, Liberty Bank and Trust will purchase approximately $55.7 million of Douglass National's assets at book value, less a discount of $6.1 million. The FDIC will retain approximately $2.8 million in assets for later disposition.

Customers with questions about today's transaction or who would like more information about the failure of Douglass National can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/Douglas.html or call the FDIC toll-free at 1-888-206-4662.

The transaction is the least costly resolution option, and the FDIC estimates that the cost to its Deposit Insurance Fund is approximately $5.6 million. Douglass National is the first FDIC-insured bank to fail this year, and the first in Missouri since Superior National Bank, Kansas City, was closed on April 14, 1994. Last year, three FDIC-insured institutions failed.


Topics: FDIC, Bank Failure, OCC, David Barr, Douglas National Bank

Subscribe by Email

Most Popular

Browse By tag

To Obtain a White Paper

BankNotes

BankNotes© is published by De Novo Strategy as a service to clients and other friends. The information contained in this publication should not be construed as legal, accounting, or investment advice. Should further analysis or explanation of the subject matter be required, please contact De Novo Strategy at subscribe@denovostrategy.com.