Banking Law Prof Blog

California Fires Cause Temporary Bank Closings

Emergency preparedness and disaster recovery plans are required for every bank.  Due to wildfires, some banks are having to exercise those plans, much like banks affected by Hurricane Katrina.  On August 31, the Office of the Comptroller of the Currency authorized national bank offices affected by the California fires to close at their discretion and to make every effort to reopen as quickly as possible.

Note to compliance officers:  Update your disaster recovery plan!

LInk to Proclamation:  http://www.occ.treas.gov/ftp/release/2009-102.htm

(ag) Sept. 2, 2009, in Federal Banking Agencies/OCC

New Exam Procedures for Consumer Protection Laws & Regs

The OCC announced today that it has issued a new electronic version of "Other Protection Laws and Regulations" -- part of the Comptroller's Handbook for examiners.  When advising banks, it's always good to know what the examiners will be looking for.

Link:  http://www.occ.treas.gov/ftp/bulletin/2009-27.html

(ag) Aug. 10, 2009, in Consumer Protection, OCC

Wake Up and Smell the Roses -- or Whatever -- at OCC!

I continue to be appalled but not surprised that Comptroller John Dugan can still argue against state consumer protections because the costs "will be ultimately be borne by consumers."  As if consumers are not bearing the costs of the OCC's shameless history of focusing only on standardization for national banks, preemption of state law regardless of purpose, and maximization of short-term bank profit whatever the long-run consequences! 

This agency is part of the problem we are living with today.  The current administration and Congress need to take this agency and its senior staff to the woodshed.  What will it take for them to recognize that all banking agencies must refocus and that consumer protections cannot continue to be disregarded?  A national banking crisis?  Oh, we have that -- well then, what????   It is clear that without a good housecleaning, this agency will not "get it."  There is no reason -- other than short-term greed -- why national banks cannot comply with reasonable state consumer protection laws.  There is also no reason -- other than arrogance and agency capture -- why the national banking supervisor cannot cooperate with state regulators to assure consumer protections.  

Link to OCC Statement about "Regulatory Reform as long as the OCC gets to keep doing exactly what it has been doing":  http://occ.treas.gov/ftp/release/2009-88.htm

(ag) July 28, 2009, in Consumer Protection, Economy, OCC, Dual Banking System, Financial Regulatory Reform

OCC says, "Don't Confuse Me With the Facts!"

The Feb. 14, 2008, Press Release by Comptroller John Dugan is a stunning example of disregard for reality. 

1.  He says that national banks were not involved in predatory lending.  Okay, maybe so.

2.  He says that the worst abuses came from state-licensed lenders.  Still, maybe so.

3.  He claims that these state-licensed lenders are exclusively the responsibility of state regulators and anyone [Eliot Spitzer, in particular] claiming "that the OCC and national bank preemption have prevented the states from taking action against predatory or abusive lenders" is "just plain wrong."

How could the Comptroller forget about the Supreme Court case of Watters v. Wachovia?  The OCC fought tooth and toenail to prevent the Michigan banking commissioner from enforcing a state law that required state-chartered mortgage companies to register with the state to be monitored for consumer protection purposes?  OCC claims to have exclusive visitorial authority over operating subsidiaries of national banks [a state-licensed mortgage lender in this very case] and the Supreme Court upheld their position. 

Comptroller Dugan's Feb. 14, 2008, press release conveniently omits any mention of OPERATING SUBSIDIARIES.  He forgets to mention that, under Watters v. Wachovia, state regulators CAN'T EXAMINE ANY STATE-CHARTERED MORTGAGE LENDERS IF THEY ARE OPERATING SUBSIDIARIES OF NATIONAL BANKS. State regulators can't even require them to register for tracking purposes. The OCC wanted these state-chartered mortgage lenders under their exclusive regulatory authority as national bank operating subsidiaries so badly that they went all the way to the Supreme Court to achieve that result.  Even though it was clear that the OCC did not have the resources to examine these operating subsidiaries or to enforce sanctions for predatory lending practices, the OCC insisted on blocking the state from exercising any authority over them. 

This statement from Comptroller Dugan's press release is so completely contrary to the Supreme Court decision and the OCC's vigorous arguments in Watters that it seems Comptroller Dugan and his staff that allowed him to publish it have suffered total amnesia. He says, "Nothing the OCC has done has prevented the states from regulating and preventing abuses among the lenders that they license – lenders that are the source of most of today’s problems.  The states have ample authority – as well as clear responsibility – to set standards for these lenders and enforce them."

This is such a bald-faced misstatement that it should be grounds for going back to the Supreme Court for reversal of the Watters case.

Read this Press Release for yourself:  http://www.occ.gov/ftp/release/2008-16.htm

(ag)February 20, 2008, in OCC - I need a new category for "Regulatory Disinformation".

