Interagency Statement on Pandemic Planning
The Federal Financial Institutions Examination Council issued the "Interagency Statement on Pandemic Planning" identifying actions that financial institutions should take to minimize the potential adverse effects of a pandemic. An institution's business continuity plan should address pandemics and provide a preventive program, a documented strategy scaled to the stages of a pandemic outbreak, a comprehensive framework to ensure the continuance of critical operations, a testing program, and an oversight program to ensure that the plan is reviewed and updated.
Comment: Now that there is an interagency statement, the examiners will start looking at your business continuity plan. It is now time to review it to make sure that it includes pandemic planning. Even if you are like my friend who thinks that a pandemic isn’t in the realm of possibility, you are required to plan for it. The planning you do for a pandemic also helps prepare your institution for other potential business disruptions.
Fed amends Reg CC to delete reference to Fed Bank of Kansas City
On April 19, 2008, the Reserve Banks will transfer the check-processing operations of the head office of the Federal Reserve Bank of Kansas City to the head office of the Federal Reserve Bank of Dallas. The Board of Governors, on February 12, 2008, adopted a final rule amending appendix A of Regulation CC to delete the reference to the head office of the Federal Reserve Bank of Kansas City and reassign the Federal Reserve routing symbols currently listed under that office to the head office of the Federal Reserve Bank of Dallas, and amending appendix B of Regulation CC to delete the reference to the Kansas City head office. The final rule will become effective on April 19, 2008.
Comment: This means that checks from the Dallas and Kansas City Federal Reserve Banks will be considered local checks.
Fed’s Consumer Advisory Council to meet
The Federal Reserve Board announced that the Consumer Advisory Council will hold its next meeting on Thursday, March 6. The meeting is open to the public. The Council advises the Board on the exercise of its responsibilities under various consumer financial services laws and on other matters on which the Board seeks its advice. The Council plans to discuss: (1) Proposed rules for residential mortgage transactions; and (2) Foreclosure issues. The Board invites comments from the public on any of these matters. Click here for more information or to register by March 4.
FDIC Issues Updated Version of Computer-Based Money Smart Curriculum
The FDIC has updated and expanded the computer-based instruction (CBI) version of Money Smart that enables students to complete the educational curriculum at their own pace and anywhere they have access to a computer. The updated curriculum now includes: shopping for a mortgage, avoiding identity theft, and saving money for the future. The English version is available now, and the Spanish version will be released in mid-2008. The FDIC offers the print version of Money Smart financial education curriculum in English, Spanish, Chinese, Korean, Vietnamese, Russian and large-print/Braille versions.
FDIC Quarterly
The current issue of FDIC Quarterly contains two articles of general interest. One entitled The Case for Loan Modification describes an approach to loan modification that will help avert foreclosure for certain subprime borrowers who cannot afford to continue making mortgage payments when interest rates reset. The second article, Establishing Voluntary Excess Deposit Insurance: Results of the 2006 FDIC Study, describes market changes that have reduced the demand for excess deposit insurance and provided depositors with other options to protect excess deposits. If Congress decides the FDIC should play a role in providing excess deposit insurance, the article examines two available methods.
Comment: Associate Member Kansas Bankers Surety provides this service for non-public (consumer and commercial) deposits.
Thomas J. Dujenski named FDIC Dallas Regional Director
Mr. Dujenski was appointed the new FDIC Dallas Regional Director after Stan Ivie, the former Dallas Regional Director, was transferred to be the FDIC San Francisco Regional Director. Mr. Dujenski began his career with the FDIC as an examiner in the FDIC's Houston Field Office in the late 1980's and subsequently held positions in the FDIC as a Field
Office Supervisor in the FDIC's New York Region, as an Assistant Regional Director in the FDIC's Dallas Region, and as the Deputy Regional Director in the FDIC's Kansas City Region. Click here for the full press release.
