CALIFORNIA FEDERAL BANK REPORTS OTS PROPOSAL FOR INDIVIDUAL CAPITAL REQUIREMENT
CALIFORNIA FEDERAL BANK REPORTS OTS PROPOSAL
FOR INDIVIDUAL CAPITAL REQUIREMENT
LOS ANGELES, Nov. 6 /PRNewswire/ -- The Office of Thrift Supervision (OTS) has notified California Federal Bank that the regulatory agency is proposing an increased capital requirement for the bank. The proposal would require California Federal Bank to increase its equity capital by $375 million by June 30, 1992. This increase would have resulted at Sept. 30, 1991, in effective regulatory capital ratios of 10.17 percent for risk-based capital, 6.23 percent for core capital and 4.67 percent for tangible capital.
"We strongly disagree with this proposal and believe that the capital requirement is excessive," said Jerry St. Dennis, chairman and chief executive officer of CalFed Inc. "Ironically, it will be counterproductive and will interfere with efforts underway to strengthen the bank's capital through private market means."
At Sept. 30, 1991, California Federal Bank's risk-based capital was $1,008.6 million, resulting in a ratio of 7.35 percent, exceeding the current industry minimum requirement of 7.2 percent by more than $20 million. The bank's 2.61 percent tangible capital and 4.17 percent core capital ratios at Sept. 30, 1991, exceeded the current industry minimum requirements of 1.50 percent and 3.00 percent. The bank's tangible and core capital levels exceeded regulatory requirements by more than $200 million.
William L. Callender, president and chief executive officer of the bank, said, "The proposal is unwarranted since, to our knowledge, the OTS has not imposed a similar requirement on any other thrift institution with capital ratios as strong as the bank's."
The bank's parent company, CalFed Inc. (NYSE: CAL), expects that if the proposed requirement becomes effective, the OTS will seek to require the parent company to contribute sufficient capital to California Federal Bank to bring the bank into compliance with the new requirement. This action would most likely be based upon net worth maintenance stipulations signed by CalFed Inc. in connection with certain acquisitions completed prior to the enactment of the Financial Institutions Reform, Recovery and Enforcement Act of 1989.
California Federal Bank will file a response to the proposed higher individual capital requirement within 30 days. Upon review of the bank's response, the OTS will determine whether or not to make the proposed requirement effective and binding on the bank, or whether the proposed requirement should become effective in a modified form. If the proposed requirement is made effective, the bank will be considered by the OTS to be out of compliance until it attains the required capital level.
California Federal Bank stressed that the proposed individual capital requirement does not affect customer deposits.
CalFed Inc. is a financial services holding company headquartered in Los Angeles. Its principal subsidiary, California Federal Bank, a Federal Savings Bank, provides mortgage loans and consumer banking services through 189 offices in California, Florida, Nevada, Georgia and Arizona.
/CONTACT: James F. Hurley, 213-930-9750, or Rhanda Kahawaii Dunn 213-932-2283, both of California Federal Bank/
(CAL) CO: California Federal Bank; CalFed Inc. ST: California IN: FIN SU: SE -- LA009 -- 1531 11/06/91 08:08 EST