by Dwight C. Smith, Barbara R. Mendelson, Charles
M. Horn, Henry M. Fields and Oliver I. Ireland
The first formal step in the
transition of the Federal Reserve Board taking over the supervisory
responsibilities of the Office of Thrift Supervision occurred when the FRB
published a notice seeking comment on the application to thrift holding
companies of its examination and supervision framework for bank holding
companies. This Commentary addresses the implications of the Notice for
differently sized savings and loan holding companies.
Savings and loan holding
companies ("SLHCs") will face important changes when the Federal
Reserve Board ("FRB") takes over the supervisory responsibilities of
the Office of Thrift Supervision ("OTS") on July 21, 2011. The first
formal step in this transition occurred on April 15, when the FRB published a
notice seeking comment on the application to thrift holding companies of its
examination and supervision framework for bank holding companies (the
"Notice"). The Notice states that the FRB's supervision regime would
not require "any specific action" by SLHCs before the transfer date.
The potential impact of some of the changes, however, warrants serious
attention now by most SLHCs.
Critically, the Notice appears to be the only written guidance from the FRB
before the transfer date. The Notice states that guidance and proposed rules
will be issued after July 21, taking into account comments on the Notice.
Comments are due by May 23.
The Notice explicitly describes a supervisory regime that is "more
intensive" than that to which SLHCs are accustomed. For that reason alone,
every SLHC should pay careful attention to the Notice. Additionally, the Notice
outlines changes across two dimensions-the nature of an examination based
almost solely on the size of the SLHC and changes that are industry-wide or
that, at least, could affect a large segment of the thrift industry, regardless
Certain SLHCs may have greater exposure under the FRB supervisory regime-among
them small SLHCs, grandfathered unitary SLHCs, and SLHCs with a considerable
portion of their capital in hybrid instruments.-and should give meaningful
consideration to the possibility of submitting a comment. In any event, all
SLHCs should review the Notice, since it is the only guidance that will be
forthcoming before the FRB takes over from OTS. [footnotes omitted]
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Dwight C. Smith, a
Partner at Morrison & Foerster, focuses his practice on bank regulatory
matters that affect the full range of the operations of banks and thrifts. His
recent representations have covered new requirements for banking institutions
under the Dodd-Frank Act and Basel III, bank mergers and acquisitions, efforts
to raise capital, and formal administrative enforcement proceedings.
Barbara R. Mendelson is a partner at Morrison & Foerster. Her
practice involves advising foreign and U.S. banks in a variety of complex
regulatory matters, including sales and acquisitions of U.S. banking and
nonbanking firms, applications to federal and state bank regulators for
expansion of activities and new products, Bank Secrecy Act and OFAC matters and
over-the-counter and exchange-based trading of various instruments and derivatives.
She has represented foreign banks in their U.S. operations for more than 25
years. She has also been instrumental in forming a number of commercial bank
subsidiaries of foreign bank holding companies. In addition, she works with
sovereign entities and multilateral organizations with respect to the
investment of their foreign currency assets.
Charles M. Horn, a Partner at Morrison & Foerster, is a regulatory
and transactional attorney whose practice focuses primarily on banking and
financial services matters. He represents domestic and global financial
services firms of all sizes on regulatory and transactional issues affecting
their organization, structure, governance, management and operations. In
addition, he provides sophisticated regulatory counseling to banks and other
financial services firms relative to federal and state financial regulation,
supervision, and compliance matters affecting their corporate, institutional,
and retail business activities.
Henry M. Fields is a Partner at Morrison & Foerster. His financial
services practice focuses on providing regulatory advice, including bank
securities activities, margin regulations, and capital compliance, to
international and domestic financial institutions and representing them in
compliance and enforcement matters, new products and services, new entity
formation, geographic expansion, mergers and acquisitions, and capital markets
transactions. He also represents clients in a range of other industries,
including branded apparel, consumer goods, and travel services, in mergers and
acquisitions and capital markets transactions.
Oliver I. Ireland is a Partner at Morrison & Foerster, His practice
focuses on retail financial services and bank regulatory issues including
consumer protection rules such as Federal Reserve Regulations Z and E, the
Gramm-Leach-Bliley Act privacy provisions, the Fair Credit Reporting Act, and
all types of payment transactions, including compliance with NACHA rules. His
practice also includes regulatory issues applicable to bank and thrift holding
companies and to national and state charter banks, federal and state chartered
thrifts, and federal and state chartered credit unions, as well as other
financial regulatory issues, including margin lending. He was named one of
Washington's top banking and privacy lawyers by the Washingtonian
magazine (2004) and he has been listed in The Best Lawyers in America as
a leader in the field of banking law since 2006.