Comment: Although I do not know Mr. Dujenscki, I have it on good advice that Mr. Dujenski is a great guy to work with. We welcome Mr. Dujenski to Texas and look forward to an opportunity to meet him. We also wish Mr. Ivie well in San Francisco.
OCC & FDIC encourage banks to work with customers affected by tornadoes
On February 12, 2007, the OCC released News Release 2008-11 and the FDIC released FIL-7-2008 encouraging national banks to consider various alternatives, including extending loan terms, restructuring debt, and easing terms for new credit, to assist their customers affected by the recent tornadoes. The OCC recommended that banks contact them if they need help dealing with these customers. The FDIC said that it will consider regulatory relief from certain filing and publishing requirements for banks in the affected areas.
Comment: As community banks are aware, in times of crisis local banks can best lead the way toward the recovery of the community as a whole by working constructively with their customers.
OCC lowers assessment fees for national banks
The Office of the Comptroller of the Currency announced on February 19th that it was recalibrating its assessment structure with the result that all national banks will pay modestly lower assessment fees, effective March 31, 2008. The interim rule is effective February 19th to allow all national banks to benefit from the lower fees in the March 31, 2008 semiannual assessment. The OCC says that overall assessment income will decrease by about 2.5 percent. The OCC invites public comment and will review those comments before issuing its final rule. Click here to read the entirety of NR 2008-19.
OCC provides consumer tips
The OCC promoted awareness of consumer protection resources during today’s National Consumer Protection Week event on Capitol Hill. OCC staffers highlighted OCC’s new consumer Web site, http://www.helpwithmybank.gov/ HelpWithMyBank.gov provides answers to common questions based on thousands of calls made to the OCC Customer Assistance Group each year. While targeted to national bank customers, the site answers many questions common to all banking consumers and provides useful information about contacting regulators of institutions other than national banks.
Comment: This could be a great resource for consumers and could lessen the number of calls bankers and regulators receive over and over and over asking the same questions. It will be interesting to see whether consumers find their way to this site. Your bank might consider putting a link to this on its website.
OCC’s Sam Golden to retire; successor named
The Office of the Comptroller of the Currency announced on February 8, that Larry L. Hattix, currently Assistant Deputy Comptroller for the Cincinnati/Columbus Field Office, has been named the agency’s Ombudsman. He will succeed Samuel P. Golden, who will retire in March. In 1993, Golden was named the OCC’s first Ombudsman, and in 1998 he led the formation of the agency’s Customer Assistance Group. Click here to read the press release, which contains a brief bio on Hattix.
Comment: Mr. Hattix has some big shoes to fill. Sam Golden did a great job for the OCC as Ombudsman and in the formation of the customer assistance group. Our best wishes go out to both of these men as they begin new chapters in their lives.
FinCEN issues administrative ruling on filing CTRs on sole proprietors
On January 25, 2008, FinCEN issued FIN-2008-R001 as further guidance and to replace FIN-2006-R003 regarding CTRs on sole proprietorships. The guidance explains that only one section A is required, even if a business has a different address or tax identification number than its owner. FinCEN will continue to accept two section A’s when filing a CTR on a legal entity operating under a DBA. Several examples of properly completed section A’s are given.
Comment: Be sure to share these interpretations with your BSA officers and staff.
FinCEN: Application of correspondent account rules to presentation of negotiable instruments
This guidance (FIN-2008-G001) clarifies that the transaction-by-transaction presentation of a negotiable instrument for payment by a covered financial institution to a foreign financial institution on which the instrument is drawn is not the establishment of a formal banking or business relationship by a covered financial institution for purposes of complying with the correspondent account rule. Because a correspondent account is not established between the covered financial institution and the paying institution, the covered financial institution is not subjected to compliance with the due diligence provisions of the correspondent account rule (i.e. Section 312 of the USA PATRIOT Act).
