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PROPOSED SAFETY AND SOUNDNESS STANDARDS: FLEXIBLE, BUT UNNECESSARY, SAYS INDEPENDENT BANKERS ASSOCIATION OF AMERICA

 WASHINGTON, Jan. 6 /PRNewswire/ -- The Independent Bankers Association of America (IBAA) commended the regulatory agencies for proposing reasonable safety and soundness standards mandated by Section 132 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). The standards appear to be sufficiently flexible, without imposing undue burden on the community banking industry.
 However, it remains to be seen if this flexibility will carry over to examination procedures, IBAA President James R. Lauffer said in a letter to the agencies. If the rules are incorrectly or over aggressively implemented by examiners, banks may refrain from taking the necessary risk to lend to credit worthy borrowers. "These new rules, if incorrectly implemented, have the potential of causing another credit crunch," said Lauffer, chairman/president/CEO of the First National Bank of Herminie, Irwin, Pa.
 To ensure that the new rules are implemented as they are written, Lauffer requested that the agencies publish for public comment the examination procedures that will be used to implement the standards. Although the IBAA recognizes that seeking public comment on examination procedures is not standard agency practice, the new rules warrant a departure from customary procedures.
 Lauffer said a notable exception to the proposal's flexibility is the compliance plan section, which establishes unreasonably short time frames. A bank must be given adequate time to analyze any notice that informs it of a deficiency. "As drafted, the proposed regulatory appeals process deprives financial institutions of their right to due process," he said.
 With the exception of the compliance plan section, the proposal avoids costly, unrealistic or overly burdensome standards. But banks are being forced to accept unnecessary rules that are an overreaction to grossly inaccurate predictions of the industry's demise, Lauffer said. "These safety and soundness standards are an attempt by the Congress to micromanage the banking system based on a crisis that never occurred," he said. "The new rules are not justified by the growing strength of the FDIC-BIF."
 IBAA is the only national trade association that exclusively represents the interests of the nation's community banks.
 -0- 1/6/94
 /CONTACT: Diane Casey or Karen Thomas of the Independent Bankers Association of America, 202-659-8111/


CO: Independent Bankers Association of America ST: District of Columbia IN: FIN SU: LEG

IH-DC -- DC015 -- 9765 01/06/94 12:40 EST
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Publication:PR Newswire
Date:Jan 6, 1994
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