Federal banking regulators have increased their focus on executive and incentive compensation in regulatory examinations, making this area one of the highest priorities in the examination process. [Read more →]

Attorney General Tom Miller is to appear today on CNBC’s “Closing Bell,” 4:30 p.m. EDT/ 3:30 p.m. CDT to discuss what he is referring to as the “Robo-Signing” issue.   Miller, with the exception of one four year term, has been Attorney General of Iowa since 1979 and has chaired a number of the NAAG standing committees, including the Consumer Protection Committee. 

He has announced that he is now putting together a broad multistate bipartisan coalition of Attorneys General, working together with federal banking regulators under the new powers and authority of the Dodd/Frank Act regulating financial practices.  

CONTACT

Jake Lutz
Practice Group Leader
804.697.1490

John C. Lynch
757.687.7765

Ashley L. Taylor, Jr
804.697.1286

Anthony F. Troy
804.697.1318

On September 27, 2010 President Obama signed into law the Small Business Jobs and Credit Act of 2010, which includes the Small Business Lending Fund (SBLF).

Under the SBLF the United States Treasury (the Treasury) will make capital investments by purchasing securities in participating community banks, most likely in the form of senior preferred stock.  The SBLF limits investment by the Treasury to 5 percent of risk-weighted assets for participating banks with total assets of $1 billion or less, and to 3 percent of risk-weighted assets for participating banks with more than $1 billion but less than $10 billion of total assets.  Community banks with a 4 or 5 CAMELS rating (or have had such a rating in the past 90 days) may not participate in the SBLF.  Although the dividend rate of SBLF securities would initially be set at 5 percent, the participating community bank could decrease the dividend rate by increasing its small business lending; as a general example, to decrease the dividend rate to 1%, small business lending must increase by 10% or more.  However, four and a half years after issuance, the dividend rate on SBLF securities will increase to 7 percent regardless of the level of small business lending. [Read more →]

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted on July 21, 2010, represents the most comprehensive legislation change to the financial sector since the 1930s. While the resulting changes will predominantly affect financial institutions, several changes will largely affect energy companies as well. [Read more →]

The United States Senate, upon returning from its August recess, will resume consideration of the Small Business Jobs and Credit Act of 2010 (H.R. 5297), which would create the Small Business Lending Fund (the SBLF).  The SBLF would provide $30 billion in capital investment for banks and other depository institutions with less than $10 billion in assets and provide certain incentives for participants to increase small business lending.

Under the SBLF, the United States Treasury (the Treasury) would make capital investments by purchasing securities in participating community banks, most likely in the form of senior preferred stock.  As proposed, the SBLF limits investment by the Treasury to 5 percent of risk-weighted assets for participating banks with total assets of $1 billion or less, and to 3 percent of risk-weighted assets for participating banks with more than $1 billion and less than $10 billion of total assets.  The SBLF aims to stimulate small business lending by reducing the dividend rate on SBLF capital investments as a participating community bank increases lending to small businesses.  Although the dividend rate would initially be set at 5 percent, the participating community bank could decrease the dividend rate to 1 percent by increasing its small business lending, thus providing the bank with an attractive and relatively inexpensive source of capital.

As proposed, the SBLF also provides an attractive option for many community banks to refinance preferred stock issued to the Treasury pursuant to the TARP program.  The primary advantages of such a refinancing would be: (1) by increasing small business lending, the participating community bank could decrease the dividend rate on SBLF securities well below the 5 percent (and 9 percent after five years) TARP dividend rates; and (2) participation in the SBLF is likely to impose fewer restrictions on the participating community bank than TARP participation, including fewer restrictions on executive compensation.  However, community banks participating in the SBLF to refinance TARP securities would be required to be current on their dividend payments to the Treasury.

Senate approval appears to be the only remaining obstacle to the SBLF, as the House has already approved H.R. 5297 and the President is a strong advocate who intends to sign the bill into law as a jobs creation initiative.  Thereafter, the Treasury would be required to announce eligibility requirements and application processes for community banks to participate in the SBLF.  The Financial Institutions Practice Group at Troutman Sanders will continue to monitor all developments regarding the SBLF and will notify its clients and friends of any opportunity to participate in this capital investment program.

The foregoing is only a summary of one of the many significant issues affecting financial institutions.  If you have any questions about the foregoing or about other financial institution issues, please direct them to your regular contact at Troutman Sanders LLP or to any of the persons listed in the sidebar to this release.

CONTACT

Jake Lutz
Practice Group Leader
804.697.1490

Tom Powell
404.885.3294

Jerome Walker
212.704.6286

CONTRIBUTOR

Seth Winter
804.697.2329

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Act”), recently signed into law by President Obama, contains within its “Miscellaneous Provisions” a passage which could have a broad impact on manufacturers of consumer and other goods.  American manufacturers of goods such as cell phones, lap tops, precision tools, appliances, lightbulbs, medical equipment and machine parts should be aware that the Act imposes new reporting and disclosure requirements requiring them to submit an annual report to the Securities and Exchange Commission (“SEC”) disclosing whether their products contain any of the commonly used minerals columbite-tantalite (coltan), cassiterite, gold, wolframite and their derivatives, as well as any other mineral determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country.  If so, the companies must describe what measure they are taking to track the minerals’ origin.  The disclosure must also be made publicly on the firms’ web sites.  [Read more →]

On August 11, 2010, the ABA Banking Law and Business Bankruptcy Committees are presenting the first in a two-part webinar series on the Dodd-Frank Wall Street Reform and Consumer Protection Act which was recently passed by Congress.  The Dodd-Frank Act is the most sweeping piece of financial regulatory reform since the Great Depression. Read more here…

July 29, 2010
12:00PM  -  1:00PM

Please join us for a webinar to discuss the new financial regulations and how they may affect your business.

ABOUT THIS EVENT
This program covers portions of the Act of interest to a wide range of banks and other financial companies, including Regulatory Restructuring and Reforms, Orderly Liquidation Authority, Mortgage Lending Reforms and Consumer Financial Protection, Corporate Governance and Executive Compensation Reforms, and Derivatives and Related Securities Matters.   [Read more →]

The financial reform bill passed by the Senate on July 15 tightens the definition of “accredited investors” eligible to participate in private placements of securities.  The bill has been sent to the White House for final enactment upon the signature of President Obama.  The relevant provision of the bill changes the financial test used to define an “accredited investor” under Regulation D, a widely used exemption for private placements. [Read more →]

On June 21, 2010, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation (together, the Regulatory Agencies) issued final guidance on sound incentive compensation policies for banking organizations. As outlined in the final guidance, banking organizations must maintain incentive compensation practices that are consistent with safety and soundness principles, even though this may require more conservative incentive compensation practices than are necessary to align employees’ interests with those of shareholders. [Read more →]