Comment: That is a long-winded and complicated way of saying that if your bank is only passing for collection an item drawn on a foreign bank, it does not establish a correspondent account with that foreign bank and is not subject to the enhanced due diligence. Again, be sure to share this with your BSA officers and staff.
SEC begins small business costs and benefits study of Sarbanes-Oxley Act Section 404
The Securities and Exchange Commission announced on February 1, 2008, that it had commenced a cost-benefit study of an upcoming auditor attestation requirement for smaller companies under Section 404(b) of the Sarbanes-Oxley Act of 2002. Under the proposed extension, the Section 404(b) requirements would apply to smaller public companies beginning with fiscal years ending on or after Dec. 15, 2009. Section 404 has two provisions: 404(a) requires company management to assess the effectiveness of the company's internal controls over financial reporting, while 404(b) requires an auditor attestation on management's assessment. Commission Announcements. The Commission has also published printed and online "plain English" guides to help small businesses comply with Section 404(a) requirements for the first time in their annual reports this year: http://www.404.gov/
Finance Commission proposes home equity rule revisions
The Finance Commission, at their meeting on February 15th, approved for comment proposed revisions to the home equity interpretations. The revisions track the changes to the constitution with one quirk. A HELOC lender can distribute a check that has been solicited by the borrower. However, the borrower may not request the lender to "periodically" send out checks. To read the proposed revisions in the Finance Commission packet, click here and go to page 3-58. The prohibition on periodically sending checks to borrowers is in 7 TAC §153.84(2) on page 3-60.
Comment: This doesn't seem problematic. Logically, the customer could request and receive a pad of checks at closing. That pad could have a reorder form--just like deposit account checks. Please remember that at this time, these are only proposed revisions. Additionally, by law, all state agency rules must be reviewed periodically. Pursuant to that requirement, the Finance Commission has invited comments on the home equity rules found in Texas Administrative Code, Title 7, Part 8 (7 TAC Chapters 151 and 153). You can find the Finance Commission’s notice of its intention to review these rules on page 3-61 of the Finance Commission packet. If you have any comments on these rules, you can follow the instructions in the packet to comment. You can tell IBAT your comments by contacting Shannon Phillips at sphillips@ibat.org.
Banking Department issues regulatory guidance on mortgage fraud
In response to HB 716, the Texas Department of Banking issued Regulatory Guidance 3008 on residential mortgage loan fraud on January 14, 2008. The guidance includes a sample of the “Notice of Penalties for Making False or Misleading Written Statement” that a lender is required to provide at closing to each applicant of a one to four family home loan. The guidance also clarifies that only fraud relating to permanent financing of 1 – 4 family homes should be reported to the Mortgage Fraud Task Force.
Comment: HB716 amended Section 343.105 of the Finance Code thereby requiring a lender, mortgage banker, or licensed mortgage broker to provide each applicant for a home loan a written notice at closing. Section 343.105 applies to permanent financing home loans (See Finance Code §343.001), except for reverse mortgages and open end accounts (See Finance Code 343.002); therefore, those loans trigger the requirement to give the notice.
Banking Department closer to implementing system for communication between financial institutions and check verification entities
On February 4, the Department of Banking (Department) sent a letter to all Texas state-chartered banks regarding the electronic notification system mandated by HB 2002. You will recall that this is the system through which financial institutions will report closed accounts to check verification entities when requested by customers. In the coming weeks, the Department will provide each state-chartered bank with details about the delivery system and the registration process. The delivery system will be ready for use on March 1, 2008. If your bank is interested in assisting the Department with final testing of the delivery system, please contact Joe Broz at the Department. If you have any questions about the law, please direct your questions to Department attorney Everette Jobe. Any state-chartered bank that did not receive a letter should contact the Department’s Director of Strategic Support, Wendy Buitron. The main phone number for the Department is 512-475-1300.
