Recent Federal Banking Regulator Rulemaking and Releases

April 16, 2010 at 10:52 pm Leave a comment

The federal banking regulators concluded an active week of new rulemaking and releases.  A description of these actions, as provided in the press releases by the applicable federal regulator, is provided below: 

FDIC Board of Directors Approves Notice of Proposed Rulemaking to Revise Deposit Insurance Assessments

On April 13, 2010, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved a Notice of Proposed Rulemaking (NPR) to revise the deposit insurance assessment system for large institutions, which pose unique and concentrated risks to the Deposit Insurance Fund.  Under the proposal, risk categories and long-term debt ratings would no longer be used. The FDIC would continue to use the supervisory ratings as a factor in measuring risk. The FDIC would replace the financial ratios currently used with a scorecard consisting of well-defined financial measures that are more forward looking and better suited for large institutions. The proposal also includes questions about how to incorporate other risk measures, like the quality of underwriting or risk management practices, in the future.

The proposal would create two scorecards: one for large institutions and the other for highly complex institutions. A highly complex institution would be defined as an insured depository institution with greater than $50 billion in total assets that is fully owned by a parent company with more than $500 billion in total assets. The designation also would apply to a processing bank and trust company with greater than $10 billion in total assets. Each scorecard would have two components—a performance score and loss severity score—that are of particular interest to the FDIC as an insurer. Two scores would be combined to produce a total score, which would be translated into an initial assessment rate. Similar to the current system, the FDIC would retain an ability to make limited discretionary adjustments.

The entire proposed rule is available by clicking here.

FDIC Board of Directors Approves Extension of Transaction Account Guarantee Program

On April 13, 2010, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved an interim rule to extend the Transaction Account Guarantee (TAG) program to December 31, 2010. Last year the program was extended to June 30, 2010. Under the TAG program, customers of participating insured depository institutions are provided full coverage on transaction accounts. The interim rule gives the Board discretion to extend the program to the end of 2011, without additional rulemaking, if it determines that economic conditions warrant such an extension.

The TAG extension will provide a continued stable funding source for participating banks and will help them maintain their ability to secure low-cost, large deposits, thereby preserving their deposit franchise value and supporting the rebuilding of their earnings and capital, which in turn protects the Deposit Insurance Fund.

Nearly 6,400 insured depository institutions, about 80 percent of the industry, continue to participate in the TAG program and benefit from the guarantee provided by the FDIC. These institutions held an estimated $266 billion of deposits above the insured deposit limit and guaranteed by the FDIC through the TAG program as of the end of 2009. Under the interim rule, participating institutions can opt out effective July 1, 2010. Last year the Board adjusted the assessment rate to make it risk based and approved an increase in the rates; the current rates will remain unchanged under the interim rule. The Board also voted to require TAG assessment reporting be based on average daily account balances and to reduce the maximum rate that can be paid for qualifying NOW accounts to 0.25 percent from 0.50 percent.

The entire interim rule is available by clicking here.

Federal Regulators Release Model Consumer Privacy Notice Online Form Builder

On April 15, 2010, eight federal regulators released an Online Form Builder that financial institutions can download and use to develop and print customized versions of a model consumer privacy notice.

 The Online Form Builder, based on the model form regulation published in the Federal Register on December 1, 2009, under the Gramm-Leach-Bliley Act, is available with several options. Easy-to-follow instructions for the form builder will guide an institution to select the version of the model form that fits its practices, such as whether the institution provides an opt-out for consumers.

 To obtain a legal “safe harbor” and so satisfy the law’s disclosure requirements, institutions must follow the instructions in the model form regulation when using the Online Form Builder.

The Online Form Builder is available by clicking here.

Entry filed under: FDIC, Financial Institutions.

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