Escritura publica eirl

Overview of Federal
Bank Enforcement Actions
Presented by
Venable LLP
Ronald R. Glancz, Esq. (Chair, Financial Services Group)
Meredith Boylan, Esq. (Associate, Commercial Litigation)

© Venable 2012

1

Statutory Authority for Bank Enforcement Powers
Section 8 of the Federal Deposit Insurance Act


12 U.S.C.§1818 (termination/suspension of insurance,
cease & desist, removal/prohibition/suspension, civil
money penalties)



12 U.S.C.§1831o (prompt corrective action)



12 U.S.C.§1831p-1 (safety & soundness directives)



12 U.S.C.§3907 (capital adequacy) (International
Lending Supervision Act of 1983)

© Venable 2012
2

Supervisory Authority
How a bank responds to findings and
recommendations in a report of examination,
Matters RequiringAttention (MRAs), and
Matters Requiring Board Attention (MRBAs)
is a key factor in whether a Federal Banking
Authority (“FBA”) will take an enforcement
action and how severe that action will be.
See OCC PPM 5310-3 at 8 (Sept. 9, 2011).
• Note: an enforcement action may be taken
before an exam is completed.

© Venable 2012
3

Informal Actions
“Informal actions are voluntary commitmentsmade by the Board of Directors/trustees of a
financial institution. They are designed to correct
identified deficiencies and ensure compliance with
federal and state banking laws and regulations.
Informal actions are neither publicly disclosed
nor legally enforceable.”
FDIC Compliance Manual (June 2009) II-8.1 (emphasis added)

© Venable 2012
4

Informal actions generally are utilized forbanks with
composite ratings of 3 or better.
The OCC has instructed its examiners that “use of
an informal enforcement action for a 4-rated bank,
or an action other than a PCA directive or cease
and desist order for a 5-rated bank, must be
specifically approved by the appropriate senior
deputy comptroller for Bank Supervision
Operations.”
See OCC PPM 5310-3 at 8-9 (Sept. 9, 2011)

©Venable 2012
5

Board Resolution


Voluntary commitment made by Board of Directors, “directing
the institution’s personnel to take corrective action regarding
specific noted deficiencies.” FDIC Compliance Manual (June
2009) II-8.1



Utilized “[w]hen a bank’s overall condition is sound, but it is
necessary to obtain written commitments from a bank’s board
of directors to ensurethat identified problems and
weaknesses will be corrected. . .” See OCC PPM 5310-3 at 4
(Sept. 9, 2011).



Regulator not a party to resolution.



Generally implemented in banks with composite ratings of 3 or
better. See OCC PPM 5310-3 at 8 (Sept. 9, 2011).



Although not legally enforceable, failure to honor the
resolution could give rise to a formal enforcement action.
©Venable 2012

6

Memorandum of Understanding (“MOU”)



Generally used when regulator has “reason to
believe that a Board resolution would not adequately
address the deficiencies noted” during an
examination. FDIC Compliance Manual (June 2009)
II-8.1.



Regulator a party; drafts the agreement.



Requirements often similar to those in C&D.



Failure to comply with MOU canresult in formal
enforcement action.

© Venable 2012
7

Individual Minimum Capital Ratio (“IMCR”)
Requirement


Preceded by a notice of intent to issue an IMCR with
period for bank to respond. IMCR usually issued by
letter to bank board of directors.



Unlike PCA directives, IMCRs are considered
confidential and do not affect a bank’s ability to accept
brokered deposits.

Failure to maintain the ratio established could be
deemed unsafe or unsound practice and trigger a
formal enforcement action.

© Venable 2012
8

Formal Actions


Cease & Desist (C&D)



Prompt Corrective Action (PCA)



Safety and Soundness Directive



Termination of FDIC Insurance



Removal/Suspension of Institution Affiliated Party
(IAP)



Civil...