Media Mentions – July 24, 2012

July 24, 2012

Authored by: Bryan Cave

With attorneys and staff worldwide, Bryan Cave attorneys are often quoted in the news.  Recent Media Mentions of Financial Institutions Group attorneys include:

Achenbach in American Banker

Ken Achenbach was quoted in a July 2 article in American Banker regarding the decline in FDIC Loss-Sharing Deals for failed-bank buyers as the economy improves. Achenbach said “If the FDIC loss share backstop is there, it certainly mitigates the risks involved in taking the portfolio . . . Given the limited amount of diligence you’re able to do in these deals, and particularly earlier in the economic cycle where there was much more price uncertainty in the real estate markets, people actively wanted that safety net. Over time, however, bidders may be becoming more comfortable with asset pricing and may be assigning less value to the protections of loss-sharing. In addition, the FDIC is now encouraging banks that are comfortable doing so to make non-loss share bids.”

Hightower in Bank Safety & Soundness Advisor

Jonathan Hightower was quoted July 2 by the Bank Safety & Soundness Advisor concerning new Basel III capital rules, and how community bankers might need to prepare for the changes sooner rather than later.  Hightower said the new rules probably won’t change acquisition, development and construction (ADC) lending behavior now, when so few banks are making ADC loans.  But he said it will impact future lending plans.  “Where you’ll really see a difference is when the market  comes back and banks get more comfortable thinking about reentering this market,” he said.  “there are lenders out there who know the business and have done this kind of lending for a long time.  But now, unless those loans meet some focused requirements, they’ll be subject to those higher risk weights.”

Jonathan Hightower was also quoted May 21 in the Bank Safety & Soundness Advisor concerning the final version of the long-promised big-bank stress testing rules, recently released by federal regulators.  Regulators have gone out of their way to say they won’t expect community banks to run the kind of bank-wide capital stress testing they address in the new rules.  However, that doesn’t mean there’s nothing of note for community banks in the new rules.  Hightower said regulators now expect higher standards from bank risk management — at banks of all sizes — and the new big-bank stress test requirements do contain plenty of useful information for banks aiming to anticipate those new standards.  “Whether we want to call it stress testing or something else, the fact is that risk management expectations have been raised,” he said.  “This is coming from regulators, but also directors and shareholders.  Given all the events of the financial crisis, directors want to know that management is on top of the risk.  Shareholders want to know that the board is on top of management.”

Hightower in American Banker

Jonathan Hightower was quoted June 25 by American Banker concerning the newly-proposed Basel III and risk-weighting rules for U.S. Banking organizations, which would implement tougher risk-weighting rules for certain types of construction and commercial real estate loans.  If the rules go through, Hightower said, it could stall small banks’ plans for returning to profitable growth.  Banks “not only have to be more conservative now, but [they have] also got to be more conservative in the future,” he said.  A BankBryanCave blog post Hightower write June 19 on this topic was also summarized in the June 22 Georgia Bankers Association’s e-bulletin distributed to members.

Klingler in American Banker

Rob Klingler was quoted July 3 in American Banker regarding TARP auctions to date. The U.S. Treasury Department has managed to bring in 90 cents on the dollar auctioning off stakes it held in 20 banks. Going forward, it will seek to unload its shares in some 325 banks still remaining in the Troubled Asset Relief Program. While the first 20 generally are thought to represent the best of the bunch, future auctions will include weaker banks that still are struggling with credit issues and, in many cases, have deferred quarterly dividend payments to the Treasury in order to preserve capital. “The Treasury got rid of some of the best ones first. They all give investors reasons to believe that with sufficient time they would repay in full,” Klingler said. “As you move down the list, the asset quality is not as good and that is likely going to be reflected in the pricing. The investors want to know when they are going to get their principal back.”

Rob Klingler was also quoted extensively June 27 by American Banker regarding the U.S. Treasury Department’s latest effort to wind down the Troubled Asset Relief Program.  Recently, Treasury told about 200 banks with TARP funds that it was considering divesting its stakes through pooled auctions that would start this fall.  Depending on how the pooled auction is structured, the agency could be replaced with multiple investors (including hedge funds or other types of firms).  “I’ve experienced every emotion from my clients,” Klingler said.  “Some see it as an opportunity for a potential investor to buy both the Treasury stock at a discount alongside some new common equity and put the company on better footing.  Alternatively, there is some trepidation . . . over who the third part is going to be if they end up in the pool.  What kind of influence will they try to have”?

