Dodd-Frank: Capital Levels and Deposit Insurance Reform in 2012 (SEC. 331, 616)
The Dodd-Frank Act, which was signed into law in July 2010, has brought major changes to the operations of banks and financial institutions. More likely, unprecedented changes came for deposit insurance and capital level requirements with the implementation of SEC. 331, 616.The Knowledge Group has assembled a panel of distinguished professionals to help financial institutions understand the significant issues surrounding deposit insurance reform and capital level requirements. The speakers will share their expert opinions and answer your questions in a two-hour LIVE Webcast.
Douglas Faucette, Partner,
Locke Lord LLP
Impact on Community Banks of Capital Compliance Under Basel III
- Definitions of three components of capital -Purification of Tier 1 capital
- CET1 Ratio
- Additional Tier 1 Capital ratio
- Total Capital Ratio
- Phase out of Non Qualifying Instruments – Continued Purification of Tier 1 capital
- Cumulative Preferred Stock
- Mutual instruments
- Adjustments to Capital -Volatility of capital
- Accumulated Other Comprehensive Income/loss AOCI
- Mortgage Servicing Assets MSAs 10% of CET1 limit
- Acquired for Sale AFS Securities and Cash Flow Hedges
- Investments in Non-consolidated Financial Entities
- Deferred Tax Assets DTAs -10% CET1 limit
- Pension Assets and liabilities
- Significant investments in bank common stock.
- Capital Conservation Buffer New 2.5 % capital Buffer requirement The Sky’s the Limit
- Restrictions on Capital Distributions and executive discretionary bonuses
- New Risk Weightings Increase in range of general categories from two( 0% to 100%) to six categories(0% to 600%). Special Impact on community banks and Housing
- category 1 Mortgage criteria
- Category 2 Mortgage residual basket- Non qualifying mortgages and 90 day past due loans
- US Govt, GSEs and Depository institutions – Unchanged
- Foreign Sovereigns, and Banks – ranges from 0% to 150% depending on CRC category ratings
- Corporates 100%
- Residential Mortgages Six categories of risk weighting ranging from 35% to 200%
- Off Balance Sheet items- Mortgage Credit Enhancements trigger on balance sheet treatment
- Commercial Real estate Increase from 100% to 150%
- Denial of Small bank Holding company exemption to S&L HCs S&Ls forced to convert to Commercial Banks
- Conclusion- Fluctuating capital requirements will inject more volatility into system, deter lending and create a waterfall of regulatory restrictions for community banks.
- Disparate impact on banks least able to manage capital through market raise
- Mutual banks
- Small Community banks
- Subchapter S banks
- Market variables inject more volatility into capital requirements
- adjustments for AFS, 90 day past due, pension funding
- Springing enforcement actions
- Disparate impact on banks least able to manage capital through market raise
Mark Chorazak , Attorney,
Simpson Thacher & Bartlett LLP
- The FDIC’s new deposit insurance pricing system incorporates Dodd-Frank’s revision to the assessment base and reflects Congress’s intent that larger institutions, as well as those that are structurally and operationally complex, bear a greater share of the assessment.
- Capital requirements under Dodd-Frank and Basel III feature the concept of “countercylicality”: that more capital should be required during periods of economic expansion and less capital required during periods of economic contraction.
- The “source of strength” obligation is no longer a policy; it is a statutory requirement.
Who Should Attend:
- Bank Executives
- Finance Executives
- Business Consultants
- Finance Lawyers
- Senior Management
- Investment Bankers
- And Other Interested Professionals
Douglas P. Faucette is a banking attorney in Locke Lord’s corporate department and heads the Firm’s Banking and Transactional Practice Group.Mr. Faucette has more than 30 years of experience representing publicly and privately held companies in a variety of corporate and securities transactions. He has represented financial services companies, including insurance, investment banking and real estate companies, commercial banks, savings associations and credit unions before the U.S. Securities and Exchange Commission, the federal and state bank regulatory agencies and the U.S. Congress. In the past decade, he has been involved in the passage of all major financial institution legislation including the Dodd-Frank Act. He has advised clients and spoken to industry groups on the various aspects of Dodd-Frank compliance.Mr. Faucette is widely-known throughout the financial services industry for his regulatory/mergers and acquisitions and thrift demutualization practice. In addition, while at the FSLIC where he served as Director of the Securities Division and Senior Associate General Counsel he designed numerous hybrid equity instruments such as the Income Capital Certificate, Mutual Capital Certificates, Subordinated Debt and Net Worth Certificate. While at the FSLIC, he served on the FSLIC Committee which developed the first risk based capital requirements. He has advised FDIC depository institutions as to compliance with prompt corrective action and risk based capital requirements. He has advised clients on matters relating to private and public securities offerings, including initial public offerings and venture financings.
Douglas P. Faucette is a banking attorney in Locke Lord’s corporate department and heads the Firm’s Banking and Transactional Practice …
Mark Chorazak is an associate at Simpson Thacher & Bartlett LLP, where he is a member of the Financial Institutions Group. Mr. Chorazak’s practice focuses on regulatory matters relating to depository institutions and their holding companies. He regularly counsels banks, thrifts, investors, and other financial services firms in connection with mergers and acquisitions and capital markets transactions before the major financial services regulators, including the Federal Reserve. He also advises clients on restrictions on bank operations, enforcement actions, and bank insolvency issues. A major focus of his practice relates to legislative and regulatory developments affecting financial institutions.Mr. Chorazak graduated from Duke Law School in 2006, where he was an editor of the Duke Law Journal. He joined Simpson Thacher in 2007, following a clerkship with Vice Chancellor John W. Noble of the Delaware Court of Chancery. He received his B.A. from Syracuse University in 2000 with Phi Beta Kappa and summa cum laude honors and, in 2002, received a master’s degree from Oxford University.
Mark Chorazak is an associate at Simpson Thacher & Bartlett LLP, where he is a member of the Financial Institutions …
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About Locke Lord LLP
Locke Lord LLP is a full-service, international law firm with offices in Atlanta, Austin, Chicago, Dallas, Hong Kong, Houston, London, Los Angeles, New Orleans, New York, Sacramento, San Francisco and Washington, D.C. www.lockelord.com Our team of approximately 650 attorneys has earned a solid national reputation in complex litigation, regulatory and transactional work. We serve our clients’ interests first, and these clients range from Fortune 500 and middle market public and private companies to start-ups and emerging businesses.Locke Lord’s team builds collaborative relationships and crafts creative solutions to solve problems ¬ all designed and executed with long-term strategic goals in mind. Among Locke Lord’s many strong practice areas are appellate, aviation, bankruptcy/restructuring/insolvency, business litigation and dispute resolution, class action litigation, corporate, employee benefits, energy, environmental, financial services, health care, insurance and reinsurance, intellectual property, international, labor and employment, mergers and acquisitions, private equity, public law, real estate, regulatory, REIT, tax, technology, and white collar criminal defense and internal investigations.
About Simpson Thacher & Bartlett LLP
Simpson Thacher & Bartlett LLP is a leading global law firm headquartered in New York City. Established in 1884, Simpson Thacher currently has more than 850 lawyers and provides coordinated legal advice on the largest and most complex corporate transactions and litigation matters in industries that include financial services, insurance, power and natural resources, consumer products, services, technology, telecommunications, media, pharmaceuticals and healthcare industries. As one of the most authoritative sources for the interpretation and application of federal and state banking laws, Simpson Thacher advises a number of U.S. and foreign financial institutions, as well as private equity firms, on regulatory and corporate matters and also assists banking clients in regulatory investigations.