The OTS issued an updated Examination Handbook Section on Capital Adequacy (“New Section 120”), providing extensive revisions from the previous version.  Changes include, among other things, (1) an expanded discussion on assessing compliance with minimum regulatory capital requirements, and (2) updates on the Basel International Accord.  New Section 120 also significantly expands the discussion on assessing overall capital adequacy to include: (a) a review of an institution’s own capital adequacy assessment process; (b) factors that affect capital, including material risks; (c) an assessment of the quality of capital; and (d) an assessment of capital adequacy relative to an institution’s unique risk profile. [Read more →]

The OTS issued a CEO Letter on “no interest, no payment” credit card programs that allow borrowers to defer making payments for extended periods. According to the OTS, these programs are most commonly associated with private label marketing agreements for retailers such as electronics and furniture companies. In the letter, the OTS states that it expects lenders to require minimum payments that will amortize the current balance over a reasonable period of time consistent with the unsecured, consumer-oriented nature of the underlying debt and the borrower’s documented creditworthiness. Specifically, the OTS states that the minimum monthly payment should cover at least a 1% principal balance reduction plus all assessed monthly interest and finance charges. The OTS indicates that a minimum payment should be required from borrowers each month for all credit card programs, including private label arrangements with retailers. While “no interest” promotions may be offered, the OTS expects there to be minimum monthly payments during the promotional period. Click here for the letter.

On October 20, 2008, the Treasury, in conjunction with the FDIC, FRB, OCC and OTS (collectively, the “Federal Banking Agencies”), released application guidelines for financial institutions interested in participating in the TARP Capital Purchase Program (the “CPP”). [Read more →]

The FRB, FDIC, OCC and OTS (the “Agencies”) announced that they are evaluating proposed amendments (the “Proposed Amendments”) to generally accepted accounting principles related to accounting treatment of securitization and other structured finance activities. Specifically, the Proposed Amendments being reviewed by the Agencies are proposed changes to the Financial Accounting Standards Board’s (”FASB”) FAS 140 concerning “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities” and FIN 46(R), a FASB interpretive ruling concerning “Consolidation of Variable Interest Entities.” [Read more →]