FTC, FCC Flex Muscles

Duane Morris partner Joseph Burton was featured in a video on Bank Info Security  on the impact of regulators involved in cybersecurity.

The Federal Trade Commission and the Federal Communications Commission are among U.S. regulators now starting to flex their muscles when it comes to enforcing cybersecurity standards, says Burton. What enforcement trends might we expect to see in 2017?

To view the video, please visit the Bank Info Security website.

Webinar: The FDIC Loss-Share Program: How to Extract Every Last Dollar

Duane Morris LLP and FTI Consulting invite you to our webinar, The FDIC Loss-Share Program: How to Extract Every Last Dollar, to be held on Thursday, March 2, 2017  from 11:00 a.m. to 12:00 p.m. Central time.

Duane Morris lawyers and FTI Consulting professionals will discuss strategies that can help banks maximize recoveries under the FDIC Loss-Share Program. Generally, the FDIC will reimburse 80 percent of losses for a covered asset, while the acquiring bank absorbs 20 percent of the loss, provided certain conditions and reporting requirements are met. Our program will outline the common challenges that banks face with the FDIC Loss-Share Program and provide practical solutions that increase loss-sharing recoveries.

Please visit the event page on the Duane Morris website for more information or to register online.

FDIC Consumer News Issues “Answers to Common Questions on How to Avoid Financial Mistakes and Protect Your Money”

Today, the FDIC issued its Winter 2017 FDIC Consumer News which can be read or printed at www.fdic.gov/consumers/consumer/news/cnwin17, with e-reader and portable audio (MP3) versions forthcoming. Additionally, in the coming weeks a Spanish-language version will be posted at www.fdic.gov/quicklinks/spanish.html.  This issue focuses on Answers to Common Questions on How to Avoid Financial Mistakes and Protect Your Money.  Continue reading FDIC Consumer News Issues “Answers to Common Questions on How to Avoid Financial Mistakes and Protect Your Money”

New Interagency Rules on Expanded Examination Cycle to Take Effect on January 17, 2017

The OCC, Federal Reserve, and FDIC have published an interagency final rule amending the regulations governing eligibility for the 18-month on-site examination cycle which will take effect on January 17, 2017. 1 and 2 rated national banks, federal savings associations, and federal branches and agencies with less than $1 billion in total assets will now be eligible for an 18-month rather than a 12-month examination cycle.

Section 10(d) of the Federal Deposit Insurance Act generally requires that each insured depository institution undergo a full scope, on-site examination at least once during each 12-month period. This can be a time consuming, expensive and disruptive process for community banks and other institutions. In 2015, the FAST Act was enacted, Public Law 114-94, 129 Stat. 1312 (2015), which authorized bank regulatory authorities to extend the on-site examination cycle for certain insured depository institutions. Prior to the FAST Act and impending rules changes examination cycles were available only to qualifying 1 and 2 rated banks with less than $500 million in total assets. The FAST Act amendments and rules changes are intended to reduce regulatory burdens on small, well capitalized, and well managed institutions and allow the agencies to better focus their supervisory resources on those insured depository institutions and domestic branches and agencies of foreign banks that may present capital, managerial, or other issues of supervisory concern.

According to the final interagency rule, the FDIC analyzed the frequency with which institutions rated a composite CAMELS rating of 1 or 2 failed within five years, versus the frequency with which institutions rated a composite CAMELS rating of 3, 4, or 5 failed within five years. That analysis indicated that between 1985 and 2011, insured depository institutions with assets less than $1 billion and a composite CAMELS rating of 1 or 2 had a five-year failure rate that was one-seventh as high as institutions with a CAMELS rating of 3, 4, or 5. The analysis did not change when restricted to institutions with assets between $200 million and $500 million versus institutions with $500 million to $1 billion in assets.

For more information or to discuss legal concerns about your institution’s examination process contact Mark Bradford (mabradford@duanemorris.com) or Mark Belongia (mbelongia@duanemorris.com). Mark Belongia and Mark Bradford of Duane Morris LLP routinely advise insured depository institutions about regulatory compliance and related matters.

Agencies Release Annual CRA Asset-Size Threshold Adjustments for Small and Intermediate Small Institutions

On December 29, 2016, the federal bank regulatory agencies today announced the annual adjustment to the asset-size thresholds used to define small bank, small savings association, intermediate small bank, and intermediate small savings association under the Community Reinvestment Act (CRA) regulations. The annual adjustments are required by the CRA rules. Financial institutions are evaluated under different CRA examination procedures based upon their asset-size classification. Those meeting the small and intermediate small institution asset-size thresholds are not subject to the reporting requirements applicable to large banks and savings associations unless they choose to be evaluated as a large institution. Annual adjustments to these asset-size thresholds are based on the change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), not seasonally adjusted, for each 12-month period ending in November, with rounding to the nearest million. As a result of the 0.84 percent increase in the CPI-W for the period ending in November 2016, the definitions of small and intermediate small institutions for CRA examinations will change as follows: Continue reading Agencies Release Annual CRA Asset-Size Threshold Adjustments for Small and Intermediate Small Institutions

OCC Report Discusses Risks Facing National Banks and Federal Savings Associations

Today, the Office of the Comptroller of the Currency (OCC) reported strategic, credit, operational, and compliance risks remain top concerns in its Semiannual Risk Perspective for Fall 2016 (OCC Semiannual Risk Perspective for Fall 2016).

