April 2009


From the editors of CCH’s Banking and Finance publications, this update describes significant developments covered in our products in recent reports, as well as product enhancements.

Market Crisis Resources, included below, provides links to vital information on the current market crisis.

A Hot Topic is included below to provide guidance on researching an issue of current interest.

Past issues of the Banking and Finance Update can be viewed on the Banking and Finance Web page at: http://business.cch.com/updates/bankingFinance.

If you have questions or comments concerning the information provided below, please contact the Banking and Finance Update editor at Serena.Lynn@wolterskluwer.com

 

Federal Banking Law Reporter

 

Treasury Unveils Public-Private Investment Program
The Treasury Department on March 23, 2009, outlined its plan to create a Public-Private Investment Program to deal with the problem of "legacy assets"—also called "toxic assets"—held on the balance sheets of financial institutions and stymieing the flow of credit in the economy. The Public-Private Investment Program will use $75 to $100 billion in Troubled Asset Relief Program (TARP) funds, in addition to capital from private investors, to buy up toxic assets in the form of real estate loans held directly on the books of banks and securities backed by loan portfolios. This story appears in Report Letter No. 2311, March 26, 2009 (ip access user)

Fed to Increase Balance Sheet to Stimulate Recovery
With the economy continuing to contract and no room remaining for interest rate cuts, the Federal Open Market Committee decided at its meeting that ended on March 18, 2009, to increase the size of the Federal Reserve Board's balance sheet in an effort to stimulate economic recovery. As expected, the Committee also voted to maintain the federal funds rate target at 0 to .25 percent. The Fed will purchase an additional $750 billion of agency mortgage-backed securities, for a total of $1.25 trillion in 2009. It also will increase its purchases of agency debt by $100 billion, for a total of up to $200 billion this year. Finally, up to $300 billion of longer-term Treasury securities will be purchased. This story appears in Report Letter No. 2310, March 20, 2009 (ip access user).

Deposit Insurance Costs to Increase
The FDIC has imposed a special assessment on insured depository institutions and also has increased the base assessment rates in steps toward restoring the Deposit Insurance Fund reserve ratio to the required 1.15 percent. A 20-basis point emergency special assessment will be imposed on June 30, 2009, and collected on Sept. 30, 2009, and the interim rule the FDIC adopted permits a second, 10-basis point assessment if it is necessary. Related documents begin at ¶95-780 (ip access user).

Mortgage Loan Modification Guidelines Issued
The Treasury Department has released the guidelines that outline which consumers will be eligible for mortgage loan modifications under the Obama administration's "Making Home Affordable" program. The guidelines also set out the modification terms, the incentive payments that lenders and servicers may receive, and transparency and accountability requirements. According to the Treasury, the two aspects of the program—one which will offer refinancing loans and one which will offer modification of existing loans—could help as many as nine million homeowners, with four to five million homeowners being able to refinance their loans and three to four million being able to obtain loan modifications. Related documents are reported at ¶95-788 (ip access user).

State Member Banks Warned About Funding Sources
The Federal Deposit Insurance Corp. has told the banks it supervises to beware of relying on funding sources such as brokered or Internet deposits, deposits that are newly insured under the temporary FDIC programs, secured borrowings or other wholesale funding sources. Reliance on these funding sources could increase the institution's risk profile and also increase the risk to the deposit insurance fund, the agency said. As a result, affected institutions will be subject to heightened supervisory review and enforcement and may be charged higher deposit insurance premiums. FIL-13-2009 is reproduced at ¶47-986 (ip access user).

Simultaneous Notification Required for Interest Rate Increase
A credit card lender that imposed a discretionary interest rate increase on a consumer who made a late payment was required by the Truth in Lending Act and Reg. Z to provide a contemporaneous notice of the increase, the U.S. Court of Appeals for the Ninth Circuit has decided. Including the notice only in the following periodic statement, after the increase took effect, could have been a violation of TILA and Reg. Z, the court said. McCoy v. Chase Manhattan Bank (9thCir) is reported at ¶101-074 (ip access user).

