Community Banking

  • A Common Sense Approach to Community Banking, OCC booklet, published June 13, 2013. The booklet is available here. The booklet focuses on:
    • Risk assessment and management, with particular emphasis on how the OCC's Risk Assessment System can be used by community banks
    • Strategic planning
    • Capital planning
    • Role of the OCC portfolio manager
  • "Lessons Learned from the Financial Crisis Regarding Community Banks," Sen. Banking Comm. hearing (June 13, 2013). Hearing materials are available here. Witnesses discussed three agency reports:

    • FDIC Community Banking Study (Dec. 2012), available here.
    • FDIC Inspector General, Comprehensive Study on the Impact of the Failure of Insured Depository Institutions (Report No. EVAL-13-002, Jan.3, 2013) available here.
    • GAO report on failures—see immediately below.
  • Causes and Consequences of Recent Community Bank Failures, GAO Report No. 13-704T (June 13, 2013), available here.

    • Bank failures in states with multiple failures driven by credit losses on CRE loans.
    • Other causes of failure:
      • Aggressive growth strategies
      • Nontraditional, riskier funding sources
      • Weak underwriting and credit administration practices.
  • OCC Policy Statement on Minority National Banks and Federal Savings Associations, available here.

    • In its discretion, OCC may continue to recognize minority depository institution even after capital raise that reduces minority ownership below 51%, if
      • MDI primarily serves the credit and other economic needs of community in which it is chartered.
      • Community is predominantly minority.
    • Mutual MDIs may maintain designation if majority of board is minority and the communities served are predominantly minority.
    • Mutual also an MDI if women comprise a majority of the board and hold a "significant percentage" of senior management positions.


  • CFPB Study of Overdraft Programs, available here.
    • No specific rules or guidelines
    • Correlation of opt-ins to higher fees and involuntary account closures
    • Variance among banks on coverage, fees, and account closures

Cyber Security

  • OCC webinar for community banks, June 11, 2013. Complete set of regulatory guidance available here.


  • GSEs: discussion draft of Corker-Warner bill, "The Secondary Mortgage Market and Taxpayer Protection Act of 2013" now circulating.
    • Circulated draft available through Bloomberg here. This may not be the latest draft.
    • Fannie Mae and Freddie Mac would be liquidated within 5 years.
    • Treasury would assume existing guarantee responsibilities.
    • FHFA would be replaced by Federal Mortgage Insurance Corporation that would reinsure conforming loans through a Mortgage Insurance Fund, funded by guarantee fees on loans.
    • Prospects for passage appear remote.
  • Force-placed insurance: American Banker reported FHFA plan to hold private hearings June 13 and 14.
  • Hockett, "Paying Paul and Robbing No One: An Eminent Domain Solution for Underwater Mortgage Debt," 19 Current Issues in Economics and Finance No. 5 (2013). Study is available here.

    • Proposal that state and municipal governments use their eminent domain powers to buy and restructure underwater mortgages held in private-label securitization trusts in order to write down the principal on this debt—thereby reducing the risk of default.

Too Big to Fail

  • FDIC MOU with Canada Deposit Insurance Corporation regarding cooperation in the event of a failure of a large, complex financial institution operating in both countries. MOU available here.

Swaps—End-User Exception

  • Temporary no-action relief for banks with assets of less that $10 billion that elect the end-user exception from required clearing. CFTC Letter No. 13-26, available here.
    • Small bank may enter into uncleared swaps transactions on or after June 10, 2013, without obtaining prior approval of board of directors, provided approval is obtained no later than July 13, 2013, and bank otherwise qualifies for end-user exception.

Bank Closings

  • None

Congressional Activity

  • Corker-Warner bill discussion draft now circulating (see above).
  • Senate Banking Comm. hearing: "Lessons Learned from the Financial Crisis Regarding Community Banks." (June 13, 2013) (see above).
  • House Fin. Serv. Comm. (full committee), "Beyond GSEs: Examples of Successful Housing Finance Models without Explicit Government Guarantees." (June 12, 2013)
  • House Fin. Serv. Comm., Capital Markets and GSEs Subcomm., "Reducing Barriers to Capital Formation." (June 12, 2013)
  • House Fin. Serv. Comm., Monetary Policy and Trade Subcomm., "Assessing Reform at the Export-Import Bank." (June 13, 2013)
  • House Fin. Serv. Comm., Housing and Insurance Subcomm., "The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers." (June 13, 2013)

Upcoming Events

  • June 17
    • Federal Reserve Board meeting on the advance and discount rates to be charged by the Federal Reserve Banks
      • Expectation that Federal Reserve will continue monthly bond-buying program for some time. Wall Street Journal story available here (subscription required). New York Times story available here (subscription required)
  • June 18
    • Sen. Banking Comm. hearing, "Long Term Sustainability for Reverse Mortgages: HECM's impact on the Mutual Mortgage Insurance Fund."
    • House Fin. Serv. Comm., Overnight and Investigations Subcomm., "CFPB Budget Review."
    • House Fin. Serv. Comm., Financial Institutions and Consumer Credit Subcomm., "Examing How the Dodd-Frank Act Hampers Home Ownership"

Regulatory Comment Deadlines

  • July 8 – CFPB: Consumer financial civil penalty fund.
  • July 15 – CFPB: 60-day Paperwork Reduction Act notice: Truth in Savings Act. FHFA: Executive compensation FHFA: Golden parachute and indemnification payments
  • July 22 – SEC: all Dodd-Frank Title VII proposed rules on security-based swaps and security-based swap market participants have been reopened for comment.
    • Includes S7-43-10: End-User Exception to Mandatory Clearing of Security-Based Swaps FHFA: Removal of references to credit ratings
  • August 4 – Federal Reserve: Application of swaps push-out rule to uninsured branches and agencies of foreign banks.
  • August 21 – SEC: Cross-border security-based swap transactions.
  • September __ (90 days after Federal Register publication) – SEC: Money market reforms.