Highlights from the report include:

Continue reading OCC Report Discusses Risks Facing National Banks and Federal Savings Associations

OCC Announces FinTech Companies Can Now Apply for Special Purpose National Bank Charters

Comptroller of the Currency Thomas J. Curry today announced that the Office of the Comptroller of the Currency (OCC) would move forward with considering applications from financial technology (fintech) companies to become special purpose national banks.

During remarks at the Georgetown University Law Center, the Comptroller described several reasons for considering special purpose national charters for fintech companies. “First and foremost, we believe doing so is in the public interest,” Comptroller Curry said. “It is clear that fintech companies hold great potential to expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters.” Continue reading OCC Announces FinTech Companies Can Now Apply for Special Purpose National Bank Charters

Changing Seasons of FDIC Shared-Loss Programs

As we head into autumn, many of us change our seasonal wardrobes, replace the filters in our home heating/cooling systems, swap our summer screens for winter’s storm windows and ready our vehicles for winter. Bankers participating in a Federal Deposit Insurance Corporation (FDIC) shared-loss program should consider adding one more seasonal item to their list—a check-up on the status of your shared-loss participation, particularly your commercial shared-loss program. Many banks acquired assets and deposit accounts of failed institutions in the years following the Great Recession via purchase and assumption agreements entered into with the FDIC. Those agreements included an eight-year commercial shared-loss component, whereby the acquiring bank shares losses with the FDIC during the first five years and then shares recoveries for the remaining three years of the term.

To read the full text of the Alert, please visit the Duane Morris website.

What’s Shaking? A Conversation About Real Estate Finance, Mortgage Banking and Earthquakes!

Duane Morris LLP, CleanFund and California MBA will present “What’s Shaking? A Conversation About Real Estate Finance, Mortgage Banking and Earthquakes!” on Thursday, September 22, 2016, from 5:00 p.m. to 8:00 p.m. in the Duane Morris San Francisco office. This California MBA MCLE networking reception offers a ground-moving educational event featuring a discussion on financing solutions for mandatory seismic compliance.  The panel will also discuss the latest developments in real estate financing in the Bay Area and recent case law and regulatory issues impacting the mortgage banking industry in California. Attendees will have the opportunity to network with banking executives, real estate developers, property owners, lenders and in-house counsel from all over Northern California. One hour of General MCLE credit is pending.

The panelists for this program are Chris Robbins, Managing Director, CleanFund; Bob Bednarz, Loan Advisor, Guarantee Mortgage; and Terrance J. Evans, Partner, Duane Morris. Jolie-Anne S. Ansley, also a Partner at Duane Morris, will serve as program moderator.

If you are interested in attending this program, please visit the event registration page.

White House Report Creates Halcyon Portrait of Community Bank Lending In Dodd-Frank Era

A report issued by the White House Council of Economic Advisers entitled, “The Performance of Community Banks Over Time,” purports to debunk the popular notion that Dodd-Frank regulations have hindered community bank lending.  Community banks are those with assets of $10 billion or less, and are typically locally owned, medium and small depository institutions that engage in localized banking activities. The report summarizes data that show lending by community banks with assets between $1 billion and $10 billion has rebounded as strongly since 2010 as lending by big banks.  This is true whether lending is examined by the rate of growth in assets or loans. Moreover, the report concludes that reforms passed in the Dodd-Frank Act have actually helped community banks by neutralizing some cost advantages that favored larger banks due to their larger scale.  The Act did so by:

  • Raising FDIC coverage to $250,000 per account from $100,000, which helped community banks attract more deposits to expand lending.
  • Redesigning insurance assessments and increasing the size of the deposit insurance fund in a way that forces large banks to bear costs proportional to their larger level of risk.
  • Using capital and liquidity requirements to ensure that the costs of proprietary trading fall to the larger banks that typically engage in the practice, thus reducing some of the advantage in financing costs that they may have held in the past relative to small banks, who depend on deposits to finance loans and are less likely to engage in risky trades with bank capital.

The only section of community banks in which lending growth has not recovered since 2010 is limited to only those banks with less than $100 million in assets.  But this is the result not of Dodd-Frank regulatory burdens, but rather on an M&A trend going back to 1994 that has resulted in significant consolidation in the sector. The report concludes that the Obama Administration is taking important steps to streamline and tailor Dodd-Frank regulations in a manner that minimizes the impact to healthy community banks that create little systemic risk.

But the White House’s rosy portrayal of the community banking sector – as well as its self-congratulatory tone – must be small succor to community bank executives struggling to maintain their margins in the post Dodd-Frank regulatory environment.  Critically, the report omits any discussion of Return on Assets (ROA) for the vast majority of community banks, those with assets between $1BN and $10BN.  In addition, the report’s conclusions regarding the rebound in growth rates really is not complete without an analysis of what rates of growth in assets and loans community banks could have achieved but for Dodd-Frank compliance burdens.