OTS Guides on Documenting Use of Federal Funds
The Office of Thrift Supervision has issued guidance on monitoring and documenting the use of funds from federal programs. In a recent letter to federal thrift chief executive officers, the OTS stressed that savings associations participating in federal financial stability and guaranty programs are expected to document how their participation supports prudent lending and/or their efforts to work with borrowers to avoid preventable foreclosures. To that end, each institution should implement a process to monitor its use of the funds. CEO Letter 295 is reported at ¶95-822 (ip access user).

Product Enhancements

Basel II Capital Rules Explanations and Issuances Updated and Reorganized
Updated explanations and supplementary source material on the Basel II capital rules have been added as part of a reorganization of materials in the “Capital—Basel II” division in the Federal Banking Law Reporter Researcher. The discussion of the regulatory requirements is reproduced at ¶47-151—¶47-157 (ip access user). The International Convergence of Capital Measurement and Capital Standards: A Revised Framework Comprehensive Version is reproduced at ¶47-161 (ip access user). For further information on coverage of Basel II regulatory requirements, see the Hot Topic of the Month at the end of this Update.

Market Crisis Resources

This section provides links to vital information on the current market crisis. We offer a compendium of product coverage, including report letter stories, white papers, primary source documents (for example, agency issuances and legislative developments) and other information to help track and understand the recent market upheavals and ensuing regulatory response.

· See the new CCH Financial Crisis News Center for news and links to vital information on the current financial crisis, including a repository of primary source material and analytical content. The list below is an excerpt of CCH Subscriber resources found at the Financial Crisis News Center, showing items reported in the Federal Banking Law Reporter during February.

Congress

Legislative Materials

  • Oversight Panel Issues "Roadmap" for Foreclosure Mitigation, March 6, 2009, ¶95-806 (ip access user)
  • Congress Issues AIG Restructuring Report, March 2, 2009, ¶95-797 (ip access user)
  • Report Provides Valuation Analysis of TARP Transactions, Jan. 27, 2009, ¶95-779 (ip access user)
  • Dodd Statement on Executive Compensation Amendment in H.R. 1—the American Recovery and Reinvestment Act of 2009, Feb. 12, 2009, ¶75-159 (ip access user)
  • Excerpt of Conference Report to Section 7001 of H.R. 1—the American Recovery and Reinvestment Act of 2009, Feb. 12, 2009, ¶75-158 (ip access user)

Federal Deposit Insurance Corporation

Agency Issuances

Federal Reserve Board

Agency Issuances

Interagency Statements

New York Attorney General

  • Cuomo Sends Letter to Congressman Frank Regarding Bonuses Paid at AIG, March 17, 2009, ¶95-821 (ip access user)
  • Cuomo Sends Letter to Edward M. Liddy, Chairman & CEO of AIG Regarding Compensation Arrangements, March 16, 2009, ¶95-819 (ip access user)

Office of the Comptroller of the Currency

Agency Issuances

Office of Thrift Supervision

Agency Issuances

Securities and Exchange Commission

Releases

  • Exemptions Allowing ICE US Trust LLC to Operate as Central Counterparty for Credit Default Swaps, Release No. 34-59527 (March 6, 2009), ¶95-805 (ip access user)

