On June 17, 2009, the Obama administration publicly announced its vision of regulatory reform. Among the key points for community banks and thrifts:
- Combine the Office of the Comptroller of the Currency (OCC) and Office of Thrift Supervision (OTS) into a new federal agency, the National Bank Supervisor, which would remain an office of the Treasury Department. The National Bank Supervisor would have all the powers of the OCC and the OTS. The Federal Reserve and FDIC would retain their respective roles with respect to state banks.
- Eliminate the federal thrift charter, subject to “reasonable” transition arrangements.
- Eliminate restrictions on interstate branching by national and state banks. States would not be allowed to prevent de novo branching into the state, or to impose a minimum age requirement of in-state banks that can be acquired by an out-of-state banking firm.
- Thrift holding companies and Industrial Loan Company (ILC) holding companies would both be required to become Bank Holding Companies supervised by the Federal Reserve.
- Create a new federal Consumer Financial Protection Agency (CFPA). The CFPA is proposed to have sole authority to promulgate and interpret regulations under existing consumer financial services and fair lending statutes, including TILA, HOEPA, RESPA, CRA, and HMDA. The CFPA is also proposed to assume from the federal prudential regulators all responsibilities for the supervision, examination and enforcement of consumer financial protection regulations.
- States would have the authority to adopt and enforce stricter laws, and federally chartered institutions would be subject to nondiscriminatory state consumer protection and civil rights laws to the same extent as other financial institutions.
As a reminder, we are the very beginning of regulatory reform; the final reforms are undoubtedly not going to be exactly as laid out in the President’s current proposal.
Boards and Strategic Planning in a Challenging Environment
Short-Term Planning for Recovery and Survival
(This post was authored by Walt Moeling and Dustin Hall. A version of this post originally appeared in the August 2009 issue of the ABA’s Community Banker magazine.)
The grim economic prognoses we continue to hear about have an immediate impact in the bank board room. Boards must think about short-term planning for recovery and survival because virtually no bank is wholly immune from the current recession. Although the problems may have started with residential real estate in the Sunbelt, they have gone much beyond that now, impacting banks throughout the country.
As a director you must plan for both long-term and short-term. Long-term planning is tremendously important, and we hope to make it to the “long-term,” but short-term planning is critical today.
Short-term planning in this context deals with the reality of today’s marketplace. The focus is not on earnings or even stock value, two traditional focal points for planning. Instead, the focus is on capital management, liquidity, and asset quality.
Capital Management
Your short-term capital planning in the face of mounting losses cannot focus on today or yesterday; it must focus on tomorrow. You must ask: Where are we going? What will happen if housing prices drop for another two and a half years, as predicted by some? Can our borrowers sustain a more prolonged recession? If not, where will our capital be three, six, and nine months from now? In essence, you must stress test your bank to see how far it can go.
A real problem for directors is assuming that capital today is as readily available as it has been for the past 15 years, or that they can sell the bank if there is a real problem. Unfortunately, there is no public market, and virtually no private equity, for bank stock. Those sources are presently closed, shall we say, for repair. Instead, short-term capital is likely to be found only within the boardroom and from family and friends.
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