Klingler in Bank Safety & Soundness Advisor

Rob Klingler was quoted May 14 by the Bank Safety & Soundness Advisor regarding an announcement by U.S. Treasury officials that clarifies its plans for those community banks still holding TARP funds.  Most of the larger banks caught up in TARP have escaped, either by paying the federal government back or by participating in the Treasury’s recent rounds of TARP auctions.  But many say the process for exiting TARP still is highly politicized, unclear and subject to change.  “Yes, Treasury did identify three alternatives, but this is still a political process,” Klingler said.  “The fact that the winds are blowing in this direction today doesn’t mean that the winds will continue to blow this way through the election.  Much of the impetus [on the government’s part] to exit the TARP program was initially politically driven.  The pressure to end the program has relaxed in the last month.  But if it becomes an election issue, it could change at any point.”

Knudson in Bank Director

Kathryn Knudson was featured in Bank Director as part of a Q&A with bank attorneys.  Following several lawsuits in which the FDIC sued directors of failed banks who served on their loan committees, Bank Director asked attorneys whether directors should be involved in approving loans.  “While directors should have a significant role in establishing loan policies and procedures, especially from a risk management perspective, they should not have additional potential liability from ‘approving’ loans,” Knudson said.  “This is particularly true when the director has no specific loan underwriting training and his or her involvement with a given loan may be a 5 to 15-minute presentation by the bank’s senior loan officer.”  Click  here to read the full column.

McAlpin, Hightower on BankDirector.com

Jim McAlpin and Jonathan Hightower authored an article June 5 for BankDirector.com regarding the takeaway lessons from recent FDIC lawsuits. The Federal Deposit Insurance Corp. is in the process of seeking recoveries from directors and officers of failed banks believed to have breached their duties in the course of managing those institutions. As of mid-May 2012, the FDIC had filed lawsuits against almost 30 groups of directors and officers. “While the FDIC lawsuits paint a picture of inattentive, runaway directors and officers, a number of the practices that the FDIC found objectionable could be found at many healthy institutions,” they wrote. “By learning from the situations that led to many of these lawsuits, even the best performing banks can enhance the performance of their boards, which will ultimately result in greater value to the shareholders of the bank.”

Moeling in Bank Director

Walt Moeling and John Bielema were quoted extensively in the second quarter edition of Bank Director magazine regarding the increasing likelihood that a bank director will be sued personally by the FDIC for a bank’s failure, and the chain of events that will occur once a suit is in the works. Bielema cautioned that the bank investigators sent often will seem “very friendly and conversational. But they’re not your friend. The investigators have an agenda – to put together a claim against you. So you need to be very careful about what you say.” Moeling said the “business judgment” rule should protect most independent directors from liability, provided they didn’t violate their duty of loyalty or engage in self-dealing. “For an outside director who honestly thinks he’s performed his job adequately well, the odds are overwhelmingly against paying out-of-pocket,” he said.

Moeling in Atlanta Business Chronicle

Walt Moeling and Eric Schroeder were mentioned July 6 in the Atlanta Business Chronicle regarding the Frazer Center and its new board members.  The Frazer Center is a community that serves people with disabilities.  Moeling was noted as one of three members who recently rotated off the board.  (Together, they had a combined service to the Center of more than 100 years.)  Schroeder was noted as the new chairman of the board.

ReVeal on BankDirector.com

John ReVeal was quoted May 30 by BankDirector.com concerning whether the Federal Reserve should require banks and thrifts with less than $10 billion in assets to have a separate risk committee. ReVeal said that requiring all banks to maintain the same risk management systems will “only add unnecessary financial burdens on smaller banks and lead to more bank failures.”

Rinearson in USA Today

Judith Rinearson was quoted May 23 by USA Today regarding prepaid debit cards, which soon could be subject to federal regulations requiring more transparent fee disclosures and increased financial protection.  The Consumer Financial Protection Bureau announced it is considering new consumer protections for the cards, popular among unbanked and under-banked consumers, whereby users load funds on the card and consumers use it like a traditional debit card.  More credit card companies, including Chase and American Express, are issuing prepaid cards as they look for new customers and to replace lost revenue due to tighter restrictions on debit card fees.  “Consumers have a huge number of protections already,” Rinearson said.  “There are a lot of other areas that probably require more focus than prepaid cards.”