Staff Guidance and No-Action Letters

Treasury Department

Agency Issuances

FEDERAL BANKING NEWS SOURCES

  • Advance Release Documents, provides federal Banking highlights of significant current events and regulatory activity (See, for example, Feb. 2, 2009 (ip access user)).
  • The Federal Banking Law Report Summary provides the news of the week (See, for example, Federal Banking Report No. 2307, Feb. 26, 2008 (ip access user)).
  • The Federal Banking QuickChart for Current Developments can be used to find and track regulatory action and legislation (See e.g., under Agency Guidance—Capital, an Oct. 14, 2008, announcement that the Treasury Department, Fed and FDIC announced a plan to purchase up to $250 billion of preferred shares in financial institutions).
  • Bank Digest Online is a comprehensive daily journal of current events and regulatory activity providing an abstract and the full text of the day’s releases (See, for example, Feb. 27, 2009 (ip access user) which includes a legislative update).
  • Subprime, Mortgage and Securitization Law Update is a monthly newsletter, with frequent Current Developments updates on the CCH Internet Research NetWork, providing coverage of regulatory, legal and industry developments involving subprime lending, securitization reform and the financial crisis (See, for example. Feb. 27, 2009 (ip access user)).

Subprime, Mortgage and Securitization Law Update

Geithner Seeks Expanded Power Over Non-Bank Financial Firm
Treasury Secretary Timothy Geithner told Congress that his agency should have the legal means to manage the orderly restructuring of a large, complex, non-bank financial institution that poses a threat to the stability of the financial system. "The administration proposes legislation to give the U.S. government the same basic set of tools for addressing financial distress at non-banks as it has in the bank context," Geithner told the House Financial Services Committee on March 24, 2009. This story appears in the March 27, 2009 update (ip access user).

Website Created to Help Consumers Estimate Mortgage Payment Reductions
The Treasury Department and the Department of Housing and Urban Development have launched a new website for consumers seeking information about the administration's Making Home Affordable loan modification and refinancing program. MakingHomeAffordable.gov offers features including interactive self-assessment tools that are intended to help borrowers determine if they are eligible to participate and calculate the monthly mortgage payment reductions they could realize under the Making Home Affordable program. This story appears in the March 23, 2009 update (ip access user).

President Obama Defends Budget Policy
President Obama on March 17 made the case for his budget blueprint and said that critics of the plan should offer "constructive alternative solutions." Obama noted that the administration's budget does not attempt to resolve every problem or tackle every issue. However, the president pledged that he would not cut back on those areas that he said are key to long-term economic growth, namely health care reform, education, energy and middle income tax relief. This story appears in the March 19, 2009 update (ip access user).

GAO Says Restrictions Hamper SEC's Ability to Regulate Credit Default Swaps
A report by the Government Accountability Office (GAO) to Congress on credit default swaps (CDS) concluded that the U.S. market for these instruments is largely unregulated and contains a number of risks. The report should aid in the drafting of legislation creating a systemic risk regulator. Participants in the CDS market include banks, brokerage firms and hedge funds. The report was presented as testimony before a House subcommittee hearing on systemic risk regulation. This story appears in the March 16, 2009 update (ip access user).

Bankruptcy Trustee Files $1 Billion Suit Against First Magnus Executives
A bankruptcy litigation trustee has filed a $1 billion lawsuit against former executives of failed Alt-A wholesale lender First Magnus Financial Corp. for excessive spending. The trustee, Larry Lattig, has accused the executives of allegedly overpaying themselves hundreds-of-millions of dollars as the company was sinking. According to the suit, two weeks before a bankruptcy filing by the firm, which employed more than 5,000 people, executives took the corporate jet to a Hawaiian resort. Lattig represents creditors in the case. This story appears in the March 10, 2009 update (ip access user).

Consumer Credit Guide

Fed Proposes to Amend Disclosure Requirements for Private Education Loans
The Federal Reserve Board has proposed amendments to Regulation Z (Truth in Lending) that would revise the disclosure requirements for private education loans. Under the proposed amendments, lenders extending private education loans would be required to: provide disclosures about loan terms and features on or with the loan application; disclose information about federal student loan programs that may offer less costly alternatives; and provide additional disclosures when the loan is approved and when the loan is consummated. The Fed has also drafted model disclosure forms that creditors would use to comply with the new disclosure requirements. Federal Agency Releases, ¶30,137 (ip access user).