Comment: Chief cashiers at state-chartered banks should be eager to volunteer to assist the Department with final testing of this system. After February 29, when a customer provides the appropriate information, compliance is mandatory. Those who participate in the early testing should have no trouble complying with the law on March 1. As we reported in the January edition of Capitol Comments, you, your chief cashier, and compliance officer should read the Banking Department’s Texas Bank Report article about the electronic notification system mandated by HB 2002.
Texas Attorney General busts data dumpers
A state investigation was launched after reports from the Levelland Police Department indicated that bulk customer records were dumped in garbage containers behind a local building. Select Physical Therapy Texas Limited Partnership and Select Medical Corporation are accused of violating provisions of the 2005 Identity Theft Enforcement and Protection Act, which requires businesses to protect and properly dispose of clients’ sensitive personal information. The Act gives the Office of the Attorney General authority to seek penalties of up to $50,000 per violation. In 2007, Attorney General Abbott filed a similar action against Minnesota-based Life Time Fitness and filed identity theft actions against CVS Pharmacy and RadioShack for improperly dumping customer records. Attorney General Abbott also obtained temporary injunctions against CNG Financial Corporation, which operates Check ‘n Go stores across Texas, and Texas-based EZPAWN and EZMONEY Loan Services to improve their document disposal systems and protect their customers from identity theft. Click here to read the AG’s news release.
Comment: What is an article about a physical therapy clinic doing in banking periodical? It is here as a reminder that your bank, your affiliates, and your 3rd party vendors must comply with federal and state laws in the storage and disposal of customer records. (See The Texas Business & Commerce Code (BCC) § 35.48 and the Identity Theft Enforcement and Protection Act, Chapter 48 of the BCC.) Section 35.48 grants authority to the Attorney General to seek injunctive relief and civil penalties for violations of its provisions.
Texas AG opinion: Enhanced drivers licenses consistent with federal law
Section 521.032 of the Texas Transportation Code requires an enhanced driver's license to be supported by an applicant's proof of citizenship, identity, and state residency, and to include a one-to-many biometric matching system as well as reasonable security and encryption measures. Attorney General Opinion GA-0589, issued January 11, 2008, ruled that a section 521.032 enhanced driver's license is consistent with current federal law regarding passports if: (1) the license is "determined . . . by the Secretary of Homeland Security to be sufficient to denote identity and citizenship"; and (2) the license conforms to the technology, security, and operational requirements of the Western Hemisphere Travel Initiative implemented under section 7209(b) of Public Law 108-458, such as being machine readable and tamper proof.
Comment: These new and improved Texas drivers’ licenses are better for your bank’s customer identification program. 31 CFR 103.121(b)(2)(i).
Texan to serve as ICBA Chair
Cynthia L. Blankenship, vice chairman of the Bank of the West in Irving, Texas, will become the ICBA chairman at the 2008 ICBA convention held March 2-6. At that same meeting, William T. Bain, president, Medina Valley State Bank, Devine, Texas, will become a Director At-Large. Cynthia has held leadership positions with IBAT, including chair of IBAT and of the IBAT Education Foundation.
Comment: We congratulate Cynthia and Bill on these well-deserved honors.
HOPE NOW
Fourteen HOPE NOW servicers reported that approximately 545,000 subprime mortgage holders were helped in the second half of 2007. These fourteen servicers are responsible for over 33.3 million loans or about sixty-two percent of prime and subprime loans outstanding in the U.S. Additionally, 324,000 prime borrowers were helped.
Comment: While we salute the efforts of these large servicers, we think that these statistics support our contention that community banks were not the cause of the subprime crisis.
Reports, Studies, Testimony, & Speeches:
- Texas’ own Cynthia Blankenship urges CRA for credit unions
Cynthia L. Blankenship, ICBA Chairman-Elect and vice-chairman and chief operating officer of Bank of the West in Irving, Texas, speaking before the U.S. House Financial Services Committee on February 13th, urged Congress to require the credit union industry to follow the Community Reinvestment Act regulations. Click here to watch the entire hearing entitled: The Community Reinvestment Act: Thirty Years of Accomplishments, but Challenges Remain. Ms. Blankenship was one of 15 people testifying.
