CSBS Examiner
A weekly report of events affecting the state banking system from the Conference of State Bank Supervisors
October 31, 2008
I thought I was indecisive; now I'm not so sure. – Bumper Sticker
Here in the USA, we citizens elect our President, whether we want to or not. Those of us who are political junkies eat, live and sleep campaigns. We watch as the list of candidates gets pared down one by one, until only two men (this time around) are left standing, plus a few “third party” candidates. Still, it’s a two-party system, at least for now. Every day, we get to hear where the candidates are, what they’re saying, whether there are any slip-ups, who they’re wooing, not to mention all sorts of scuttlebutt about their private lives. Truly, we don’t know how they keep ticking in this over-heated oven of popular opinion. This time around, the election seems to have even more significance, given the travails of the day. With four days left before the 2008 election, we’re all ready to take a deep breath and set our sights on the future. Come Wednesday, we all should take advice from former Philippines first lady and noted shoe collector Imelda Marcos, who said, “Win or lose, we go shopping after the election.”
NY Governor Seeks State Representation On Oversight Panel
In an open letter to Congressional leadership, New York Governor David A. Paterson urged Congress to include state representation in oversight responsibilities for the implementation of the Emergency Economic Stabilization Act. In his letter to House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.), and House Minority Leader John Boehner (R-Ohio), Paterson said that states should have representation on the five-member Congressional Oversight Panel created as part of the emergency law. This Oversight Panel is charged with overseeing Treasury’s adoption of the program, including the effectiveness of its foreclosure mitigation efforts. The panel will issue a special report by Jan. 20, 2009, which will assess the current financial regulatory system and make recommendations for improvement. “Given the importance that financial institutions have to state economies, and the devastating impact that foreclosures are having on communities, state representation in the overview process would provide a unique perspective and valuable input,” said Governor Paterson. More Information
CSBS: Now Is Not The Time For New Risk-Based Capital Framework
In a comment letter submitted this week to federal banking agencies, the Conference of State Bank Supervisors said this is not the appropriate time to implement a new capital framework.
“The proposed Standardized Approach and the adopted Advanced Approach will fundamentally change the way capital adequacy is calculated at a time when most of our assumptions regarding quantifying risk and the impact of complex financial instruments are being challenged by global market events,” CSBS President and CEO Neil Milner said.
Milner noted that CSBS has consistently expressed concerns about adopting the Basel II capital framework in the United States. The arguments for its adoption have centered on international competitiveness and the need to more accurately quantify risk.
“While we agree that international competitiveness is important, we do not believe U.S. institutions have had difficulty competing,” Milner said.
CSBS said, given the relative complexity of the Standardized Approach, it is likely that only a small number would opt-in. The additional required data elements and significant operational risk charge would likely outweigh any benefit to most community and regional banks.
“Current economic stress has provided a reality check on the real purpose of capital. As risk begins to generate actual losses, actual capital erodes very quickly. We need an approach to capital which encourages building capital during periods of strength and ensures a strong capital base as the economic cycle changes.
“In light of our current economic condition, CSBS believes implementation of a new risk-based capital framework, including the advanced approaches of Basel II, should be suspended. Regulators and the industry need time to work through significant regulatory issues and evaluate the lessons learned from this crisis. This will permit the creation of a capital framework which is appropriately risk sensitive, ensures strong levels of capital, and provides transparency.”
Nebraska and Oklahoma Tell How They Use BSA Data For Licensing
The latest issue of the FinCEN SAR Activity Report features articles by Nebraska Director of Banking John Munn and Oklahoma State Banking Department Legal Counsel Dudley Gilbert.
Munn writes that the Nebraska Department has direct access to SARs, CTRs and CTR exemption data. "In supervising mortgage and payday lending, direct access to the FinCEN data base allows the department to know more about parties seeking licenses than would be possible without the data.” Nebraska also uses the BSA data during the evaluation process for executive officers. Nebraska is unique among states in licensing executive officers of state chartered banks. Munn said the department is careful to safeguard the BSA data. "Only four of our Department staff have access to the BSA site," The four received FinCEN training, underwent a security check and were finger-printed.
Gilbert's article pertains to the Oklahoma State Banking Department's use of BSA data in its money services business licensing program. The Department began licensing money transmitters in 2007 in cooperation with the Oklahoma State Bureau of Narcotics and Dangerous Drugs Control (OBN). State law requires the OBN to conduct a criminal financial check on all applicants for money transmitter licenses. Upon completion of the background review, OBN sends a report of its findings to the Banking Department. In addition to the background review at the time of application, any new managing officer and director must complete a form authorizing a financial background review as part of the annual license renewal process. According to Gilbert, "These reviews give the Banking Department information that it may use when determining whether a licensee’s managers and directors have the competence, experience, character, and general fitness to permit the applicant to engage in money transmission in Oklahoma." More Information
CSBS’s Milner Now Jump$tart Chairman
Neil Milner, president and CEO of the Conference of State Bank Supervisors has been elected to chairman of the Jump$tart Coalition for Personal Financial Literacy Board of Directors. He succeeds Randy Lively, who recently retired from the American Financial Services Association after serving as Jump$tart chairman since its inception in 1995. The Board then elected John Gannon, executive director and secretary, FINRA Investor Education Foundation, to serve the remainder of Milner's term as Treasurer. Jump$tart is a national coalition of organizations dedicated to improving the financial literacy of kindergarten through college-age youth by providing advocacy, research, standards and educational resources. Milner’s term as chairman will run through December 2009.