Collector’s Statement Hinges on “Unsophisticated Consumer’s” Perspective
The U.S. Court of Appeals for the Seventh Circuit issued opinions in three cases addressing the issue of whether a debt collector’s statement in a collection letter could be considered “false” in violation of the federal Fair Debt Collection Practices Act (FDCPA). In each case, the Seventh Circuit rejected the argument posed by the respective consumers that the only determination for the court was to determine the falsity or accuracy of the statement itself. The court emphasized that even if a collector’s statement could be considered “false” in a technical sense, the statement would not violate the FDCPA if it would not mislead or confuse an “unsophisticated consumer.” The court focused on the materiality of the collector’s statements, whether the objective “unsophisticated consumer” would rely upon the statement, whether the consumer would be confused by the statement, and whether the statement obscured or overshadowed other language in the collection letter. Wahl v. Midland Credit Management, Inc. (7thCir) ¶52,232 (ip access user); Hahn v. Triumph Partnerships, LLC (7thCir) ¶52,235 (ip access user); and Muha and Cajski v. Encore Receivable Management, Inc. (7thCir) ¶52,236 (ip access user).

State Law Update

Oregon: The Department of Consumer and Business Services (DCBS) has revised the annual licensing fee for consumer finance licensees. For short-term lender applicants or licensees, the fee is $750 for an initial application for each location to be licensed and $750 for the renewal of a license for each licensed location. Previously, the fee for each was $1,200. Regulation at Oregon ¶8030 (ip access user).

Smart Charts Highlights

Some of the latest changes reflected in Consumer Credit Smart Charts include:

  • Consumer Credit Topics Smart Charts. The Interest-Usury Topics Smart Chart reflects the current monthly and quarterly interest rate modifications for April 2009.
  • The Legislative Developments Smart Charts now are updated regularly as legislation is enacted, allowing users to keep up to date without waiting for a scheduled report. Links to legislative summaries and to full text of laws amended, repealed or added are provided. Recent updates include:
    • Arkansas: Identity Theft Protection—Consumer Report Security Freeze Act.
    • Colorado: Uniform Consumer Credit Code; Debt Management Services.
    • Kentucky: Deferred Deposit Transactions.
    • Mississippi: Identity Theft—Fraudulent Use of Another's Identity.
    • Oregon: Credit Cards—Fraudulent Use—Crimes.
    • Utah: Uniform Consumer Credit Code, Mortgage Lending and Servicing; Collection Agencies, Exemptions.
    • Wyoming: Uniform Consumer Credit Code—Mortgage Loan Originators; Rental Vehicle Agencies.

Secured Transactions Guide

Untimely Perfection Costs Creditor Its Lien
A debtor could avoid a finance company's lien perfected within 90 days of the debtor's filing of a petition for bankruptcy as a preferential transfer because the finance company failed to timely perfect its lien. The debtor financed a vehicle on January 15. The finance company submitted an application to perfect its lien on the vehicle title on February 29. The debtor filed a petition for bankruptcy on April 18. The bankruptcy trustee sought to avoid the finance company's lien on the vehicle. The Bankruptcy Code provides that a creditor's security interest perfected within 90 days prior to the debtor's filing for bankruptcy relief may be avoided as a preferential transfer. The finance company argued that its lien was perfected on the date of sale, more than 90 days prior to the filing of the petition. Alabama law provides if an application for a certificate of title is delivered within 30 days of the sale of the vehicle, the lien is perfected as of the date of sale. However, the finance company's application was received more than 30 days after the sale. The excuse that failure to timely perfect was "a standard practice in the automotive industry" was not a recognized exception to the law. In re Baker; Reding v. T.R. Motors, Inc. (Bankr MDAla) appears at ¶56,179 (ip access user).