The First Bank Failure of 2008

On Friday, Jan. 25, 2008, the OCC closed Douglass National Bank, Kansas City, MO, a $53 Million bank.
http://www.occ.gov/ftp/release/2008-7.htm

FDIC is Receiver of this failed financial institution.  All deposit accounts have been transferred to Liberty Bank and Trust Company, New Orleans, LA.  Cost to the Deposit Insurance Fund is estimated to be approximately $5.6 Million.

(ag) Monday, Jan. 28, 2008, in OCC.

Gee, I Thought All Bankers Knew That!

Here's the August 3, 2007, announcement from the OCC: 
OCC Working Paper 2007-4 "Loss Given Default of High Loan-to-Value Residential Mortgages"
The authors show that loss given default can largely be explained by various characteristics associated with the loan.

The authors of this study look at residential mortgage loans and find that if the lender takes a loss when the borrower defaults, that loss can "largely be explained by characteristics associated with the loan, the underlying property, and the default, foreclosure and settlement process." They do find that loan-to-value ratio is the single most important determinant.

Link:  http://www.occ.gov/ftp/workpaper/wp2007-4.pdf

(ag) Aug. 6, 2007, in OCC/Lending Issues

Two New OCC Web Publications: 1. Legal Interpretations and Decisions; and 2. Permissible Activities for National Banks

Two July publications from the OCC are worth checking out:

OCC releases two publications that provide the latest OCC interpretations and decisions authorizing activities for national banks and their operating subsidiaries: Significant Legal, Licensing, and Community Development Precedents for National Banks: 2006 (annual) and Activities Permissible for a National Bank, Cumulative: 2006.

(ag) July 19, 2007, in OCC

Julie Williams Talks About the Watters Decision, Subprime Lending, and Consumer Protection

OCC's First Deputy Comptroller and Chief Counsel Julie Williams spoke to the New York Bankers Association this week. 

First, she addressed the Supreme Court decision in Watters v. Wachovia.  She says it's not new news.  She also says "move on". 

With respect to mortgage lending through subsidiaries of national banks, the OCC now clearly has responsibility to police predatory lending & deal with consumer protection issues. 

Ms. Williams calls for cooperation between state and federal regulators.

LInk:  http://www.occ.treas.gov/ftp/release/2007-72a.pdf

(ag) July 13, 2007, in Consumer Protection/Predatory Lending/Preemption

You Don't Have To Be Chicken Little to Adjust Your System for the Time Change

I've already posted news about the earlier-than-usual switch to Daylight Savings Time this year, so I am gratified that the OCC agrees this is worth bankers' attention.

Link to OCC Bulletin 2007-9:  Daylight Savings Time Change - Risk Management Guidance:  http://www.occ.treas.gov/ftp/bulletin/2007-9.html

New Change in Bank Control Manual

Advising clients about Change of Control intricacies?  Or just trying to explain to law students how to rebut presumptions of control or when you may have a change of control because of "acting in concert" rules?  Check out the OCC's Change in Bank Control booklet, available now on the OCC website.

Link:  http://www.occ.treas.gov/corpbook/group3/public/pdf/cbca.pdf

(ag) Feb. 5, 2007, in Federal Banking Agencies/OCC

OCC's Quarterly Journal

As of Jan. 18, 2007, OCC has posted its Quarterly Journal for the 2nd Quarter 2006.  This is a valuable source of collected data, speeches & testimony, supervision activities and other information relating to national banks.

Link:  http://www.occ.treas.gov/qj/qj25-3/qj25-3.pdf

(ag) Jan. 18, 2007, in Federal Banking Agencies/OCC

What's the OCC Going to Charge My Client?

The OCC's Current Fee Schedule, effective Jan. 1, 2007, reflects increases due to inflation indexing.  The OCC will also apply a surcharge for banks that require increased supervisory resources.  Check out the Fee Schedule for the current Application Fees, including new charters; Semiannual Assessments; and FOIA fees.

LInk:  www.occ.treas.gov/ftp/bulletin/2006-45.PDF

(ag) Dec. 20, 2006, in Federal Banking Agencies - OCC

OCC's Annual Report for 2006

The OCC's Annual Report for 2006 is well worth a look.  Particularly enlightening are the sections on "Comptroller's Viewpoint" and "Looking Ahead". 

After noting that this is the second consecutive year in which no national bank has failed, Comptroller Dugan raised two fundamental questions:  "Are we at the stage of the credit cycle where risks in the system begin to increase because of less favorable macroeconomic conditions, increased competition, and weaker underwriting standards?  What must we be doing to prepare the banking system and the OCC for the challenges ahead?" 

