CCH Financial Reform News Center

NCUA Reports on Call Report Findings

This story appeared in Bank Digest.

In a release issued by the National Credit Union Administration, first-quarter Call Report data indicate a declining demand for loans. Because share growth significantly outpaced loan growth, credit unions' loan-to-share ratio continues to recede, down to 73.16 percent as of March 31, 2010, from 76.06 percent at year-end 2009, the NCUA has announced. Despite an annualized 1.5 percent rise in first mortgages, the first quarter showed declines in most secured and unsecured loan markets, such as credit cards, new auto and other real estate loans. And even though the industry's delinquency and charge-off ratios edged lower in the aggregate, credit unions in certain markets are confronted with much higher loan losses.

Bernanke Addresses Role of Emerging Markets and Central Bank Policies

This story appeared in Bank Digest.

Addressing the Bank of Korea's International Conference via a video recording on May 30, 2010, Federal Reserve Board Chairman Ben S. Bernanke said, “As emerging market economies become increasingly important in the global trading and financial systems, the world economy will depend even more on them to maintain strong domestic growth and economic and financial stability.” Bernanke also noted that, because economic conditions vary, the appropriate timing of a central bank's exit from economic stimulus programs is likely to differ across countries. He said that central banks “will have to weigh the risks of a premature exit against those of leaving expansionary policies in place for too long."

FDIC-Insured Institutions Earned $18 Billion in the First Quarter of 2010

This story appeared in Bank Digest

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. reported an aggregate profit of $18.0 billion in the first quarter of 2010, a $12.5 billion improvement from the $5.6 billion the industry earned in the first quarter of 2009, but still well below historical norms for quarterly profits, the agency has reported. More than half of all institutions, 52.2 percent, reported year-over-year improvements in their quarterly net income. Fewer than one in five institutions, 18.7 percent, reported net losses for the quarter, compared to 22.3 percent a year earlier. The average return on assets (ROA), a basic yardstick of profitability, rose to 0.54 percent, from 0.16 percent a year ago. This is the highest quarterly ROA for the industry since the first quarter of 2008. “There are encouraging signs in the first-quarter numbers,” said FDIC Chairman Sheila C. Bair. She added that the $18 billion in net income during the quarter “is more than three times as much as banks earned a year ago, and it is the best quarterly earnings for the industry in two years.”

April Loan Officer Survey Released

This story appeared in Bank Digest.

The April 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of, and demand for, bank loans to businesses and households over the past three months. The survey included three sets of special questions: the first asked banks about lending policies regarding business credit card accounts for use by small firms; the second queried banks about the use of loan extensions on commercial real estate loans; and the third asked banks about the effects on their lending standards and terms of the adoption of new accounting standards issued by the Financial Accounting Standards Board. The summary is based on responses from 56 domestic banks and 23 U.S. branches and agencies of foreign banks.

U.S. Monthly House Price Index Declines Again

This story appeared in Bank Digest.

U.S. house prices fell 0.2 percent on a seasonally adjusted basis from January to February 2010, according to the FHFA's monthly House Price Index. The previously reported 0.6 percent decline in January was unchanged. For the 12 months ending in February 2010, prices fell 3.4 percent. The U.S. index now is 13.3 percent below its April 2007 peak, the agency reported.

Duke Addresses Issues in Economic Development

This story appeared in Bank Digest.

Federal Reserve Board  Governor Elizabeth A. Duke addressed the Fed's research, policy, and related activities in the areas of small business lending, commercial real estate and workforce development in a speech at the International Economic Development Council's Federal Economic Development Forum in Alexandria, Va., on April 19, 2010. Duke said she was “optimistic about small business lending in the near future” and believes that “we will begin to see an increase in bank loans to small businesses later this year.” Regarding commercial real estate, Duke noted that, “while overall real estate lending continues to decline due to a sharp contraction in construction lending, loans outstanding in several other commercial real estate sectors increased modestly in the fourth quarter.” Finally, Duke emphasized “the importance of workforce development as a means for attracting and keeping businesses and jobs in your community” and said the Fed “is engaged in ongoing research to identify best practices and establish methods for measuring the success of workforce development programs.”

Matz Stresses Consumer Benefits, Strong Oversight

This story appeared in Bank Digest.

National Credit Union Administration Chairman Debbie Matz told an Internet audience that pending Congressional action to reform the financial institution regulatory landscape will be “very good for credit unions and credit union members.” Matz’s remarks came during an appearance on Reuters Insider, a web-based venue featuring in-depth coverage of public policy issues.

OCC Publishes Economics Working Paper on Bank Executive Turnover

This story appeared in Bank Digest.

The OCC has published an economic working paper revisiting the topic of relative performance evaluation (RPE) of top management using a large panel of community banks. The paper shows that penalizing executives for poor performance arising from economic downturns is not necessarily inconsistent with the theory. The OCC's empirical results indicate that weak downturn-linked performance is strongly related to increased executive turnover. Furthermore, this relationship is more pronounced in better-governed banks, which are more likely to engage in value-enhancing disciplinary actions. The OCC's analysis suggests that executive dismissals during adverse economic conditions are not necessarily a result of bad luck; rather, the analysis implies that bad times are informative about management quality.

Forum Explores Causes of the Financial Crisis

This story appeared in Bank Digest.

After hearing public testimony from leaders of both private and public sector entities in January 2010, the Financial Crisis Inquiry Commission (FCIC) brought together experts who have researched the financial crisis for a forum in Washington, D.C., on Feb. 26-27, 2010, at American University  Washington College of Law. The forum was a part of the FCIC’s ongoing efforts to hear from academic experts and economists on issues related to the crisis.

The economists presented working papers to the Commissioners on the key issues and events leading up to the crisis and on its underlying causes. The presentations were followed by discussion with the Commissioners. Links to the working papers for each session are provided below.

Grassley Seeks Information on Bond Underwriting Fees

This story appeared in Bank Digest.

Senate Finance Committee Ranking Member Chuck Grassley, R-Iowa, has asked Goldman Sachs whether it would collect double-digit underwriting fees for participating in a newly expanded Build America Bonds program that was included in a bill passed by the Senate. “I'm interested in finding out whether the big Wall Street investment banks being so involved in, and profiting from, the Build America Bonds program siphons off a lot of taxpayer dollars that are meant to help cities and states,” Grassley said in his letter.