Financing Statements Were Not Seriously Misleading
Financing statements which incorrectly identified collateral were not so misleading as to render them ineffective. Because the description identified all of the debtor's assets as collateral, it was incumbent on subsequent creditors to investigate whether the collateral at issue was covered by the security agreement. A debtor assigned its interest in two insurance annuity contracts as collateral. The financing statements described the collateral as "all of Debtor's right, title, and interest in and to, assets and rights of Debtor” but listed the wrong issuer and policy numbers for the annuity contracts. The debtor subsequently assigned its interest in the same two annuity contracts to a second creditor. The second creditor argued that the financing statements filed by the original creditor were seriously misleading. A financing statement is not seriously misleading if "it provides notice that a person may have a security interest in the collateral claimed." Any errors in describing the annuity contracts were immaterial, because the financing statements identified all of the debtor's assets as collateral. ProGrowth Bank, Inc. v. Wells Fargo Bank, N.A. (8thCir) appears at ¶56,180 (ip access user).

State Law Update

Colorado: New requirements for certificate of titles to manufactured homes have been added in Colorado. Where an applicant for a certificate of title to a manufactured home is unable to provide sufficient evidence of ownership, surety for the certificate of title will no longer be required for manufactured homes 25 years old or older, if certain statutory requirements are met. Other requirements have been added for manufactured homes affixed to the ground prior to July 1, 2008, where no certificate of permanent location was filed or recorded and for manufactured homes that occupy real property subject to a long-term lease with an express term of at least ten years. The law begins at Colorado ¶1206 (ip access user).

Nebraska: A change in the provision regarding the effect of errors or omissions on a filed financing statement that was originally to take effect Sept. 2, 2009, has been delayed until Sept. 2, 2010. The revised provision will specify that if a search of the records of the filing office under the debtor's correct name, using the filing office's standard search logic, would disclose a financing statement that fails to sufficiently provide the name of the debtor, the name provided does not make the financing statement seriously misleading. The law appears at Nebraska ¶R816 (ip access user).

Wyoming: The law relating to motor vehicle certificates of title has been revised. Among other changes, a Wyoming certificate of title must contain an appropriate notice whenever records readily accessible to the state indicate that the motor vehicle was previously issued a title or registration from any jurisdiction that bore any word or symbol signifying that the vehicle was "salvage", "unrebuildable", "parts only", "scrap", "junk", "nonrepairable", "reconstructed", "rebuilt" or any other symbol or word of like kind, or that it has been damaged by flood. Additional requirements have been added for titling rebuilt, salvage, damaged or reconstructed vehicles and selected definitions have been revised. The law begins at Wyoming ¶1101 (ip access user).

Smart Charts Highlights

Latest Changes Reflect Updated Filing Fees
The Secured Transactions UCC Filing Fees Smart Chart has been updated to reflect filing fee changes in North Dakota that will take effect Aug. 1, 2009, and additional changes in South Dakota that will take effect July 1, 2009.

 

Financial Privacy Law Guide

CRA Settles FTC Charges for Failure to Screen
A consumer reporting agency (CRA) that allegedly failed to properly screen prospective customers and, as a result, sold more than 300 credit reports to identity thieves has settled charges brought by the Federal Trade Commission that it violated the Fair Credit Reporting Act (FCRA). According to the FTC's complaint, the CRA used credit information, including consumers' names, Social Security numbers, birth dates, bank and credit card account numbers and credit histories from other consumer reporting agencies to create reports that landlords then used to assess potential renters. However, the company failed to properly screen new customers. It did not require an applicant to submit any supporting documentation that it was a landlord. As a result, identity thieves posing as property owners were given an account with unlimited access to credit reports, and the account was used to access at least 318 reports containing sensitive personal information. United States v. Rental Research Services, Inc. (DMinn) appears at ¶100-425 (ip access user).