Other key points: 

1.  The OCC Survey of Credit Underwriting Practices indicated that both commercial and retail loan underwriting standards were less stringent for the third consecutive year.  Commercial real estate and residential mortgage loan underwriting standards were lower, even as the housing market cooled.  Competition for a shrinking pool of loans explains this potentially dangerous trend.  Interagengy Guidance on Nontraditional Residential Mortgages represents a coordinated regulatory effort to address this problem.  The federal banking agencies also proposed Guidance on Commercial Real Estate Concentrations. 

2.  Maintaining strong capital in the banking system is particularly important in these economic times.  Proposed rules relating Basel II address this issue. 

3.  Community Bank Director Workshops represented a significant OCC outreach project.

4.  Bank Secrecy Act and Anti-Money Laundering initiatives remained a high priority.

5.  Hurricane recovery, community development, and small business initiatives represented significant issues during 2006. 

6.  Enhancing the value of the National Bank Charter and the litigation over whether state laws are preempted as to operating subsidiaries of national banks occupied significant focus for this OCC this year.  The U.S. Supreme Court should provide some answers with the opinion in Watters v. Wachovia, expected in the Spring of 2007.

7. Information security has a high priority.  During 2006, the OCC itself suffered some data comprises -- and seeks to guard against these problems.

8.  Dugan congratulated the OCC on being ranked 6th out of 170 agencies in a survey of "The Best Places to Work in the Federal Government" and among Business Week's "50 Best Place to Begin a Career in America".

(ag) Dec. 16, 2006, in Federal Banking Agencies/OCC

OCC Posts Interpretations and Actions for November

As of Nov. 24, 2006, OCC Interpretive Letters, Conditional Approvals, Final Enforcement Actions, and CRA Performance Evaluations for the month of November are available online.  These categories of OCC Actions are published on the OCC website each month.

Link:  http://www.occ.treas.gov/interp/nov06/intnov06.htm

(ag) Nov. 27, 2006, in Federal Banking Agencies - OCC

Don't Forget About the Ombudsman as a Way to Resolve Disputes with the OCC

Sam Golden exemplifies the best features of Ombudsman for a federal banking agency.  In fact, you might say he invented the role.  The OCC was the first federal banking agency to establish an ombudsman's office in 1993.  Sam has been the only occupant of this office.  The office was originally designed to provide an independent mechanism for banks to challenge agency decisions without fear of retribution.  Thanks to Sam Golden's fair, respectful, and even-handed approach, this office provides an excellent service to bankers and their lawyers.  The Ombudsman has authority to resolve Appeals from agency decisions and can function formally like an arbitrator; however, most disputes are resolved through facilitated airing of issues and negotiating a resolution. 

So, if you think that C&D was motivated by a personality conflict with the examiner-in-charge, the Ombudsman's Office can help you address that issue. 

This Office now also handles complaints by customers of national banks through its Customer Assistance Group.

LInk to last posted Annual Report:  http://www.occ.treas.gov/2004Report.pdf

Link to the Consumer Complaints & Assistance section of the OCC website:  http://www.occ.treas.gov/customer.htm

( ag) Nov. 15, 2006, in Federal Banking Agencies - OCC

Derivatives Are Risky Business

Comptroller of the Currency John C. Dugan addressed the New York Bankers Association Annual Convention on Nov. 10, 2006, focusing on the risks to the financial system posed by derivatives.  Derivatives can be an effective risk management tool and one in six national banks uses derivatives in that way.  Nevertheless, five banks, all holding a national charter, hold 97% of the $119 trillion notional amount of outstanding derivatives.  That raises concerns not only about concentration but also about the pricing, credit, and operational risk involved in the use of derivatives.  The OCC maintains continuous, on-site presence in large national banks as part of its examination process, which allows the OCC to monitor derivative use.  Even so, major market disruption could result if these large, concentrated holdings are mismanaged.

Link:  http://www.occ.gov/toolkit/newsrelease.aspx?Doc=HI14R11T.xml

(ag) Nov. 12, 2006, in Federal Banking Agencies - OCC

OCC on the March Again - Extending Powers One Step at a Time

The OCC has released another "real estate powers" approval letter dated Sept. 15, 2006, which is worthy of perusal.  In this case, the bank is permitted to redevelop land where one of its branches is located by signing a 40-year lease with an unaffiliated third-party developer.  The developer builds a 17,000 square foot retail complex and subleases back to the bank half of that space for its branch.

Link:  http://www.occ.treas.gov/interp/oct06/int1072.pdf

This letter was posted on the OCC website as part of the Agency's Oct. 25, 2006, release of interpretations for Oct. 2006.  http://www.occ.treas.gov/interp/oct06/intoct06.htm

(ag) Oct. 27, 2006, in Real Estate Powers/Federal Banking Agencies - OCC