CCH Financial Reform News Center

BHCs that Are S-Corps or Organized in Mutual Form to Include Subordinated Debt Issued to Treasury in Tier 1 Capital

This story appeared in Bank Digest.

The Federal Reserve Board has issued an interim final rule that permits bank holding companies (BHCs) that are S-Corps or that are organized in mutual form to include in Tier 1 capital all subordinated debt issued to Treasury under the Troubled Asset Relief Program (TARP), provided that the subordinated debt will count toward the limit on the amount of other restricted core capital elements includible in Tier 1 capital. The interim final rule also will allow small bank holding companies that are S-Corps or that are organized in mutual form to exclude subordinated debt issued to Treasury under TARP from treatment as “debt” for purposes of the debt-to-equity standard under the Fed’s Small Bank Holding Company Policy Statement.
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090522a2.pdf

Senior Perpetual Preferred Stock Issued to Treasury Dept. Includible in Tier 1 Capital

This story appeared in Bank Digest.

The Federal Reserve Board has issued a final rule that will allow bank holding companies to include in their Tier 1 capital without restriction senior perpetual preferred stock issued to the Treasury Department under the Troubled Asset Relief Program (TARP). This rule makes final the interim final rule that the Fed adopted in October 2008. http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090522a1.pdf

Committee on Capital Markets Regulation Issues Broad Reform Framework Centered on Unitary Regulator

James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

The blue ribbon Committee on Capital Markets Regulation has recommend a consolidated unitary regulator approach for the US, modeled on the UK Financial Services Authority, plus naming the Federal Reserve Board as systemic risk regulator. The Committee urged the creation of the US Financial Services Authority (USFSA) with jurisdiction over market structure and activities, safety and soundness of financial institutions, and possibly consumer and investor protection with respect to financial products. The USFSA would be comprised of the OCC, FDIC, SEC CFTC, and the OTS.

Recent Legislation Signed into Law to Have Broad Impact on Consumers/Economy

John M. Pachkowski, J.D., Editor, CCH Federal Banking Law Reporter and Bank Digest; Author, Anti-Money Laundering and Bank Secrecy: Compliance and the USA PATRIOT Act; Co-Author CCH Financial Privacy Law Guide, May 29, 2009.

Credit Cardholders' Bill of Rights Act 

Keeping his promise to sign credit card reform legislation by Memorial Day, President Barack Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 or the Credit CARD Act of 2009, as Public Law 111-24 on May 22, 2009. The Act is also referred to as the "Credit Cardholders' Bill of Rights Act."

In signing the law, President Obama noted "we're putting in place some common sense reforms designed to protect consumers." He added that "Credit card companies provide a valuable service; we don't begrudge them turning a profit. We just want to make sure that they do so while upholding basic standards of fairness, transparency, and accountability. Just as we demand credit card users to act responsibly, we demand that credit card companies act responsibly, too. And that's not too much to ask." The President also remarked that "we're not going to give people a free pass; we expect consumers to live within their means and pay what they owe. But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives."

Temporary Liquidity Program Form Provided

This story appeared in Bank Digest.

A Temporary Liquidity Guarantee Program Demand for Payment and Proof of Claim form, which may be used if a non-commercial paper FDIC-guaranteed debt issuance defaults, has been provided by the FDIC. This form contemplates that an authorized representative will be the claimant. An individual debt holder may also use this form or request an alternate form from the FDIC. Demand and Proof of Claim Form at http://www.fdic.gov/regulations/resources/TLGP/pocform.pdf

FDIC Advises Consumers on Protecting Against Foreclosure Frauds

This story appeared in Bank Digest.

The FDIC has issued a variety of tips to help consumers be on guard financially in the current economy. The advice was published in the Spring 2009 issue of “FDIC Consumer News,” the agency’s quarterly newsletter for consumers. The publication includes tips for protecting against foreclosure rescue and loan modification scams that target homeowners having difficulty making their monthly mortgage payments. It also reminds consumers that that, on May 19, Congress extended the temporary federal deposit insurance limit of $250,000 per depositor through Dec. 31, 2013. The FDIC emphasizes the importance of this extension for people who have or plan to place long-term deposits, because the insurance limit would have reverted back to $100,000 per depositor on Jan. 1, 2010, if Congress did not authorize the extension.

Press Release at http://www.fdic.gov/news/news/press/2009/pr09078.html 

FDIC Consumer News at http://www.fdic.gov/consumers/consumer/news/cnspr09/

Home Prices Fall in First Quarter

This story appeared in Bank Digest.

U.S. home prices fell in the first quarter of 2009 according to the Federal Housing Finance Agency seasonally-adjusted purchase-only house price index (HPI). The purchase-only HPI, calculated using home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages, was 0.5 percent lower on a seasonally-adjusted basis in the first quarter than in the fourth quarter of 2008. This decline was much more modest than the 3.3 percent decline in the prior quarterly period. Over the past year, seasonally-adjusted prices fell 7.1 percent from the first quarter of 2008 to the first quarter of 2009.  http://www.fhfa.gov/webfiles/2399/1q09hpi.pdf

Comptroller Dugan Comments on Community Development Projects

This story appeared in Bank Digest.

“With incentives provided by the Community Reinvestment Act and government programs, national banks are able to provide marketable loans that create a sense of renewed confidence in these communities,” stated Comptroller of the Currency John C. Dugan following a tour of successful community development projects in Dallas, Texas. Dugan said that when national banks partner with community-based organizations and local governments, major investments in housing and community development are not only economically sound and profitable, but are also successful in bringing jobs and homeownership back to economically distressed communities. http://www.occ.treas.gov/ftp/release/2009-56.htm

FDIC Problem Bank List Rises to 305 in First Quarter

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, May 27, 2009.

The Federal Deposit Insurance Corp.’s “problem list” of banks stood at 305 in the first quarter, up from 252 at the end of 2008, with total assets of problem institutions rising to $220 billion from $159 billion at year-end.

The FDIC announced on May 27 that 21 FDIC-insured institutions failed in the first quarter, the largest number seen since the fourth quarter of 1992.

OCC Discusses Capital Treatment of ICE Trust Exposures

This story appeared in Bank Digest.

The Office of the Comptroller of the Currency has issued an Interpretive Letter which describes the appropriate risk-based capital treatment for three types of exposures of national banks, which are members of the ICE US Trust, LLC (ICE Trust), a credit-default swap clearinghouse. As a result of their dealings with ICE Trust, the OCC found that national banks will have three types of exposures: counterparty credit exposure arising from cleared CDS transactions; exposures from margin posted as collateral for the transactions; and exposure from a required contribution to the clearinghouse guarantee fund. Due to the regulated nature of ICE Trust and other prudential factors, the OCC determined that the risk-based capital treatment provided under the risk-based capital rules does not appropriately reflect the risks of transactions with ICE Trust. Therefore, the OCC, using its reservation of authority, will apply a 20 percent risk weight to these three types of exposures. The OCC believes that a 20 percent risk weight more appropriately reflects the risk associated with these exposures.