FACT Act Does Not Violate Fifth, Fourteenth Amendments
A federal district court in Illinois held that the Fair and Accurate Credit Transactions Act (FACT Act) does not violate the U.S. Constitution, thus allowing a class action suit to proceed. A consumer had visited the Skydeck at the Sears Tower, a popular tourist attraction in Chicago, paid for admission with a credit card, and received a computer-generated receipt that contained the expiration date of his card in violation of the FACT Act. The court rejected the Skydeck operator’s argument that the FACT Act violates the due process clause because the range of statutory damages combined with punitive damages is impermissibly vague and excessive and constitutes impermissible “double punishment.” The court also rejected the argument that the FACT Act violates the Equal Protection clause because it exempts handwritten and imprinted credit card receipts. A story on Irvine v. 233 Skydeck, LLC (NDIll) appears in Privacy Extra, March 31, 2009 (ip access user).

Credit Monitoring Costs Are Not Actual Damages Under FACT Act
A consumer who failed to allege any injury to his credit or identity could not maintain an action against a utility company for its negligent noncompliance with the credit card truncation requirements of the Fair and Accurate Credit Transaction Act (FACT Act). According to a federal district court, credit monitoring costs do not constitute actual harm under the Act. A story on Aliano v. Armiegas Partners, L.P. (NDIll) appears in Privacy Extra, March 31, 2009 (ip access user).

GLBA Does Not Completely Preempt State Law Claims
A federal district court has ruled that the Gramm-Leach-Bliley Act (GLBA) does not completely preempt state consumer protection laws. As a result, a consumer class action brought against a bank for violations of state consumer protection laws for the bank's alleged failure to protect the consumers' nonpublic information could not be removed to federal court. The Act provides that a state law is preempted only to the extent that it is inconsistent with the provisions of the GLBA. Congress did not intend the GLBA to provide the exclusive cause of action when a financial institution fails to protect the privacy of its customers and the security of those customers’ nonpublic information. A story on C.S. v. United Bank, Inc. (SDWV) appears in Privacy Extra, March 31, 2009 (ip access user).

Bankruptcy Law Reporter

Failure to File Financial Disclosures Does Not Warrant Automatic Dismissal
In an issue of first impression, the U.S. Court of Appeals for the First Circuit has determined that a bankruptcy court may enter an order excusing nondisclosure of the items required under Bankruptcy Code Sec. 521(a)(1)(B)(iv) after the time for filing the required information has expired. Chapter 7 debtors were not permitted to “game the system” and obtain “automatic dismissal” of their case by citing their own failure to file payment advices or other financial disclosure information in an effort to avoid losing an asset to the Chapter 7 trustee. Acosta-Rivera and Balseiro-Chacon (1stCir) ¶81,430 (ip access user)

Trustee Has Standing to Oppose Motion to Reclassify
A Chapter 13 trustee, who is charged with assuring that claims are properly disbursed, has standing to object to a motion to reclassify a claim. Because a trustee must be able to verify that secured claims are, in fact secured, it necessarily follows that a trustee has standing to object when a debtor attempts to reclassify a secured claim as an unsecured claim. Overbaugh (2ndCir) ¶81,438 (ip access user)

Limited Stay Relief Order Could Not Be Expanded to Bar Discharge
A creditor’s state court judgment lacked preclusive effect to establish the elements of a Sec. 523(a)(2)(A) nondischargeability claim. The fraudulent misrepresentation claim pursued by the creditor in state court was outside the scope of a bankruptcy court order that granted limited relief from the automatic stay to allow the creditor to proceed against bonding companies, not the debtor. The judgment in the pending state court action was effective only as to those claims actually pending in the state court at the time the order modifying the stay issued or that were expressly brought to the attention of the bankruptcy court during the relief from stay proceedings. Wardrobe (9thCir) ¶81,446 (ip access user)

