Several bills of significance to the FDIC and insured depository institutions were enacted
during 1996. From the FDICs standpoint, the most significant legislation fully
capitalized the Savings Association Insurance Fund (SAIF), one of the two insurance funds
administered by the FDIC. This Act and other new laws that impact the FDIC and insured
depository institutions are described in this chapter.
On September 30, 1996, an omnibus
bill (P.L. 104-208) was enacted containing several laws of interest to the FDIC.
The Deposit Insurance Funds Act of
- Capitalizes the SAIF on October 1,
1996, through a one-time special assessment based on SAIF-assessable deposits held on
March 31, 1995, in the amount necessary to achieve the funds designated reserve
ratio of $1.25 for every $100 of insured deposits.
- Exempts weak institutions and various
other defined institutions from the special assessment and reduces SAIF-assessable
deposits at certain institutions for purposes of calculating the special assessment.
- Separates assessments for Financing
Corporation (FICO) bonds (those issued by the government corporation created in 1987 to
recapitalize the former Federal Savings and Loan Insurance Corporation) from the regular
SAIF assessments starting January 1, 1997.
- Requires banks insured by the Bank
Insurance Fund (BIF) to begin sharing FICO bond payments. The rate on BIF- assessable
deposits will be one-fifth the rate imposed on SAIF-assessable deposits for the first
three years beginning on January 1, 1997, unless the last savings association ceases to
exist before that date. Thereafter, all FDIC-insured institutions will share the FICO
assessment on a pro rata basis, regardless of which fund insures their deposits.
- Directs the FDIC and the other
federal banking and thrift agencies to take appropriate actions to prevent insured
depository institutions from shifting deposits to evade SAIF assessments.
- Provides for the merger of the BIF
and the SAIF on January 1, 1999, if no savings association exists on that date.
The Economic Growth and Regulatory
Paperwork Reduction Act of 1996 modified numerous regulatory requirements and procedures
affecting federal regulatory agencies, financial institutions and consumers. This law:
- Streamlines application and notice
requirements in a number of areas, such as nonbanking acquisitions by well-managed and
well-capitalized bank holding companies.
- Allows a 60-day period (with a 30-day
extension) for FDIC consideration of completed applications from a state bank or its
subsidiary to engage in an activity that is not permissible for a national bank, but does
not provide for automatic approval if the FDIC does not act on an application within the
- Raises the threshold for small banks
to be examined every 18 months from $175 million in total assets to as much as $250
million in total assets.
- Requires the FDIC and other federal
bank regulatory agencies to review their regulations periodically and eliminate
requirements for unnecessary internal policies.
- Directs each federal banking agency
to coordinate examinations and consult with each other, to resolve inconsistencies in
recommendations to be given to an institution, and to consider appointing an
examiner-in-charge to ensure consultation takes place.
- Provides in cases of coordinated
examinations of institutions with state-chartered subsidiaries that the lead agency could
be the state chartering agency.
- Requires reports from all banking
regulators on actions taken to eliminate duplicative or inconsistent accounting or
reporting requirements in statements or reports from regulated institutions.
- Reduces regulatory burden under a
number of consumer protection statutes, including the Home Mortgage Disclosure Act, Truth
in Lending Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, and
Fair Housing Act.
- Amends the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, excluding lenders from
liability under certain circumstances.
- Reforms consumer credit reporting
laws to provide consumers with additional protections in areas such as protecting privacy
and correcting mistakes.
The omnibus legislation includes
other miscellaneous provisions also of interest to the FDIC or depository institutions,
including authorizing the FSLIC Resolution Fund to reimburse the Department of Justice for
various legal expenses.
Small Business Regulatory
Enforcement Fairness Act of 1996
The Small Business Regulatory
Enforcement Fairness Act of 1996 (P.L. 104-121) was enacted on March 29, 1996, as part of
the Contract With America Advancement Act of 1996. Provisions affect government regulation
of small businesses, which may in some instances include financial institutions with less
than $100 million in assets. The law also establishes a congressional review process for
The new law requires that agencies
produce and make available additional materials to assist small businesses in complying
with new regulations promulgated under the Regulatory Flexibility Act. Also, each agency
must establish a program for responding to concerns of small businesses.
Each agency that regulates the
activities of small businesses must establish a policy or program not later than March 29,
1997, providing for the reduction or waiver of civil penalties for violations of statutory
or regulatory requirements, subject to exceptions the agency may establish. The agency
may, under appropriate circumstances, consider ability to pay in determining penalties
against small businesses.
The law also provides that before
certain rules can take effect, the agency promulgating the rule must submit a report to
Congress and the Comptroller General including any cost-benefit analysis and actions taken
under the Regulatory Flexibility Act. A rule may not take effect or continue in effect if
Congress enacts a joint resolution of disapproval and the President signs the resolution.
Another omnibus bill (P.L. 104-134),
enacted on April 26, 1996, contains the Debt Collection Improvement Act of 1996. This law
amends a number of statutes related to debt collection and electronic funds transfer of
federal payments. In general, the law requires that all federal payments
ultimately be made by electronic funds transfer unless a waiver is obtained. It also
enhances the federal governments ability to collect delinquent debts from people who
are owed money by another government agency.
The Office of Government Ethics
Authorization Act of 1996 (P.L.104-179), enacted on August 8, 1996, extended the
operations of the Office of Government Ethics (OGE) for an additional three years. One
provision eliminates the statutory requirement for OGE concurrence in FDIC regulations
concerning the conduct of independent contractors retained by the FDIC and relating to
conflicts of interest, ethical responsibilities, and the use of confidential information.
|Bank and Thrift Taxation
The Small Business Job Protection Act of 1996
(P.L. 104-188), enacted on August 20, 1996, contains several changes to the tax code that
could affect small businesses, the banking industry, and bank regulatory programs. One
provision allows both spouses to contribute up to $2,000 to an Individual Retirement
Account (IRA), even if one spouse does not work outside the home. Other provisions
authorize financial institutions meeting certain criteria to qualify as Subchapter S
corporations, create financial asset securitization investment trusts (FASITs), and repeal
the reserve method of accounting for bad debts by thrift institutions.
The Electronic Freedom of
Information Act Amendments of 1996 (P.L.104-231), enacted on October 19, 1996, requires
the disclosure of agency records in an electronic format, where feasible, when requested
under procedures established by the Freedom of Information Act.
The FDIC's push to recapitalize the Savings Association Insurance
Fund was successful, in part, due to the work of many at the agency, including Alice
Goodman and Eric Spitler of the Office of Legislative Affairs.