Sara Kelsey Steps Down As FDIC General Counsel
FDIC General Counsel Sara A. Kelsey, who came to the position after serving in the New York State Banking Department for more than eight years, retires today. Ms. Kelsey has served in this position for the past two years.
"Sara's leadership, her federal and state regulatory background, as well as her vast experience representing large and complex banks enabled her to hit the ground running immediately upon her arrival at the FDIC," said Chairman Bair. "During Sara's tenure, the FDIC has been presented with a number of significant and complex challenges. Sara's legal and practical problem-solving skills have been a valuable asset to the FDIC, and we will miss her."
CSBS President and CEO Neil Milner said, “It’s been a pleasure to work with Sara through the years. She brought a depth of knowledge and a unique perspective on bank regulation and policy-making from her experience at both the state and federal level as well as in private practice. We will miss her leadership and counsel, and we wish her well in the future.”
Before joining the FDIC, Ms. Kelsey served as Deputy Superintendent and General Counsel of the New York State Banking Department after serving for two years as counsel at Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, for nearly two years, and as Senior Vice President and Associate General Counsel at Chase Manhattan Bank for ten years. Ms. Kelsey began her legal career with the Board of Governors of the Federal Reserve System, Washington, D.C., in 1976.
New Web Site: EconomicRecovery.gov
The Commerce Department on Oct. 24 launched a Web site to cover important economic issues. The Web site has information to assist people in keeping their homes, finding jobs and protecting their savings, said Commerce Secretary Carlos Gutierrez. The Web site provides links to government sites that may be useful for families, workers and businesses during these challenging economic times. For example, a farmer may find information about the Agricultural Department’s farm loan program; or an out-of-work American may learn about job opportunities in their state at a link to the Labor Department. The Web site provides links to FDIC, the Treasury Department, the Small Business Administration, the Commerce Department, the Labor Department, the Department of Housing and Urban Development and the White House. More Information
Around The States
Georgia: The Georgia Department of Banking and Finance closed Alpha Bank and Trust, Alpharetta, Ga., last Friday and named FDIC as receiver. FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St. Cloud, Minn., to assume the insured deposits of Alpha Bank & Trust. The two branches of Alpha Bank opened today as Stearns Bank branches. Stearns Bank will purchase approximately $38.9 million of Alpha's assets. As of Sept. 30, Alpha Bank had total assets of $354.1 million and total deposits of $346.2 million. Stearns Bank did not pay the FDIC a premium for the right to assume the failed bank's insured deposits. FDIC estimated that the cost to its Deposit Insurance Fund would be $158.1 million. The last bank to fail in Georgia was Integrity Bank, Alpharetta, on Aug. 29, 2008. Sixteen banks have closed so far in 2008. More Information
Around The Agencies
FDIC: The FBI, the U.S. Postal Inspection Service, and state and local authorities are investigating more than 30 threatening letters that have been received by financial institutions in nine states and the District of Columbia Most of these letters contain a powder substance with a threatening communication. So far, tests on the powder have been negative. Financial institutions that receive one of these letters at any location should contact their local FBI office and ask for the Weapons of Mass Destruction Coordinator. FDIC-supervised financial institutions also should notify their regional office. The letters have been reported in these states: California, Colorado, Georgia, Illinois, New Jersey, New York, Ohio, Oklahoma and Texas. More Information
FDIC: FDIC approved an interim rule to govern its newly created Temporary Liquidity Guarantee Program. Eligible institutions are automatically enrolled in the program for the first 30 days at no cost. Organizations that do not wish to participate in the program must opt out by 11:59 p.m. on Nov. 12, 2008. After that time, participating entities will be charged fees. The program has two components. One guarantees newly issued senior unsecured debt of the participating organizations, within a certain limit, issued between Oct. 14, 2008, and June 30, 2009. For such debts maturing beyond June 30, 2009, the guarantee will remain in effect until June 30, 2012. The other component provides full coverage for non-interest bearing transaction deposit accounts, regardless of dollar amount until Dec. 31, 2009. While the rule is in effect, comments will be accepted for a 15-day period. More Information
Upcoming Events
November 4 – Election Day. Vote.
November 18 – The House Financial Services Committee will hold an oversight hearing on the Troubled Asset Relief Program (TARP) program being managed by the Treasury Department and related initiatives taken by the Federal Reserve Bank and the FDIC in response to the turmoil in domestic and global financial markets. – 10 a.m., 2128 Rayburn House Office Building.
MARK YOUR CALENDAR
May 19-21, 2009 -: The 2009 CSBS Annual Meeting & Conference will be held at the Rancho Bernardo Inn, San Diego, Cal.
Closing Comments
“If the lunch truly is free, the demand for free lunches will be large.” – Paul McCulley, managing director with the investment firm Pimco, commenting in today’s New York Times on a plan being contemplated by Treasury and the FDIC to help delinquent borrowers avoid foreclosure.
Mary White, Editor
Teresa Dean, Contributing Writer
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