Bankruptcy Legislation
The House of Representatives has passed H.R. 1106, the Helping Families Save Their Homes Act of 2009, also known as the “cramdown” bill, would allow bankruptcy judges to modify the loan terms for families with existing mortgages on their primary residence when they have exhausted other options. Under H.R. 1106, the court can reduce the mortgage only to the current fair market value of the house. Judges may also reduce the interest rate, reduce the principal or extend the life of an existing loan. The bill seeks to ensure that bankruptcy is avoided whenever possible, with families having to demonstrate that they have made good faith efforts to get a loan modification outside of bankruptcy. Homeowners would also have to share the increase in property value with the lender for five years. The bill has been referred to the Senate Committee on Banking, Housing and Urban Affairs

 

Individual Retirement Plans Guide

Lump-Sum Distribution from Plan to Roth IRA Allowed
The IRS has ruled that mandatory retirement deductions, discretionary contributions and voluntary contributions to certain qualified plans, if distributed in a lump-sum distribution from a plan, could be rolled over into a Roth IRA. The related interest was subject to taxation with respect to the tax year of the distributee or recipient in which the amount was distributed. IRS Letter Ruling 200909074 is reported at ¶6125 (ip access user).

 

Hot Topic of the Month

This month’s Hot Topic of the Month is the Basel II capital rules for banks. Extensive coverage of the federal banking agencies’ Basel II regulatory requirements is found in the Federal Banking Law Reporter and Bank Digest.

The Basel Committee on Banking Regulations and Supervisory Practices comprises representatives of the central banks and supervisory authorities of the Group of Ten countries. The Group of Ten countries include Belgium, Canada, France, Germany, Italy, Luxembourg, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States. The Basel Committee meets at the Bank for International Settlements in Basel, Switzerland and is an organization in which these major banking regulators have coordinated an internationally recognized risk-based capital framework.

The regulatory provisions require some banking organizations, referred to as "core banks," to use an internal ratings-based approach to calculate regulatory capital requirements for credit risk and an advanced measurement approach to calculate regulatory capital requirements for operational risk. Core banks are generally a group of large and internationally active U.S. banking organizations. Other banking organizations may opt-in to use their own internal ratings-based and advanced measurement approaches provided they meet certain qualification requirements.

The Federal Banking Law Reporter Researcher “Capital—Basel II” division provides a compilation of CCH explanations and official source material. An editorially authored discussion of regulatory requirements is found at ¶47-151—¶47-157 (ip access user).

The International Convergence of Capital Measurement and Capital Standards: A Revised Framework Comprehensive Version is reproduced in its entirety at ¶47-161 (ip access user). This document is a compilation of the June 2004 Basel II Framework, the elements of the 1988 Accord that were not revised during the Basel II process, the 1996 Amendment to the Capital Accord to Incorporate Market Risks, and the 2005 paper on the Application of Basel II to Trading Activities and the Treatment of Double Default Effects.

The bank regulatory agencies—Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corp. and Office of Thrift of Supervision—have implemented the Basel II Internal Ratings Based Approach for Credit Risk and the Advanced Measurement Approaches for Operational Risk. The Advanced Capital Adequacy Framework Regulations are codified and reproduced in Federal Banking Law Reporter Regulations as follows:

The agencies have also issued interagency statements on the application of Basel II:

  • Qualification Process for Advanced Approaches Risk-Based Capital Framework Implementation, July 8, 2008, ¶47-130 (ip access user)
  • Interagency Guidance on Supervisory Review of Capital Adequacy (Pillar 2), July 15, 2008, ¶47-131 (ip access user)

Comprehensive coverage of any announcements or statements by banking regulators relating to the Basel Committee can be found in Bank Digest. For example:

  • The FDIC has issued support for the work of the Basel Committee on Banking and Supervision and the International Association of Deposit Insurers (IADI) on issuing the Core Principles for Effective Deposit Insurance Systems for public consultation. The core principles address a range of issues including deposit insurance coverage, funding and prompt reimbursement. They also address issues related to public awareness, resolution of failed institutions and cooperation with other safety net participants including central banks and supervisors. Bank Digest, March 18, 2009 (ip access user).