Comment: If you are using Windows Media to watch this, but do not want to watch the entire five hour webcast, place your cursor on the progress bar that is directly below the picture, click and hold on the oval that appears, and drag it to the 4:21:50 point of the meeting.
- FTC Testifies on efforts to stop mortgage foreclosure “rescue” fraud
On February 13th, the Federal Trade Commission told the U.S. Senate Special Committee on Aging that the Commission, partnering with other federal agencies and state and local governments, is working to prevent mortgage foreclosure “rescue” fraud through law enforcement and consumer outreach. Noting an estimated 75 percent increase in foreclosure filings from 2006 to 2007, Peggy Twohig, Associate Director of the FTC’s Division of Financial Practices, told the committee about the Commission’s enforcement efforts and its work to educate consumers about scams in which borrowers typically pay thousands of dollars but end up losing their homes and the money. Click here to see the FTC’s full press release and to read their testimony. You can also click here to watch a webcast of the hearing entitled: Foreclosure Aftermath: Preying on Senior Homeowners.
Comment: This ruthless fraud targets seniors disproportionately. Your customers who are having a hard time making their mortgage payments need to be warned against “nice people” calling who have “the answer to all their mortgage problems.” Often these people will strip their equity and increase the mortgage payments that they already can’t pay. Customers having a hard time paying their mortgages need to: 1) communicate with their lenders, 2) contact reputable mortgage foreclosure counselors, 3) be careful who they deal with, and 4) don’t wait to do something!
- Fed’s senior loan officer survey reveals tightening lending
The January 2008 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. Special questions in the survey queried banks about changes in terms on commercial real estate loans during 2007, expected changes in asset quality in 2008, and loss-mitigation strategies on residential mortgage loans. In addition, the survey included a new set of recurring questions regarding revolving home equity lines of credit. This article is based on responses from fifty-six domestic banks and twenty-three foreign banking institutions. In the January survey, domestic and foreign institutions reported having tightened their lending standards and terms for a broad range of loan types over the past three months. Demand for bank loans reportedly had weakened, on net, for both businesses and households over the same period.
- Comptroller Dugan expresses concern about commercial real estate concentrations
During a speech on January 31, 2008, Comptroller of the Currency John C. Dugan said that the OCC is focusing increased attention on problems arising from high community bank concentrations in commercial real estate (CRE) at a time of significant market disruptions and declining house and condominium sales and values. Dugan said, “There will be more frequent interaction between supervisors and banks with concentrations in CRE loans that are declining in quality. There will be more criticized assets; increases to loan loss reserves; and more problem banks.” The OCC expects banks with CRE concentrations to make realistic assessments of their portfolio based on current market conditions, and to make necessary adjustments as market conditions change. News Release 2008-9
Comment: Yes, he is talking to community banks as well as large banks.
- Fed Governor’s speech explains Fed’s moves
On February 15th, Fed Board Member Frederic S. Mishkin gave a speech to The Federal Reserve's Tools for Responding to Financial Disruptions at the Tuck Global Capital Markets Conference, Tuck School of Business, Dartmouth College, Hanover, New Hampshire. In his speech Governor Mishkin explains how the Fed has used four tools to address the more difficult policy environment caused by the disruption of financial markets. We have attempted to address the resulting challenges by using four tools.
Comment: This speech can serve as a primer for understanding the Fed’s recent moves.
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This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in the rendering of legal, accounting or other professional advice-from a Declaration of Principles adopted by the American Bar Association and a Committee of Publishers and Associations. © 2008 Independent Bankers Association of Texas, 1700 Rio Grande, Suite 100, Austin, Texas 78701.
Phone: 512/474-6889; fax: 512/322-9004; Website: www.ibat.org. All rights reserved. Shannon Phillips Jr., Editor
