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1996 Annual Report


Significant Legislation Enacted

Several bills of significance to the FDIC and insured depository institutions were enacted during 1996. From the FDIC’s 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.

Omnibus Legislation

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 1996:

  • 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 fund’s 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 time period.

  • 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 certain regulations.

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.

Debt Collection Improvement Act

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 government’s ability to collect delinquent debts from people who are owed money by another government agency.

FDIC Contractor Regulations

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.

Electronic FOIA

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.

[Photo] Alice Goodman & Eric Spitler

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.

 

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